Reverse Mortgage Renewal: What Happens When Your Term Ends?

"My CHIP reverse mortgage term ends next year — what happens now? Do I have to pay everything back?" This question causes real anxiety among Canadian seniors who took out a reverse mortgage years ago and are approaching a term renewal date. The good news is that reverse mortgage renewals are routine, and in the vast majority of cases, the loan simply continues. But there are details you need to understand — including how rates may change, what options you have, and when to start planning.

This article is for educational purposes only and does not constitute financial advice.

How Reverse Mortgage Terms Work in Canada

Unlike conventional mortgages where the term ending triggers mandatory principal repayment or renegotiation, reverse mortgages in Canada are designed to last for the life of the borrower's occupancy. However, the interest rate on a reverse mortgage is not necessarily fixed for life — it is fixed for a specific term, after which it renews at the then-current rate.

Here is how terms work at Canada's major reverse mortgage lenders:

Lender	Available Term Lengths	Rate Type	What Happens at Term End
HomeEquity Bank (CHIP)	6-month, 1-year, 3-year, 5-year	Fixed	Rate renews at current posted rate
Equitable Bank	1-year, 3-year, 5-year	Fixed	Rate renews at current posted rate
Bloom Financial	Variable or lifetime fixed	Variable tracks prime; fixed is lifetime	Variable adjusts with prime; lifetime fixed never changes
Home Trust (EquityAccess)	5-year	Fixed	Rate renews at current posted rate

The critical distinction: the term ending does not mean the loan is due. The loan remains in place. Only the interest rate changes — resetting to whatever the lender's current rate is at the time of renewal.

According to the Financial Consumer Agency of Canada (FCAC), reverse mortgage borrowers should be aware that while the loan itself does not have a fixed repayment date (it becomes due when the borrower sells, moves out, or passes away), the interest rate may be subject to renewal at regular intervals depending on the lender and term selected.

The Renewal Timeline: What to Expect

Most lenders follow a predictable renewal process. Here is a typical timeline for a 5-year term renewal:

Timeline	What Happens
120 days before term end	Lender sends renewal notice by mail
90 days before	Borrower reviews renewal offer and rate
60 days before	Deadline to request changes (advance additional funds, switch term length)
30 days before	Final renewal confirmation sent
Term end date	New rate takes effect automatically

If you do nothing, the renewal happens automatically at the lender's posted rate for the new term. There is no risk of the loan being called, no requirement to requalify, and no new application process.

What Changes at Renewal — and What Doesn't

Understanding what actually changes at renewal helps reduce anxiety:

Factor	Does It Change at Renewal?	Details
Interest rate	Yes	Resets to lender's current rate for the new term
Loan balance	No change from renewal itself	Balance continues to compound at the new rate
Monthly payment requirement	No — still $0	Reverse mortgages never require payments
Remaining equity	Unaffected by renewal process	Equity depends on home value vs loan balance
Property ownership	No change	You retain full title to your home
No-negative-equity guarantee	Remains in effect	You will never owe more than your home is worth
Eligibility requirements	No re-qualification needed	You do not need to reapply or pass income/credit checks
Right to remain in home	Unchanged	As long as you live there and maintain obligations

The no-negative-equity guarantee continues to protect you through any number of renewals. For a detailed explanation, see reverse mortgage inheritance in Ontario.

How Rate Changes Affect Your Balance Over Time

The interest rate at renewal directly affects how quickly your loan balance grows through compounding. Here is an illustration of how different renewal rates affect a $200,000 reverse mortgage balance over time:

Years After Renewal	Balance at 6.50%	Balance at 7.25%	Balance at 8.00%
0 (renewal date)	$200,000	$200,000	$200,000
2	$226,845	$230,051	$233,312
5	$274,082	$284,415	$295,163
10	$375,515	$404,101	$434,849
15	$514,430	$564,959	$620,690

The difference between a 6.50% and 8.00% renewal rate over 10 years is approximately $59,000 on a $200,000 balance. Over 15 years, that gap widens to over $106,000. This is why the renewal rate matters — even though you do not make monthly payments, the compounding effect means every fraction of a percentage point has long-term consequences.

For current rates and projections, see reverse mortgage interest rates in Ontario (2026).

Your Options at Renewal

You are not simply forced to accept whatever rate the lender offers. Here are your options at each renewal:

Option 1: Accept the Renewal

The simplest path. The loan continues at the new rate, the same term length or a new one you select, and nothing else changes. This is what the majority of borrowers do.

Option 2: Negotiate the Rate

Just as with a conventional mortgage renewal, you can negotiate. Lenders may offer a discount from their posted rate, particularly if you are a long-standing borrower with a good property and a low loan-to-value ratio. Rick Sekhon can negotiate renewal rates on your behalf — an advantage of working with a mortgage broker rather than dealing directly with the lender.

Option 3: Request Additional Funds

If your home has appreciated since the original reverse mortgage was taken out, you may be eligible for additional funds at renewal. The lender will assess your current age (older borrowers qualify for higher LTV), your current home value, and the existing loan balance.

Factor	Original (5 Years Ago)	At Renewal
Borrower age	67	72
Home appraised value	$650,000	$740,000
Maximum LTV at current age	30%	38%
Maximum loan amount	$195,000	$281,200
Existing balance (after 5 years at 7.00%)	—	$273,476
Additional funds available	—	~$7,700

In this example, even though the balance has grown through compounding, the combination of aging (which increases the eligible LTV) and home appreciation creates a small amount of additional available equity. In stronger real estate markets, the additional funds can be significantly larger.

Option 4: Make a Partial Prepayment

Renewal is one of the windows when you can make a prepayment on your reverse mortgage — often without penalty. Most lenders allow a partial or full prepayment at the end of a term without incurring the prepayment charge that would apply mid-term.

This can be strategic. If you have received an inheritance, sold a second property, or simply want to reduce the compounding balance, paying down a portion of the loan at renewal resets the base on which future interest accrues.

For tips on minimizing prepayment penalties, see how to avoid reverse mortgage prepayment penalties.

Option 5: Repay in Full and Exit

You can repay the entire reverse mortgage balance at renewal without any prepayment penalty. This might apply if your circumstances have changed — for example, if a spouse has passed away and you plan to downsize, or if you have received a substantial inheritance that makes the reverse mortgage unnecessary.

For a full guide on exiting a reverse mortgage, see how to get out of a reverse mortgage in Canada.

Bloom Financial's Lifetime Rate Lock: A Different Approach

Bloom Financial offers a unique product in the Canadian market: a lifetime fixed rate that never renews. Once locked in, the rate remains unchanged for the life of the loan — regardless of what happens to market interest rates.

This eliminates renewal risk entirely. However, the lifetime fixed rate is typically higher than a shorter-term fixed rate at the time of origination. The trade-off is certainty versus cost:

Feature	5-Year Fixed (CHIP/Equitable)	Lifetime Fixed (Bloom)
Initial rate (approximate, 2026)	6.59–7.50%	7.50–8.50%
Renewal risk	Yes — rate may increase	None — rate locked for life
Planning certainty	Moderate — rate changes every 5 years	High — rate guaranteed
Best for	Borrowers who may repay within 5–10 years	Borrowers planning to stay 15+ years
Compound interest predictability	Varies by renewal	Fully predictable

For borrowers who plan to remain in their home for the long term and value predictability above all, the Bloom lifetime rate can provide peace of mind — even if the initial cost is higher. Rick Sekhon can model both scenarios to show which approach results in a lower total cost over your expected time horizon.

When Reverse Mortgage Renewals Become Due Events

It is important to distinguish between a routine rate renewal and a due event — a situation where the lender requires full repayment. A rate renewal is not a due event. The following are due events:

1. Sale of the property. If you sell your home, the reverse mortgage must be repaid from the sale proceeds.
2. Moving out permanently. If you leave the home (for example, moving to a long-term care facility), the loan becomes due. Most lenders provide a grace period of 6–12 months.
3. Death of the last surviving borrower. The estate has a defined period (typically 6–12 months) to repay the loan, usually by selling the home.
4. Default on obligations. Failure to pay property taxes, maintain homeowner's insurance, or keep the property in reasonable condition can trigger a due event — though lenders work with borrowers to resolve these issues before calling the loan.

According to OSFI guidelines, federally regulated lenders must clearly communicate the distinction between term renewals and loan maturity events to reverse mortgage borrowers, ensuring that renewal correspondence does not create confusion about the borrower's right to remain in the home.

Planning for Your Next Renewal: A Checklist

If your reverse mortgage renewal is approaching, here is what Rick Sekhon recommends:

1. Review your current statement. Know your exact balance, current rate, and term end date.
2. Get a current home value estimate. An informal assessment helps you understand your remaining equity and whether additional funds are available.
3. Compare current rates across lenders. While switching lenders mid-stream is possible, it involves legal costs and a new appraisal — so it must be worth the rate difference.
4. Consider your time horizon. If you expect to remain in the home for 10+ more years, a longer term or Bloom's lifetime rate may be worth considering. If you may move or downsize within 3–5 years, a shorter term provides flexibility.
5. Assess whether a partial prepayment makes sense. Reducing the balance at renewal reduces future compounding and preserves more equity for your estate.
6. Discuss with your family. If your family is involved in your financial planning — as many are in the aging in place context — keep them informed about renewals and balance growth.

For borrowers focused on preserving assets for the next generation, the living legacy planning approach offers structured guidance on balancing current needs with estate preservation.

FAQ

Do I have to reapply for my reverse mortgage at renewal? No. A reverse mortgage renewal is automatic. You do not need to submit a new application, undergo a credit check, prove income, or get a new appraisal (unless you are requesting additional funds). The loan simply continues at the new interest rate.

Can the lender refuse to renew my reverse mortgage? In standard circumstances, no. As long as you continue to meet your obligations (property taxes paid, insurance maintained, property in reasonable condition), the lender will renew the mortgage. Reverse mortgages are designed to remain in place until a due event occurs.

What if I want to switch lenders at renewal? It is possible but involves costs — a new appraisal, legal fees, potential discharge fees from the current lender, and setup fees with the new lender. These costs typically total $2,500–$5,000. The rate savings must be significant enough to justify these expenses. Rick Sekhon can calculate whether switching makes financial sense.

How much notice will I get before my renewal? Most lenders send a renewal notice 90–120 days before the term end date. This gives you time to review the terms, consult with Rick Sekhon, and decide whether to accept, negotiate, or make changes.

Can I convert from a fixed rate to a variable rate at renewal? This depends on the lender. CHIP and Equitable Bank offer primarily fixed-rate terms. Bloom Financial offers both variable and lifetime fixed options. Switching between lenders to change rate types is possible but involves costs. Discuss your options with Rick Sekhon well before the renewal date.

Does the renewal process affect my property taxes or insurance? No. The renewal is purely a financial transaction between you and the lender. Your property tax obligations, insurance requirements, and homeownership responsibilities remain exactly the same.

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Speak to a licensed mortgage professional. Independent legal advice is required before closing a reverse mortgage in Ontario.

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This content is for illustrative purposes only. Rates may vary. Call Rick Sekhon for the best rates and more information.