By Peter Fabry, B.Comm.

Licensed Mortgage Professional in Canada since 1999 | Founder of Rewind Mortgage | Former Director, major Canadian bank

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I've been brokering mortgages since 1999. In that time, I've helped hundreds of Canadians access home equity — and I've seen the same costly mistakes made over and over again. Not because borrowers aren't smart. But because nobody told them what to watch out for.

This is good for bank profits. Not so good for the borrowers.

How do you avoid these mistakes? Work with someone who has a fiduciary duty to work in your interest — not the lenders.

Here are the five most expensive mistakes I see — and how to avoid every one of them.

Mistake #1: Not Understanding Prepayment Penalties

This is the big one. Most borrowers think of the reverse mortgage as a "set it and forget it" product — and that's exactly what lenders are counting on.

Life changes. You may decide to sell, downsize, move into care, or refinance. When that happens, you'll pay a prepayment penalty — and if you didn't know about it going in, it can be a genuine shock.

Here's how every lender's penalty structure breaks down, sourced directly from lender product guides:

CHIP HomeEquity Bank

Year 1: 5% of balance

Year 2: 4% of balance

Year 3: 3% of balance

Year 4+: 3 months interest

Death: $0

Equitable Bank

Year 1: 5 months interest

Year 2: 4 months interest

Year 3–10: 3 months interest

Year 10+: No penalty

Death: $0

Equitable Bank has the lowest penalties in years 1–3 of any lender.

Bloom Financial — Standard

Year 1: 4% of balance

Year 2: 3% of balance

Year 3: 2% of balance

Years 4–10: 3 months interest

After Year 10: $0

Death: $0

Long-term care entry: $0

Bloom Financial — SafeRate

Bloom's SafeRate is a unique product: your rate is locked for the life of the mortgage — no resets, no surprises, ever. The trade-off is a higher early penalty that reflects the protection you're receiving.

Year 1: 8% of balance

Year 2: 7% of balance

Year 3: 6% of balance

Year 4: 5% of balance

Year 5: 4% of balance

Years 6–10: 3 months interest

After Year 10: $0

Death (first 3 yrs): $0

Long-term care entry: $0

SafeRate also has a unique portability feature — if you downsize, you can carry your locked rate to your new home and receive a rebate on prepayment charges. No other reverse mortgage in Canada offers this.

Home Trust EquityAccess

Home Trust is the newest entrant to the Canadian reverse mortgage market.

Year 1: 5 months interest

Year 2: 4 months interest

Years 3–10: 3 months interest

Year 10+: $0

From Year 6 onward, you can prepay the entire balance with no charge — with 3 months' written notice.

One more thing most people don't know: All lenders allow you to pay the interest monthly, which prevents compounding and keeps your balance flat. Some lenders require you to commit to paying the interest for a full year if you want to exercise this option. Some don't. Most people don't know these options exist, let alone the differences lender to lender.

All lenders also allow a 10% annual prepayment privilege within 30 days of the renewal date.

Mistake #2: Fixating on Rate Over Term Strategy

Why do most banks offer their most attractive rates on five-year mortgages to new first time homebuyers? Because these borrowers typically pay out within 3.5 years — and the penalty is significant. They know the statistics. Get you now or get you later. Later is easier.

Thinking about a reverse mortgage is no different. What do the statistics say about how long people actually stay in their home after getting a reverse mortgage? That's the question most borrowers never ask.

A small difference in rate means very little if you end up paying a large penalty because you chose the wrong term. A shorter term gives you more flexibility — you're not locked in as long, and renewal gives you a natural penalty-free exit window. A longer term may offer a lower rate, but if circumstances change before that term is up, you could pay dearly for it.

The right term isn't the one with the lowest rate. It's the one that matches your actual situation and your real intentions for the property.

Compare all lenders using my own Reverse Mortgage Calculator → Click Image Below

Mistake #3: Taking a Lump Sum When a Drawdown Would Serve You Better

Interest on a reverse mortgage compounds — monthly, on your outstanding balance. A dollar you borrow today starts costing you immediately.

Many borrowers take the maximum lump sum available because it feels like the right move. But if you don't need the money all at once — and most people don't — you're paying interest on funds that are sitting in your bank account doing nothing.

Most lenders offer scheduled advance options: monthly, quarterly, semi-annually, or annually. You can also take ad hoc draws as you need them. The interest clock only starts on what you've actually borrowed.

The difference between a lump-sum strategy and a thoughtful drawdown plan, over ten years, can run into TENS of thousands of dollars.

Mistake #4: Not Thinking Through Who's on Title

This one catches people off guard — and by the time they discover it, it's often too late to fix without significant cost.

For a reverse mortgage in Canada, both spouses must be at least 55 — whether on title or not, whether on the mortgage or not. All persons on title must also be 55.

This is also an important consideration if you're thinking of adding an adult child to the title for estate planning purposes. If they're not 55, you can't get a reverse mortgage. And with a reverse mortgage, the amount you qualify for is based on the age of the youngest borrower. So all of this affects your estate planning and mortgage financing.

A financial planner would never know the underwriting criteria — which is why you need to ask the right person. For mortgage advice, talk to a mortgage expert. For reverse mortgage advice, talk to a reverse mortgage specialist.

The same issue arises if you got married after you got the reverse mortgage. Your new spouse is not automatically on the mortgage — which means they have no legal protection from the lender if something happens to you. This is a serious gap that many couples don't discover until it's a crisis.

Mistake #5: Treating Rate as the Primary Decision Variable

It's important enough that I wrote an entire page on the four reverse mortgage rates you didn't know about — you can read it here: The Four Reverse Mortgage Rates You Didn't Know About

Here's the short version: every lender — CHIP HomeEquity Bank, Equitable Bank, Home Trust, and Bloom Financial — is competing for the same clients. Fixed up-front lump sum rates are very close across the board and lenders will generally match each other when pushed.

What you won't see clearly is how dramatically their products differ in every other dimension: penalties, term flexibility, advance options, LTV, portability, renewal terms, and estate provisions.

CHIP has the longest track record, widest availability, and products like the inter alia blanket mortgage that allow borrowing against rental or second properties as well.

Bloom's SafeRate gives you certainty that no other product can match — your rate never changes for the life of the mortgage, regardless of what rates do.

Home Trust's EquityAccess has three tiers — including EquityAccess Boost, which offers up to 59% LTV for borrowers aged 70+, the highest of any lender.

Equitable Bank offers the lowest penalties in the early years.

The difference between the right lender and the wrong one isn't measured in rate. It's measured in outcomes — and those outcomes can add up to TENS of thousands of dollars over the life of the mortgage.

The Bottom Line

None of these mistakes are obvious until someone points them out — and by then, you may have already signed. Every one of them is avoidable with the right advice upfront.

This is why trying to do it yourself is a mistake — especially if experienced, independent, unbiased help is available to you at no extra cost.

I work exclusively with my clients. I am not employed by any lender. I am paid by lenders only upon a successfully funded mortgage — and every lender pays more or less the same, I don't prefer one over another. My only job is to find you the most suitable fit for your needs.

Book a free, no-obligation call → Click Here

About the Author

Peter Fabry, B.Comm is a Licensed Mortgage Broker (since 1999) and Reverse Mortgage Specialist. A former Director-level executive in mortgage compliance and regulatory operations at a major Canadian bank, Peter has spent his entire career in alternative and non-bank lending. He is a member of Mortgage Professionals Canada, a member of CMBA Ontario and CMBA Atlantic, and a Founding Member of CAAMP. He brokers independently through his licensed brokerage Broker It! (lic. in multiple provinces). No lender bias, no fees to clients on reverse mortgages. View Peter's profile on LinkedIn → https://www.linkedin.com/in/peterafabry/

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