Not ready to downsize? How a reverse mortgage can buy you time

Most people assume reverse mortgages are designed to help retirees stay in their homes. Increasingly, I am arranging them for homeowners who fully expect to sell. Strange as that may sound, it makes perfect sense.

Many of my clients already know they will downsize one day. Their question isn’t whether they should move. It’s whether they should move now.

For years, the retirement playbook seemed straightforward. Sell the family home, buy something smaller, invest the difference and enjoy your retirement.

Softer conditions, including falling prices in some housing markets, have changed the downsizing conversation.

Many retirees who planned to downsize are now asking whether waiting makes more sense. For some homeowners, a reverse mortgage is making that possible.

Why downsizing has become more complicated

Downsizing has traditionally served two purposes. It reduces housing costs while unlocking home equity to supplement retirement income.

Today’s housing market has changed the math.

Selling costs remain substantial. Purchasing another property often involves land transfer taxes, legal fees, moving expenses and, in some communities, surprisingly high prices for smaller homes.

Equally important, many retirees simply are not ready to leave the communities they know, particularly when they believe today’s market may not reflect the full value of their home.

Whether that perception ultimately proves correct is almost secondary. What matters is many homeowners no longer feel comfortable making one of the largest financial decisions of their retirement under perceived time pressure.

Why reverse mortgages are becoming part of the solution

Traditionally, reverse mortgages have been associated with aging in place.

Increasingly, I am arranging them for homeowners who fully expect to move. They simply don’t want to move today.

By unlocking a portion of their home equity without requiring regular mortgage payments, a reverse mortgage may allow homeowners to repay existing debts, improve monthly cash flow and reduce the financial pressure to sell immediately.

Rather than avoiding a future move, the reverse mortgage gives the homeowner control over when that move takes place.

A recent example

Recently, I worked with a homeowner in his mid-sixties living in a prime Toronto neighbourhood. Like many retirees, he assumed downsizing would eventually solve his financial concerns.

Instead, he found himself carrying a sizeable mortgage, unsecured debt and overdue property taxes while relying primarily on government retirement income. Selling seemed like the obvious answer. It wasn’t.

His children and grandchildren lived nearby, he loved his neighbourhood, and he believed selling into a softer market would not maximize the value of his largest asset.

His problem was not whether to downsize, it was when. Instead of listing the property immediately, we explored a reverse mortgage.

The proceeds eliminated his existing mortgage, cleared his unsecured debt, brought his property taxes current and created a financial reserve. Most importantly, his regular monthly debt payments largely disappeared.

He may still downsize one day. The difference is he can now do so because he chooses to, not because financial pressure forces the decision.

Preserving your options

One of the most overlooked benefits of a reverse mortgage is flexibility. Homeowners continue to own their homes and remain free to sell whenever they choose.

Future changes in the homeowner’s age, property value and financial circumstances may affect the options available. Refinancing, restructuring or accessing additional equity may be possible, depending on lender criteria at the time.

None of these outcomes is guaranteed. However, preserving flexibility can be valuable in an uncertain housing market.

The trade-offs

Reverse mortgages are not appropriate for everyone.

Interest continues to accrue over the life of the loan, reducing the homeowner’s remaining equity. Legal fees, appraisal costs and other setup expenses must also be considered, along with any discharge or prepayment charges that may apply if the home is sold or the loan is repaid. Homeowners remain responsible for maintaining the property, paying property taxes and keeping insurance in place.

Estate planning implications should also be discussed with family members and professional advisors.

Like any mortgage strategy, the objective is not simply to qualify for financing. It is to determine whether the financing genuinely improves the client’s long-term financial position.

Final thoughts

For some retirees, a reverse mortgage isn’t about avoiding downsizing. It’s about avoiding the need to downsize before they’re ready.

Sometimes its greatest value isn’t simply the money it provides, but the time and control it gives homeowners to make one of retirement’s biggest financial decisions on their own terms. In my experience, the best financial decisions are rarely made under pressure.

Frequently asked questions

If home prices recover, can a homeowner benefit even after taking out a reverse mortgage?

Yes. A reverse mortgage does not freeze the value of the home. If property values increase faster than the interest accumulating on the loan, the homeowner’s remaining equity may also increase. The homeowner also retains the option to sell whenever they choose. In some cases, additional borrowing capacity may become available if both the property’s value and the homeowner’s age increase.

Why not simply refinance with a traditional mortgage?

For many retirees, qualifying for a conventional refinance has become increasingly difficult. Traditional lenders focus heavily on income, debt service ratios and the borrower’s ability to make ongoing monthly payments.

A reverse mortgage places greater emphasis on the homeowner’s age, property and available equity, without requiring the same income qualification or regular payments as a conventional mortgage. This can improve monthly cash flow for homeowners living on fixed retirement income.

Does using home equity undermine an estate plan?

Many discussions about reverse mortgages begin with concerns about preserving equity for future heirs. That is an important consideration, but it is not the only one.

For many retirees, the larger question is whether they can comfortably afford to remain in the home they love while maintaining their independence and quality of life.

Sometimes using a portion of accumulated home equity during retirement is not a failure of financial planning. It is the very purpose of building that equity in the first place.

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Last modified: August 12, 2026