Reverse mortgage vs. Home Equity Sharing Agreement: Which fits GTA homeowners?
A reverse mortgage is one way to turn home equity into cash without a monthly payment. A Home Equity Sharing Agreement (HESA) is another. Here is how the two compare and which homeowners each one tends to suit.
Reverse mortgages are having a moment in Canada. HomeEquity Bank, the country’s only Schedule I bank dedicated to reverse mortgages, reported more than $1 billion in reverse mortgage originations for the fourth year in a row, and more homeowners are asking how to turn home equity into cash without a monthly payment.
A reverse mortgage is one way to do that. A Home Equity Sharing Agreement (HESA) is another. If you are looking for a reverse mortgage alternative in Canada, here is how the two compare and which homeowners each one tends to suit.
What is a reverse mortgage?
A reverse mortgage is a loan secured against your home, available to homeowners 55 and older. You do not make monthly payments, but interest is charged on the balance and compounds until you sell, move or pass away. As of October 2026, NerdWallet listed CHIP Reverse Mortgage fixed rates between 6.99% and 7.59%, depending on the term.
Any existing mortgage generally has to be paid off as part of the transaction. That means part of the money you access goes to clearing your current mortgage before any of it reaches what you actually need it for.
What is a Home Equity Sharing Agreement?
A HESA is not a loan. HEQ gives you an upfront Initial Payment and, in exchange, receives a share of your home’s future change in value when you settle, whether that value rises or falls. As HEQ Founder Shael Weinreb puts it, the key difference comes down to sharing versus borrowing.
There is no interest, no monthly payment, and no age requirement. Eligible homeowners can keep their existing first mortgage in place, with HEQ’s interest registered on title behind it. You can read more on our HESA explainer page.
Reverse mortgage vs. HESA at a glance
| Reverse mortgage | HESA | |
|---|---|---|
| Age requirement | 55 and older | None |
| Monthly payments | None | None |
| Interest | Compounds on the growing balance | None |
| Existing mortgage | Generally paid off first | Can stay in place, if your mortgage plus the Initial Payment is 75% or less of your home’s value |
| If your home’s value falls | You still owe the full balance plus interest | HEQ shares in the loss when you sell on the open market after the first three years |
| Term | Until you sell, move or pass away | 10 years, renewable at HEQ’s sole discretion |
| Early exit | Prepayment charges may apply | No prepayment penalty on a Homeowner Buyout |
| What it costs you | Interest that grows over time, plus setup and closing costs | A one-time 3.90% Transaction Fee and closing costs, plus a share of your home’s future change in value |
For a deeper side-by-side, see our HESA vs. reverse mortgage page.
What does the difference look like in practice?
Take a retired GTA homeowner with a $1,000,000 home and a $200,000 mortgage they are happy with. They want $100,000 to help with the cost-of-living crisis.
With a reverse mortgage, the $200,000 mortgage generally has to be cleared first. To end up with $100,000 for their plans, they would need to borrow about $300,000, if they qualify for that amount. At a rate of about 7%, that balance would nearly double to almost $600,000 over 10 years.
With a HESA, they keep their mortgage and receive a $100,000 Initial Payment, which makes their Investment Percentage 10%. HEQ measures the change in value from a Starting Agreed Value, which is the appraised value less a 5% Risk Adjustment, or $950,000 in this case. If the home later sells for $1,000,000, the $50,000 difference counts as a gain. HEQ’s share of a gain is four times the Investment Percentage, or 40%, which is $20,000. That makes the total repayment $120,000.
If the home’s value rises further, they repay more. If it sells for less than $950,000 after the first three years, HEQ shares in the loss, and they repay less than the $100,000 they received. HEQ shares in a decline below the Starting Agreed Value only when you sell your home on the open market after the first three years. Loss sharing does not apply to a Homeowner Buyout.
Which homeowners does each option suit?
A reverse mortgage can suit retirees 55 and older who plan to stay in their home for life, have little or no mortgage left and are comfortable with the balance growing over time.
A HESA can suit homeowners who:
- Want to keep a mortgage that is already working for them
- Would rather not pay compounding interest
- Expect to sell or settle within 10 years
What about your estate?
With a reverse mortgage, compounding interest can significantly reduce the equity left for your heirs, especially over an extended period. With a HESA, the amount owed is your Initial Payment plus or minus HEQ’s share of the change in value, with no interest added on top. If the last signatory on the HESA passes away, the estate settles the agreement through a sale or buyout within 180 days.
Frequently asked questions
Is a HESA a type of reverse mortgage?
No. A reverse mortgage is a loan with interest. A HESA is an equity partnership with no interest and no monthly payments.
Can I get a HESA if I am under 55?
Yes. A HESA has no age requirement.
Do I have to pay off my mortgage to get a HESA?
No. Eligible homeowners can keep their first mortgage, as long as their mortgage balance plus the Initial Payment is 75% or less of the home’s appraised value.
Who qualifies for a HESA?
Homeowners with at least 30% equity in detached, semi-detached homes, and freehold townhomes in HEQ’s GTA service area where they live for at least 180 days a year (i.e., their principal residence), and a credit score of 500 or higher. HEQ looks at your overall financial picture rather than income alone.
Before you reverse, explore the alternative
Both options let you access home equity without a monthly payment. The difference is what you give up in return: compounding interest on a growing loan, or a share of your home’s future change in value. Get your free estimate at theheqpartners.com.
Comparing your options? Talk to the HEQ team. Get in touch with HEQ to see how a Home Equity Sharing Agreement compares for your home.
Example figures are illustrative, exclude fees and closing costs, and assume a constant reverse mortgage rate of about 7%. Reverse mortgage amounts depend on age, property, and lender.