A New Home Equity Product for Ages 55 to 70: What We Know, and What We Don't Yet

What was announced

On 15 October, HomeEquity Bank said it is launching a product that mixes features of a traditional loan with features of a reverse mortgage.

According to Canadian Mortgage Trends, the product, called HEB Advantage, gives eligible homeowners access to as much as 59 per cent of their home's value, paid out as a single lump sum. Borrowers make monthly interest payments on a portion of the loan for the first 10 years. After that, payments are no longer required as long as the borrower continues to meet the mortgage terms.

• Aimed at Canadian homeowners aged 55 to 70.
• Fixed and variable options.
• Primary residence with an appraised value of at least $250,000.
• An appraisal and independent legal advice are required.
• Final limits depend on age, income, credit profile, property value, location and an affordability assessment.
• Expected to be available near the end of October.

We have not seen the lender's product documents, so this article relies on that report and on the figures the bank gave it.

Where it sits next to the options you already know

HomeEquity Bank told the outlet it expands what its broker network can offer clients who want more equity with lower monthly payments than a traditional home equity line of credit (HELOC) would carry. A few plain-language contrasts, offered as general background rather than a comparison of products we have not seen:

• HELOC. Revolving credit secured on your home, usually with interest-only minimum payments, and it requires you to keep qualifying on an ongoing basis. See our piece on why the balance never moves.
• Traditional reverse mortgage. Generally designed so regular payments are not required while you live in the home, with the balance repaid when you sell or move. We covered when that can make sense.
• This hybrid. Some payments for 10 years, then none required while terms are met. That sits in between, and how it behaves in year 11 is exactly what has not been published.

The questions the announcement leaves open

Canadian Mortgage Trends notes the bank did not provide pricing or fees, did not say how the portion requiring monthly payments is determined, and did not explain how interest will be treated once payments end after 10 years. Those are the three details that decide whether a product like this suits a household.

With a lump sum, you also start paying on the full amount from day one, whether or not you need all of it. Borrowing only what you have a plan for is usually the safer instinct.

A sensible checklist before anyone signs

• Get the full written terms, including pricing, fees and how interest is applied after year 10.
• Ask what happens to the monthly payments if your income drops.
• Ask how the loan is repaid when you sell, move, or when the estate settles.
• Compare it against a HELOC, a standard refinance, downsizing, and a traditional reverse mortgage on the same house.
• Talk with family who may inherit the home, and take the independent legal advice that is required.
• Check how any monthly payment fits your retirement income, including income-tested benefits.

Our article on reverse mortgage versus downsizing shows how to set the options side by side. Once the terms are public, we will put this product through the same test.