Better Than A Lower Rate – Get 0% Interest On Part Of Your Reverse Mortgage
Like with any mortgage, getting a good rate is a smart move.
But in this post I’ll show you a way that can save you even more than a low rate – because it gives you a 0% interest rate on part of your mortgage.
I’ll also walk through a real example that saved someone $45,000 in interest. This is real and this works.
Let’s take a look.
As always, you can watch the video version or read the full article below:
Before The Details: What Is A Reverse Mortgage
A reverse mortgage is a loan available to Canadian homeowners aged 55 and older.
Unlike a regular mortgage, you don’t make any monthly payments.
Instead, the loan is repaid when you sell the home or pass away.
You can borrow up to 55% of your home’s value—typically between 10% and 55% depending on your age, the type of property, and its location.
Any existing mortgage on your home must be paid off first using the reverse mortgage funds.
It’s designed to help you access your home equity in retirement, while continuing to live in your home.
Pay Less Interest (Regardless Of Your Rate)
So there is one key strategy that makes all of this work and that is:
With a reverse mortgage, you don’t need to take all the money upfront.
It’s one of the biggest differences between a reverse mortgage and a regular mortgage.
With a regular mortgage – you’re charged interest on all the money from day one.
With a reverse mortgage – you only pay interest on the money you actually take out.
That means you can pay less interest no matter what rate you get.
This is the hidden power of reverse mortgages.
Unlike a traditional mortgage loan where the clock starts ticking on every dollar the moment it lands in your account, with a reverse mortgage, unused funds don’t cost you a thing.
If you don’t touch it, you don’t pay interest on it. Period.
Reverse Mortgage vs Regular Mortgage
I’ll use some numbers to help illustrate the point.
Let’s say you borrow $300,000 on a regular mortgage. You will get charged interest on $300,000 immediately.
With a reverse mortgage, you could take $100,000 now and leave $200,000 for later – paying 0% interest on the $200,000 until you use it.
This makes a reverse mortgage more like a Home Equity Line Of Credit (HELOC) than a mortgage.
It also makes reverse mortgages way more flexible than people realize.
You’re not locked into a lump sum – you can stagger your withdrawals to match your actual needs.
That $200,000 you leave untouched? It’s sitting there as emergency or future-use money – without costing you a dime in interest until you actually draw from it.
Paying 0% Interest
If you qualify for $300,000 in reverse mortgage fund and you take $100,000 now.
The other $200,000 sits there for when you need it.
You’re paying interest only on the $100,000.
The other $200,000 is effectively sitting at 0% interest.
This is where the real savings kick in. By taking only what you need now, you delay interest charges on the rest.
And because reverse mortgages compound semi-annually, every dollar you avoid borrowing now is a dollar that avoids years of compounded growth.
The longer you leave it untouched, the more interest you save.
Borrowing Smarter vs A Lower Rate
This is a way to borrow smarter – not just cheaper.
You delay the compounding interest from starting and building up from day 1.
You also gain flexibility – you can take the money when you need it, not all upfront.
Since you control the draw schedule, you’re also effectively controlling how fast the interest grows.
You’re using the loan as a reserve fund, not a debt burden – and that’s the smartest way to use a reverse mortgage.
Real Life Example & Savings
Let’s look at an actual scenario:
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Home value: $1,000,000
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Approved reverse mortgage amount: $300,000
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Option 1: Take the full $300,000 upfront at 6.5%
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Option 2: Take $100,000 upfront, then withdraw $3,333/month (totaling $200,000 over 5 years), all at 6.5%
Here’s how the numbers played out:
Option 1:
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At the end of 5 years, their home was worth $1,220,997
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The reverse mortgage balance was $414,872
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They had $806,124 in home equity (up $106,124 since they took the reverse mortgage out)
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Option 2:
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- At the end of 5 years, their home was worth $1,220,997
- The reverse mortgage balance was $369,601
- They had $851,396 in home equity (up $151,396 since they took the reverse mortgage out)
Total Savings Using Option 2 = $45,272
Same rate. Same lender. Same amount.
Over $45,000 less interest paid because you used a smarter strategy.
That’s over $45,000 more equity left in the home – just by borrowing smarter and timing your withdrawals.
No rate shopping, no negotiation – just a smarter draw schedule.
That’s the power of understanding how reverse mortgages really work.
Are There Any Catches?
Yes – and it’s important to be aware of them:
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Existing debt must be paid off
If you have a mortgage or HELOC already, it usually has to be paid off in full with the reverse mortgage funds.
That might mean you’re forced to take more upfront than you’d prefer, just to clear the balance.
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Rate risk – future withdrawals might have a different rate
Rates can change over time and your future withdrawals will reflect this – they won’t necessarily be at the same rate you get on your initial funds.
Of course, this means rates can go both up and down – if they go down the savings are even larger.
But it does mean there’s some uncertainty there.
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Lender risk – hidden costs, rates & fees
Some lenders are far better than others when it comes to how they handle future withdrawals.
Some charge fees on each withdrawal. Some charge higher rates too.
Essentially, the lender may not want you to follow this strategy – so they may make the rates and fees very high.
If you want to benefit the most from this approach, you need to pick the right lender up front.
That’s why it’s absolutely critical to work with a professional who understands how each lender treats this strategy.
Summary – Better Than A Low Rate – Getting 0% On Your Reverse Mortgage
With a reverse mortgage, you don’t have to take the full amount upfront.
This is one way in which a reverse mortgage is different to a regular mortgage.
If you take money more gradually, you keep the rest at 0% interest until you need it.
That can save you thousands of dollars – in this article I showed you a real life example with over $45,000 in interest savings.
Just make sure you choose a lender who supports this strategy and doesn’t add in hidden rates, costs and fees when you go to withdraw your money.
A good rate is important – but a smart strategy is better.
If you structure your reverse mortgage the right way, you can preserve more of your equity, reduce total interest paid, and stay flexible for whatever the future holds.
Get A Free Professional Reverse Mortgage Assessment In 90 Seconds
If you’re interested in using this strategy – or just want to know how much you qualify for – I can help.
I’ll show you what each lender offers, including all the hidden costs, a full lender comparison table and help you figure out the smartest way to borrow.
Of course, I will also show you the rate – as well as costs and fees – on future withdrawals if you want to use the strategy I just talked about.
It’s completely free and only takes 90 seconds:
ReverseMortgagePros.ca/Assessment
A Canadian Chartered Accountant and licensed Mortgage Professional – creator of Reverse Mortgage Pros – the #1 reverse mortgage specialists in Canada. I make it my mission to educate Canadians about how reverse mortgages work so that you can make an informed and educated decision that’s right for you and your family.
