Government Benefits and Reverse Mortgages
A common concern among Canadian seniors considering a reverse mortgage: will the funds affect my government benefits? Here’s what you need to know about reverse mortgages and programs like OAS, GIS, and the Allowance.
The Good News: Tax-Free Funds
Money received from a reverse mortgage is not considered income. It’s a loan secured against your home, similar to receiving funds from a line of credit. This has important implications for your benefits.
Impact on Specific Benefits
Old Age Security (OAS)
Reverse mortgage funds do not count as income for OAS clawback calculations. The OAS recovery tax (clawback) is triggered when net income exceeds a threshold. Since reverse mortgage funds aren’t income, they won’t push you into clawback territory.
Guaranteed Income Supplement (GIS)
GIS eligibility is based on income. Reverse mortgage funds are not considered income, so they won’t disqualify you from GIS or reduce your GIS amount.
The Allowance and Allowance for the Survivor
Same principle applies — these income-tested benefits are not affected by reverse mortgage funds.
✓ Asset Testing
Some provincial programs use asset testing in addition to income testing. While reverse mortgage funds in your bank account are technically an asset, the home equity backing the mortgage is also reduced. Speak with us about your specific provincial benefits.
Compare to Other Income Sources
This is where reverse mortgages can actually be advantageous. Consider how other income sources affect benefits:
- RRSP/RRIF withdrawals: Count as taxable income — can trigger OAS clawback and reduce GIS
- Part-time work: Counts as income — affects income-tested benefits
- Investment income: Counts as income — taxable and affects benefits
- Reverse mortgage: Not income — no impact on income-tested benefits
💡 Strategic Planning
Coordinate with your financial plan. For some retirees, using reverse mortgage funds instead of RRIF withdrawals can preserve more GIS eligibility and reduce overall taxes. Consider working with a financial advisor alongside your mortgage planning.
Alberta and BC Specific Programs
Both Alberta and British Columbia have provincial seniors benefits that may be affected by income. The Alberta Seniors Benefit and BC’s Senior’s Supplement are income-tested. Reverse mortgage funds typically don’t affect these, but we recommend confirming with provincial authorities.
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