A reverse mortgage may let an eligible homeowner fund spending without selling investments immediately. It also adds a debt secured by the home. Preserving an investment account balance is not the same as preserving your overall wealth.

When markets are unsettled, selling investments can feel uncomfortable. For homeowners in Surrey and across BC, home equity may appear to offer breathing room. A useful comparison looks at both sides of the household balance sheet: the investments you keep and the borrowing costs you take on.

Start with the spending need and the time horizon

Write down the amount needed, when it is needed and whether it will recur. A one-time purchase, a temporary budget gap and a permanent retirement-income shortfall require different plans.

Also consider how long you expect to remain in the home. A borrowing arrangement intended to last many years can work out differently if you sell or move sooner. Ask for an early-exit comparison before deciding based on a long-term illustration.

Compare net wealth, not just the investment balance

Consider a simplified example. A household has $200,000 in investments and needs $20,000 for spending. Withdrawing $20,000 leaves $180,000 before taxes, fees or market changes. Borrowing $20,000 and spending it leaves the account at $200,000, but creates a $20,000 debt before borrowing costs.

Immediately after the spending, the investments less that new debt total $180,000 in either case. The future outcomes can differ because of returns, taxes, fees and interest. This example is only an accounting comparison; it does not assume that borrowing is available in that amount or that either choice fits a particular household.

A fuller analysis also includes the home, existing debts and the cash you need to keep available. If a reverse mortgage must repay an existing mortgage, its opening balance may be much larger than the spending money you receive.

Understand the risk of relying on a market recovery

Selling investments after a decline leaves fewer assets available to participate in a later recovery, if one occurs. That is a reason to plan withdrawals carefully, but it is not a guarantee that holding investments will be the better financial outcome.

Keeping the investments exposes you to further losses while borrowing costs continue. A recovery could take longer than expected or produce returns below the cost of the loan. Avoid a plan that only works if investments rise quickly or the home increases steadily in value.

Ask your financial adviser to compare a range of outcomes, including flat returns, further declines, a slow recovery and an earlier move. A mortgage illustration on its own cannot answer the investment-planning question.

Include the full cost of the reverse mortgage

Reverse mortgages generally allow eligible homeowners aged 55 and older to borrow against their principal residence without regular loan payments while meeting the contract's conditions. Interest that is not paid adds to the balance.

The Financial Consumer Agency of Canada explains that reverse-mortgage rates are generally higher than traditional mortgage or HELOC rates. Other expenses can include appraisal, legal and setup costs, along with charges for early repayment.

Request the actual fees and projected debt over the period you intend to borrow. Include ongoing homeownership costs in your budget and confirm the conditions that can make the loan repayable. Keeping an investment portfolio does not remove those obligations.

Account type and taxes can change the result

A withdrawal from one account can have different consequences from a withdrawal from another. The amount you sell may not equal the after-tax cash available to spend. Minimum withdrawals, benefit calculations and investment-income effects may also matter in an individual plan.

Have a qualified financial or tax adviser assess the accounts you actually hold. Although the FCAC describes reverse-mortgage loan proceeds as tax-free, that does not mean every strategy involving those proceeds is tax-free. Nor does it make the borrowing cost disappear.

Use this checklist before choosing a funding source

1. Define the net amount needed. Include any tax allowance on a withdrawal and all fees on a proposed loan.

2. Compare the same dates. Use identical one-, five- or ten-year horizons for the investment and debt scenarios.

3. Stress-test assumptions. Include weak markets, higher future borrowing rates and a lower-than-expected home sale price.

4. Consider smaller steps. Compare a partial withdrawal, a smaller advance, staged spending or a mix of sources.

5. Protect flexibility. Leave room for repairs, care needs, a move and changes to the household.

6. Coordinate the advice. Ask the mortgage broker, financial planner and tax adviser to work from the same spending and housing assumptions.

Common questions about preserving retirement savings

Does a reverse mortgage protect me from investment losses?

No. It may postpone a sale, but the investments can still fall in value while interest accumulates on the loan.

Should investment returns simply be compared with the mortgage rate?

That is incomplete. Include taxes, fees, the uncertainty of returns, compounding, withdrawal timing and the possibility that plans change.

What if preserving an inheritance is a priority?

Compare the expected estate as a whole. A larger investment account may be offset by a larger mortgage balance and repayment costs. Discuss the plan with your advisers and the people who would manage the estate.

Explore borrowing capacity without treating it as investment advice

The Rossander reverse mortgage calculator can help you explore an illustrative borrowing estimate and equity projection. It does not forecast portfolio returns or establish that borrowing will leave you better off.

Book a consultation with Tony Rossander to review the financing side of the decision, then compare that information with advice about your investments and taxes.

General educational information, not an investment recommendation or individual financial, tax or legal advice. Figures are hypothetical. Eligibility and loan terms vary. Featured image is AI-generated illustrative photography.