reverse mortgage

Reverse Mortgage or Downsizing? An Honest Comparison

Published July 2, 2026 · By YYZ Mortgage

Sooner or later, most Ontario homeowners over 55 have this talk. It happens at the kitchen table. The house is worth a lot. Should we sell and downsize? Or stay put and tap the equity?

Both paths can work. Both have real costs that the brochures gloss over. This article lays out the honest math. It covers the Greater Toronto Area in mid-2026. It shows when downsizing truly wins. It also shows when a reverse mortgage is the better tool.

All dollar figures below are illustrative examples. They use a roughly average GTA home price. That is about $1.07 million, per TRREB’s May 2026 data. They are not quotes for any specific home.

What it really costs to sell and move in the GTA

Downsizing sounds like pure profit. Sell high, buy smaller, pocket the difference. But the deal costs are big. They come off the top.

Illustrative example: sell at $1,070,000, buy a $700,000 condo in Toronto

Cost item	Illustrative amount
Realtor commission (4–5% + HST on the sale)	$48,400 – $60,500
Land transfer tax on the new home (Toronto, provincial + municipal)	~$20,950
Legal fees (sale + purchase)	~$3,000 – $4,000
Pre-sale repairs, staging, painting	~$5,000 – $10,000
Moving, decluttering, junk removal	~$3,000 – $8,000
Total transaction costs	~$90,000 – $105,000

A few of these deserve a closer look:

Realtor commission is the big one. Selling a $1.07M home costs roughly $48,000–$60,500 in commission alone. That is at 4–5% plus 13% HST. Fees can be talked down. But even discount models rarely cut the total below tens of thousands. Not at GTA prices.
Toronto charges land transfer tax twice. Ontario’s land transfer tax on a $700,000 buy is about $10,475. Buy within the City of Toronto, and the city adds its own tax. That roughly doubles the bill, to about $20,950 combined. Buy in Mississauga, Vaughan or Durham instead? Then you pay only the provincial part. Where you buy truly changes the math.
The quiet costs add up. New furniture that fits the smaller space. Window coverings, condo moving fees, utility hookups. Downsize into a condo? Then monthly maintenance fees are a lasting line in your budget.

Bottom line: expect roughly 8–10% of your sale price to vanish in these costs. That is on an average GTA sale. In our example, you sell at $1,070,000 and buy at $700,000. After roughly $95,000 in costs, you free up about $275,000 in net equity. That is real money. But it is a long way from the $370,000 gross difference.

What a reverse mortgage offers instead

A reverse mortgage lets homeowners 55+ borrow against their home. There are no monthly payments required. Lenders advertise up to 55% of its value. Some products for borrowers 70+ reach as high as 59%. You repay the loan when you sell or move out for good. Or when you pass away. Until then, interest is added and compounds. You stay on title. The major lenders also offer a no-negative-equity guarantee. It is a promise. You will never owe more than the home’s fair market value (the price it would sell for). That promise holds as long as property taxes, insurance and upkeep are kept current.

How much can you get? Age matters most. A rough estimate: a 70-year-old might get 30–40% of the home’s value. On a $1.07M home, that is somewhere around $320,000 to $430,000. (These are estimates only; lenders price each file on its own.) Get a personal figure in minutes with our reverse mortgage calculator. Our qualification page shows what lenders look at.

The trade-off is interest. Reverse mortgage rates in mid-2026 run from the low-6% to mid-8% range. It depends on the lender and product. That is roughly 1.5–2.5 percentage points above regular mortgages. There are no payments. So the balance compounds — it grows on itself. Over ten years, that takes a real bite from what your estate gets. We walk through the full math in Reverse Mortgages and Your Estate.

The things a spreadsheet can’t capture

Money is only half of this decision.

Community and routine. Your street. Your neighbours, your doctor, your place of worship. The grandkids twenty minutes away. Downsizing often means leaving your area for good. At GTA prices, the smaller home you can afford is often in another city. Surveys keep finding the same thing. Most older Canadians want to age in place. If that is you, it deserves real weight, not guilt.

The house itself. A garden you love is one thing. Stairs you can no longer manage. A roof due to be replaced. And 2,400 square feet to heat and clean. That is another thing. Sometimes the honest answer is plain. The home no longer fits the life.

The stress of the move itself. Clearing out 40 years of things is a huge job. For many retirees, it is one of the hardest they ever face. It is not a reason to avoid a good money decision. But pretending it is easy helps no one.

When downsizing truly wins

We arrange reverse mortgages. We will still tell you plainly: sometimes selling is the better move. Downsizing tends to win when:

You need a large amount of equity. A reverse mortgage tops out at 55–59% of value. At younger ages, it is often less. Need more than that? Selling is the only way to unlock the rest.
You want zero interest cost. The money you free by selling never compounds against you. Is your main goal the largest possible estate? That settles it.
The home is a burden. A large house has ongoing costs. High upkeep, property taxes and utilities. A smaller home cuts them for good.
You’d be happy — or happier — somewhere else. Closer to family. A walkable condo. A smaller town. Does the move improve your life anyway? Then the costs buy something real.

When a reverse mortgage wins

A reverse mortgage tends to be the better fit when:

Staying in your home and community comes first. It turns equity into cash. No moving van. No goodbye to the neighbourhood. No monthly payment.
The amount you need is modest. Say you need $150,000–$300,000, not every dollar of equity. Borrowing it can mean far less upheaval. And remember: downsizing has its own six-figure “fee” in selling costs.
The market is a bad time to sell. As of May 2026, GTA average prices were down 4.6% year over year. Sales rose, and new listings fell sharply — a market in flux. A reverse mortgage lets you tap equity now. You do not lock in a sale price you dislike. (Timing cuts both ways, of course. Would you also be buying in the same market? Then the weakness partly nets out.)
You want to fund aging in place. A main-floor bedroom, a walk-in shower, a stair lift. Changes like these can make the current home work for many more years.

Don’t forget the middle options

Reverse mortgages are not for everyone. Neither is selling. Do you have solid retirement income? Then a HELOC may work. So can a regular refinance. Both can unlock equity at lower rates than a reverse mortgage. The catch: both need monthly payments. And you must qualify on income. Still carrying a mortgage into retirement? We look at one strategy in Using a Reverse Mortgage to Pay Off Your Existing Mortgage. Has something you’ve heard made you wary? Check it against 7 Reverse Mortgage Myths, Debunked.

A licensed mortgage professional is expected to walk you through these choices. In Ontario, regulators check that these products truly suit older borrowers. It is a named priority. And lenders require independent legal advice before any reverse mortgage funds. That means your own lawyer, separate from the lender’s.

A simple way to decide

Try this three-question test:

If money were equal, would you rather stay or move? Answer honestly. It does most of the work.
How much cash do you truly need? More than ~50% of your home’s value points to selling. A modest amount keeps both doors open.
Compare the two costs. Downsizing an average GTA home costs roughly $90,000+. Those are one-time selling costs. Weigh that against the compound interest you would pay on what you borrow. Run your own numbers in the reverse mortgage calculator. Then read the full Ontario guide or browse the FAQ.

Whichever way you lean, get the numbers on paper first. And take your time. Both of these doors stay open longer than you think.

This article is general information, not financial, legal or tax advice. Mortgage products are subject to lender approval (OAC). Rates and product details change — confirm current terms before deciding. Speak with a licensed mortgage professional about your situation.

Frequently asked questions

How much does it cost to downsize in the GTA?

Budget roughly 8 to 10 percent of your sale price once everything is counted. On an average GTA home around $1.07 million, the bill can total about $90,000 to $105,000 — realtor commission of 4 to 5 percent plus HST, land transfer tax on the new home (doubled in Toronto), legal fees, moving, and pre-sale prep. The exact figure depends on your commission rate, where you buy, and how much prep the home needs.

Is a reverse mortgage better than selling your house?

Neither one is always better. Downsizing usually frees more equity and stops interest from compounding, while a reverse mortgage lets you stay in your home and community with no monthly payments. The right answer depends on how attached you are to your home, how much cash you need, and how the selling costs compare with projected interest.

Do you pay land transfer tax twice in Toronto?

In effect, yes. Buyers within the City of Toronto pay both the Ontario land transfer tax and a city tax set on similar brackets, which roughly doubles the bill. On a $700,000 purchase that is about $20,950 combined, versus about $10,475 for the same purchase outside Toronto.

How much can I get from a reverse mortgage instead of selling?

Canadian lenders advertise up to 55 percent of your home's value, and some products for older borrowers reach as high as 59 percent. The amount depends mainly on your age, your home's value and location, and the product. A 70-year-old might access roughly 30 to 40 percent as an estimate — use a calculator or a broker quote for a real number.

What are the alternatives to both downsizing and a reverse mortgage?

A home equity line of credit (HELOC) or a regular refinance can unlock equity at lower interest rates, if your income supports the monthly payments. Renting out part of your home is another option some retirees use. A licensed mortgage professional should walk you through all of these before you commit to anything.

Figures shown are estimates only — not an offer of credit or a commitment to lend. The amount you may qualify for depends on the lender's assessment of your age(s), property type, location, appraised value and any existing liens. Reverse mortgage lenders require independent legal advice before funding. A reverse mortgage is not suitable for everyone; alternatives include refinancing, a home equity line of credit, or downsizing.