Reverse mortgages are not just for people low on cash. They can also be useful for retirees who want to minimize the government’s clawback of their Old Age Security (OAS) or other benefits.
Reverse mortgages are a type of loan. That means their proceeds are not added to your taxable income (i.e., they are tax-free).
This, in turn, ensures that the stream of income they provide does not adversely affect government benefits like Old Age Security (OAS), Guaranteed Income Supplement (GIS) and Canadian Pension Plan (CPP).
As of this writing (February 2018), the government starts clawing back OAS after $72,809 in annual earnings. In specific circumstances, using a reverse mortgage to prevent clawbacks and maximize government benefits can make economic sense.
If you need more guidance on this topic, the best bet is speaking with a licensed financial advisor.
Tip: What is OAS? OAS is a government pension. You qualify if you are 65 years of age or older and have lived in Canada for at least 10 years (if you’re a resident, 20 years otherwise). It is not mandatory that you have worked in Canada. Here are more qualifying rules.