Is a Reverse Mortgage Subject to HST/GST in Canada?

"Do I have to pay HST or GST on a reverse mortgage — on the interest, the fees, or the money I receive?" This question comes up frequently among Ontario seniors exploring a reverse mortgage, and the confusion is understandable. Canada's tax system applies HST (Harmonized Sales Tax) to most goods and services, yet financial products follow a different set of rules. The short answer is that reverse mortgage interest and loan proceeds are exempt from HST/GST, but some related fees and services do carry HST. This guide breaks down exactly what is taxed, what is not, and what Ontario homeowners should expect at closing.

This article is for educational purposes only and does not constitute financial advice.

The Fundamental Rule: Financial Services Are GST/HST-Exempt

Under the Excise Tax Act (Part IX), most financial services in Canada are exempt from GST/HST. This includes:

• Interest charged on loans, mortgages, and lines of credit
• Loan origination and underwriting services provided by the lender
• The lending of money itself
• Insurance premiums related to mortgage default insurance

According to the CRA, financial services as defined in subsection 123(1) of the Excise Tax Act are listed as exempt supplies in Part VII of Schedule V. This means that the core components of a reverse mortgage — the loan itself, the interest charged, and the disbursement of funds — are not subject to GST or HST.

This applies equally to all Canadian reverse mortgage lenders: HomeEquity Bank (CHIP Reverse Mortgage), Equitable Bank, Bloom Financial, and Home Trust.

What Is Exempt vs What Carries HST: Complete Breakdown

Here is where Ontario homeowners need to pay close attention. While the financial product itself is exempt, many of the ancillary services required to set up the reverse mortgage are standard commercial services subject to HST.

Component	HST/GST Status	Explanation
Reverse mortgage interest	Exempt	Financial service — no HST applies
Loan proceeds received	Exempt	Not a taxable supply — it is a loan
Lender setup/administration fee	Exempt	Part of the financial service
Home appraisal	Subject to HST (13%)	Professional service, not a financial service
Independent legal advice (ILA)	Subject to HST (13%)	Legal services are taxable
Title search and registration	Subject to HST (13%)	Legal/professional services
Title insurance	Exempt	Insurance is an exempt financial service
Mortgage broker commission	Exempt	Financial intermediary service
Courier and document fees	Subject to HST (13%)	Standard commercial services
Prepayment penalty (if applicable)	Exempt	Part of the financial service
Discharge fee (when repaying)	Exempt	Part of the financial service

The distinction comes down to the CRA's definition of a financial service. Anything provided directly by the lender as part of the lending transaction (interest, fees, penalties) is exempt. Anything provided by a third party (appraiser, lawyer, courier) is a standard commercial service subject to HST.

HST Impact on Closing Costs: What Ontario Seniors Actually Pay

Let us put real numbers on this for a typical Ontario reverse mortgage closing:

CHIP Reverse Mortgage (HomeEquity Bank) Closing Cost Example

Fee	Base Cost	HST (13%)	Total Cost
Lender setup fee	$1,795	Exempt	$1,795
Home appraisal	$450	$58.50	$508.50
Independent legal advice	$700	$91.00	$791.00
Title search and registration	$350	$45.50	$395.50
Title insurance	$300	Exempt	$300
Courier/admin fees	$75	$9.75	$84.75
Total closing costs	$3,670	$204.75	$3,874.75

The total HST on closing costs is approximately $205 — a modest amount in the context of the overall transaction. The largest fee — the lender's setup charge — is exempt.

Equitable Bank Closing Cost Example

Fee	Base Cost	HST (13%)	Total Cost
Lender setup fee	$995	Exempt	$995
Home appraisal	$400	$52.00	$452.00
Independent legal advice	$650	$84.50	$734.50
Title search and registration	$300	$39.00	$339.00
Title insurance	$275	Exempt	$275
Courier/admin fees	$50	$6.50	$56.50
Total closing costs	$2,670	$182.00	$2,852.00

With Equitable Bank, the total HST is approximately $182. The lower lender setup fee results in lower total costs overall. For a complete comparison of costs across all lenders, see our reverse mortgage closing costs breakdown for Ontario.

Why Reverse Mortgage Interest Is Exempt

Some Ontario homeowners question why interest — the largest cost component of a reverse mortgage over time — is not subject to HST. The answer lies in long-standing Canadian tax policy.

According to the Department of Finance Canada, financial services were exempted from the GST when it was introduced in 1991 (and subsequently from the HST when harmonization occurred). The rationale is that financial services are difficult to value-add tax consistently — the "value" of a loan is intertwined with the interest, risk pricing, and time value of money in ways that do not map cleanly onto a consumption tax framework.

This exemption applies to all mortgages — not just reverse mortgages. Whether you hold a conventional mortgage, a HELOC, a private mortgage, or a reverse mortgage from HomeEquity Bank or Bloom Financial, the interest charged is exempt from GST/HST across the board.

For a full analysis of how reverse mortgages are treated under Canadian tax law, see our detailed guide on CRA tax treatment of reverse mortgages.

Are Reverse Mortgage Proceeds Subject to Income Tax?

This is a separate but related question that often arises alongside the HST inquiry. The answer is no — reverse mortgage proceeds are not income and are not subject to income tax.

The CRA classifies reverse mortgage disbursements as loan advances, not income. This means:

• They do not appear on your T1 tax return
• They do not increase your net income
• They do not trigger OAS clawback
• They do not reduce GIS eligibility
• They are not subject to federal or provincial income tax
• They are not subject to GST/HST

This tax-free status is one of the primary advantages of a reverse mortgage over other income sources like RRIF withdrawals, pension income, or employment earnings. For Ontario seniors living on fixed incomes from CPP and OAS, the ability to access home equity without tax consequences is significant.

For more on this topic, read our comprehensive post on reverse mortgage tax implications in Canada.

HST on Related Services: What to Watch For

Beyond the closing costs, there are several related services that Ontario reverse mortgage borrowers may encounter — each with its own HST treatment:

Financial Planning and Advisory Fees

If you hire a financial planner to evaluate whether a reverse mortgage fits your retirement plan, their fees are subject to HST. Financial planning services are not classified as financial services under the Excise Tax Act — they are professional advisory services.

Real Estate Commissions (If You Later Sell)

When the reverse mortgage is eventually repaid through a home sale, the real estate agent's commission is subject to HST. On a $700,000 home with a 5% commission ($35,000), the HST adds $4,550. This is not a reverse mortgage cost per se, but it affects the net proceeds available to repay the loan and distribute to the estate.

Home Renovation Costs

Many Ontario seniors use reverse mortgage proceeds for aging-in-place renovations. Renovation contractors charge HST on their services. On a $50,000 renovation, the HST is $6,500 — a substantial additional cost. The CRA offers a GST/HST New Residential Rental Property Rebate for some circumstances, but this generally does not apply to personal residence renovations.

Property Insurance

Home insurance premiums in Ontario are exempt from HST (insurance is a listed financial service). However, Ontario levies a separate 8% provincial premium tax on most insurance products. This is not HST — it is a separate tax administered under the Ontario Insurance Act.

Ontario-Specific HST Considerations

Ontario's HST rate is 13% (5% federal GST + 8% provincial component). This is higher than some provinces:

Province	HST/GST Rate	Impact on Reverse Mortgage Closing Costs
Ontario	13% HST	~$205 on typical closing
British Columbia	5% GST + 7% PST	~$190 (PST exempt on some services)
Alberta	5% GST (no PST)	~$79
Quebec	5% GST + 9.975% QST	~$237
Nova Scotia	15% HST	~$237
Manitoba	5% GST + 7% RST	~$190

Ontario's HST on reverse mortgage closing costs falls in the middle range nationally. The difference between provinces is modest — typically $50–$160 — and should not be a factor in deciding whether to proceed with a reverse mortgage.

For a comparison of reverse mortgage costs across provinces, see our Ontario vs BC reverse mortgage comparison.

The Mortgage Broker's Role: Also Exempt

When you work with a reverse mortgage broker like Rick Sekhon, the broker's compensation is paid by the lender as a commission — and mortgage brokerage services are classified as exempt financial services under the Excise Tax Act. This means:

• You pay no HST on the broker's services
• The broker's commission does not increase your closing costs
• There is no tax consequence to using a broker versus going directly to the lender

According to FSRAO (Financial Services Regulatory Authority of Ontario), licensed mortgage brokers in Ontario are required to disclose all compensation arrangements. The broker commission on a reverse mortgage is typically paid by the lender and ranges from 0.5% to 1.5% of the loan amount — entirely exempt from HST.

Rick Sekhon can walk you through the complete cost structure — including which fees carry HST and which do not — during your initial consultation.

Common Misconceptions About Reverse Mortgage Taxation

Misconception 1: "I'll have to pay HST on the money I receive." False. The reverse mortgage proceeds are a loan advance — not a purchase of goods or services. No GST/HST applies to receiving loan funds.

Misconception 2: "The lender's setup fee includes HST." Generally false. The lender's administration or setup fee is part of the exempt financial service. However, always confirm with the specific lender, as fee structures can vary. HomeEquity Bank's $1,795 setup fee and Equitable Bank's $995 fee are both HST-exempt.

Misconception 3: "I can claim the HST on closing costs as an input tax credit." False for personal use. Input tax credits (ITCs) are only available to GST/HST registrants (businesses) who incur HST in the course of commercial activities. A personal reverse mortgage does not qualify.

Misconception 4: "Reverse mortgage interest is deductible for income tax purposes." Generally false for personal use. Reverse mortgage interest is only deductible if the borrowed funds are used to earn income from a business or property (e.g., investing in a non-registered income-producing account). Using the funds for personal living expenses, debt consolidation, or home renovations does not qualify for interest deductibility. The CRA is clear on this under paragraph 20(1)(c) of the Income Tax Act.

What About Land Transfer Tax?

While not directly related to HST/GST, Ontario homeowners sometimes confuse land transfer tax with HST in the context of a reverse mortgage. Important clarifications:

• A reverse mortgage does not trigger Ontario land transfer tax — you are not transferring ownership of your property
• If you use reverse mortgage funds to purchase a new property, that purchase is subject to land transfer tax (and Toronto's municipal land transfer tax if applicable)
• When the reverse mortgage is repaid through a sale, the buyer pays land transfer tax — not the seller

For more on land transfer tax and reverse mortgages, see our post on reverse mortgage and Ontario land transfer tax.

Frequently Asked Questions

Do I pay HST on reverse mortgage interest?

No. Reverse mortgage interest is classified as an exempt financial service under the Excise Tax Act. No GST or HST is charged on the interest that accrues on your reverse mortgage balance, regardless of whether you hold a CHIP Reverse Mortgage from HomeEquity Bank, an Equitable Bank product, or any other Canadian reverse mortgage.

Is the lender's setup fee subject to HST?

No. The lender's administration or setup fee is considered part of the exempt financial service. The $1,795 fee charged by HomeEquity Bank and the $995 fee charged by Equitable Bank are both exempt from HST.

Which reverse mortgage closing costs do have HST?

The home appraisal, independent legal advice, title search and registration, and any courier or document preparation fees from third-party providers are subject to Ontario's 13% HST. Title insurance is exempt. The total HST on a typical Ontario reverse mortgage closing is approximately $180–$210.

Are reverse mortgage proceeds considered taxable income?

No. Reverse mortgage disbursements are loan advances, not income. They are not subject to income tax, do not appear on your tax return, and do not affect your OAS, GIS, or any other income-tested government benefits. See our full guide on reverse mortgage tax implications.

Can I get a rebate on the HST I pay at closing?

For personal-use reverse mortgages, no. The Ontario New Housing Rebate and other HST rebate programs do not apply to reverse mortgage closing costs on a primary residence. The HST paid on the appraisal, legal advice, and other services is a final cost.

Does working with a mortgage broker add HST to my costs?

No. Mortgage brokerage services are exempt from GST/HST under the Excise Tax Act. Rick Sekhon's services as a licensed Ontario mortgage broker carry no HST cost to the borrower — the broker's compensation is a commission paid by the lender and is itself exempt from HST. There is no additional cost to using a broker for your reverse mortgage, and the retirement cash flow planning and living legacy guidance you receive is included at no charge.

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The bottom line: a reverse mortgage in Ontario is largely HST/GST-exempt. The interest, loan proceeds, lender fees, broker commission, and prepayment penalties all fall under the exempt financial services category. The only HST you will encounter is on third-party services like the home appraisal and independent legal advice — totalling approximately $180–$210 on a typical transaction. This should not be a material factor in your decision. If you have questions about the tax treatment of a reverse mortgage for your specific situation, Rick Sekhon can connect you with the right professionals to ensure everything is structured correctly.

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