Retiring from practice.
What a lender reads next.

A retired physician can still qualify for a line of credit or a mortgage, but the lender reads the income you can document after you stop billing: CPP, OAS, RRIF withdrawals, pensions, investment income and dividends from your medical corporation. The cleanest results usually come from arranging a home equity line of credit while your practice income is still on your tax returns, because a HELOC is capped at 65% of your home value and still needs a stress test at a bank. A reverse mortgage is a separate option from age 55 that needs no regular payments but grows the balance over time.

A lender approves a line of credit or a mortgage on income it can verify on the day you apply. While you are still billing, that is your practice income, shown on your notices of assessment and, if you are incorporated, your corporate financial statements. The month after you stop, the picture changes. Practice income winds down and retirement income takes over, often at a lower level and with a shorter paper trail.

That is why many physicians who plan to keep borrowing room in retirement set it up in the last year or two of practice. Nothing forces you to do it that way, and a retired physician can still qualify. It is simply easier to document a full practice income than a pension that started three months ago.

Retirement income comes from several places, and each one arrives with different paperwork. A lender adds up what it can document and applies the same debt ratios it uses for anyone else.

The RRIF minimum is set by a federal formula. At age 70 or younger the factor is 1 divided by (90 minus your age). At 71 it is 5.28% of the balance at the start of the year for most RRIFs, and it rises each year after. A lender reads the payments you actually receive, so a RRIF that pays only the minimum shows less income than one drawing more.

For incorporated physicians, the corporation often holds most of the savings. When practice income stops, dividends become your paycheque. Lenders differ on how they read that: some look only at what you paid yourself on your personal returns, others review the corporate statements to see what the company can support. This is a place where matching the file to the right lender matters more than the rate.

There are four common ways to keep borrowing room in retirement. They differ on what secures them, how much they allow, and whether you have to make payments.

A HELOC has its own equity tests. A standalone HELOC needs more than 35% equity in the home, and one combined with a mortgage needs 20%. You also have to pass the stress test to get one at a bank, which means showing you can carry payments at the greater of your contract rate plus 2% or 5.25%.

A reverse mortgage works the other way around. It does not ask you to qualify on income for a payment, because there is no regular payment. You repay the loan and the interest when you sell or move. That makes it useful for some retirees, but the balance grows over time and reduces what is left in the home.

Getting the line approved is half the job. The other half is knowing what the lender can still change. The Financial Consumer Agency of Canada says a financial institution may lower a HELOC limit at any time and may ask you to pay the full amount. Most HELOCs carry a variable rate based on the lender's prime rate, and a federally regulated institution has to tell you in writing within 30 days of changing it.

• A variable rate means your interest cost moves when prime moves. Budget for a higher payment, not just today's.
• Interest-only payments keep the payment low but never reduce the balance.
• If you sell the home, a HELOC has to be repaid from the sale.
• A reverse mortgage can limit other borrowing on the same home, and you may need to pay off an existing HELOC to get one.

A short list, in the order that keeps the most options open.

1. Pull your last two notices of assessment and, if incorporated, your last two years of corporate statements. That is the income a lender reads while you are still practising.
2. Read your professional line of credit agreement and ask your lender in writing what happens to the line when your income changes.
3. Decide with your planner when CPP, OAS and RRIF payments will start, since those dates set the income a lender can see later.
4. If you want a HELOC, apply while your practice income is still on your returns, and ask for a limit you will actually use.
5. If you are 55 or older and expect little retirement income, compare a reverse mortgage with a HELOC side by side, including the fees and how the balance grows.
6. Get advice before you take any line that will be used to fund living costs.

If you are an Ontario physician within a few years of retirement, a short call can map your current income, your corporation and your home equity against the options above, so the borrowing room is in place before you need it.

Figures in this guide come from the sources below. Each entry shows the date the source published it, or the date it was accessed when the source does not state one. The page carries a review-by date; after October 2027 treat any number as a starting point and check the source.