Canada's Condominium Magazine

Is it so terrible to have a mortgage when you retire?

Research in England shows that almost a third of mortgage holders in that country will still be paying off their mortgages after they retire. The research was done for a mortgage company, which reports that the situation is “worrying” because those retired mortgage holders will no longer have a regular salary coming in and will have to rely on whatever pensions and savings they have to pay the mortgage. It sounds like the mortgage company finds this “worrying” for reasons of its own.

In Canada, even more of us (51 per cent) will be dragging that mortgage into retirement, according to a Bank of Montreal survey. But is it really so terrible? Does it mean we’ve failed somehow if we still have a mortgage in our sixties and later? Does it mean we will have an impoverished retirement?

Many experts today would answer no to all of those questions. Having a mortgage later in life is just a reflection of the new reality. Financial opinion that was taken as unquestionable a generation or two ago may not apply today. People live longer, work longer. Many have a more sophisticated understanding of the financial and equities markets. Why shouldn’t a person decide to get into the real estate market in his or her fifties or later?

The truth is, there are several sound financial strategies that could be better for you than getting rid of a mortgage as you approach your retirement years. What’s more, having that mortgage in your golden years may not be worrying at all, assuming you are not in dire straits and can afford to pay it. It is not always the best strategy to put every available dollar you have into paying down the mortgage. The better strategy is to balance present and future needs.

Don’t obsess about the mortgage: find the most profitable way to use your money

If you have other debt that carries significantly higher interest—credit card debt and student loans are two of the most common—it makes more sense to pay that debt off first. Mortgage interest rates have been very low for several years now. As long as they stay low, people are better off ridding themselves of the more crippling debt burden.
Financial gurus like Suze Orman stress that paying down high-interest debt, like credit cards, should always be the top priority, not making extra mortgage payments.

Your money could do better for you in a savings account or retirement plan. It is much worse to reach retirement without having sufficient funds than to reach retirement with a mortgage. If you aren’t already contributing to a retirement plan, or if you could contribute more, it may make more sense to use your money that way, rather than throwing it all at the mortgage just so you can be mortgage free. A person relying entirely on Old Age Security and the Canada Pension Plan could earn a maximum of around $1,500 a month in Ontario. That is obviously not enough to pay anything but the smallest mortgage, no matter how frugally a person lives. And you have to sell a house to get the money out of it, or resort to a reverse mortgage or the like.

You could do better investing your money. There are no guarantees in the stock market. In fact, investing in stocks can be a high-risk strategy. But if you have the stomach for it, and the benefit of good advice,  it is certainly possible to earn much more than the 3.5–4.5 per cent that you are paying on your mortgage. This could be a good way to diversify your financial strategy.

If you plan to sell your home when you retire, there’s no particular urgency about paying the mortgage off first. You can pay it off when you sell, and use that extra money more profitably in the meantime. does not advise or recommend any of the measures mentioned here, which are presented for information and entertainment only. 

Auberge on the Park-Tridel


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