Retiring with a Mortgage

Last week there was an article in the Toronto Star that discussed the amount of baby boomers who are putting off retirement or heading into retirement, still having not paid off their mortgage. With 35 year amortizations becoming the norm, most borrowers now, at least at the beginning of their mortgage, are looking at an end to their mortgage that is tickling the age, if not right into what they deem to be the age they want to retire. This isn’t necessarily a bad thing and may in fact end up being the reality. However, this doesn’t need to be the reality. Most mortgages come with flexible pre-payment plans. If you don’t want to be part of the percentage putting off retirement or still with a mortgage when you are retired, take advantage of your pre-payment options. It’s not difficult to calculate the effect that extra payments will have on the life of your mortgage. Talk to a professional, if you haven’t already, to develop your plan to get mortgage-free sooner, rather than later.

Below is the article that appeared in the Toronto Star on October 28, 2010:

Ontario baby boomers are looking to move to smaller homes in retirement. But first they have to pay off the mortgage.

A poll by TD Canada Trust released Thursday says 86 per cent of boomers want a smaller home when they retire. However, even though they say it is important to pay off the mortgage before they retire, it turns out less than half, or 43 per cent have actually done so.

One quarter of those boomers have paid off less than 40 per cent of their mortgage, meaning they have a ways to go before thinking about retirement.

About half says moving to a smaller home will help them save money, while more than a third says the new home, although smaller, will have more luxurious features.
“Moving to a smaller home can allow you to free up assets to put towards your retirement savings or enjoy in other ways,” said Farhaneh Haque, regional sales manager for TD Canada Trust.

Baby boomers are the post war generation born between 1946 to 1964,with the first wave approaching their retirement years. But an uncertain economy and falling stock markets over the last several years have meant that some boomers have had to hold back retirement or refinance their homes to stay afloat.

For their next property, boomers aren’t all rushing to the condo market either. More than half, or 61 per cent say they plan to buy detached. Condos came in second at 24 per cent. Top reasons for a detached house is that boomers still want a back yard and garden and really hate paying condo fees. Condos are popular because they require less maintenance and offer better security, and have amenities such as a gym or pool.

Meanwhile, another third of boomers are planning to buy a retirement property south of the border.

A quarter say “opportunities created by the depressed real estate market have sparked their interest,” according to the poll.

About ten per cent already own a vacation property, but another 12 per cent plan to buy on retirement.