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The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

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Freedom 55 Financial is a division of The Canada Life Assurance Company and the information you requested can be found here.

5 things to consider when retiring with a mortgage in Canada

Key takeaways

  • There are ways to manage having a mortgage in retirement.
  • Alternatives to having a mortgage in retirement include downsizing your home, a reverse mortgage or renting a home.

Having a mortgage in retirement

Retirement is a time to celebrate. But it’s also a time to reflect on your finances, especially the role your home plays in your complete financial picture. And a lot of that depends on if you’re carrying a mortgage with you into retirement.

Can you retire with a mortgage? Certainly. There are ways to effectively manage this debt before and after retirement. You can start with effective financial planning and researching some of the tools available to help manage housing debt in retirement.

Prioritizing debt repayment

Middle-aged Canadians often focus on building their investments or helping children cover car or tuition payments while slowly paying down their mortgage. In some cases, this can result in people retiring with lots of investments but few “liquid” assets, like cash. It’s no reason to panic, but it may require some changes.

If you’re retiring with mortgage payments, it may be time to speak with an advisor, who can help make your money work effectively by prioritizing debt payments or if necessary, renewing a mortgage after retirement.

Variable rate mortgages in retirement

If your mortgage has a variable interest rate, and interest rates are rising, you may find your mortgage payment increasing. This could potentially make it challenging to continue making payments. 

Considering a reverse mortgage

If you’re over age 55 and own a home, you may be eligible for a reverse mortgageOpens in a new window. If you’re married, both of you must be age 55 or older to qualify.

Unlike a regular mortgage, a reverse mortgage allows you to access money using the equity in your home – without forcing you to sell. In fact, you may be able to borrow more than half the current value of your home, tax-free.

A few factors are considered by a lender when you apply for a reverse mortgage, including the amount of equity you have in your home, its location, your age (and the age of your spouse, if applicable), your home’s current value and current interest rates. Should you qualify, you can receive the money through a lump-sum payout, regular payments or some combination of the 2.

Regardless of how you receive the money, a reverse mortgage could be a good way to access cash for emergency expenses. That said, it’s important to note that interest rates for a reverse mortgage can be higher than a traditional mortgage and you may need to pay for a home appraisal and lawyer to finalize the agreement. There may also be limitations to how much you receive and when you can get it from a reverse mortgage, resulting in interest on funds you may or may not need.

What are the pros and cons of downsizing in retirement?

Although it depends where you live, in Canada we’re fortunate to be able to buy larger homes with big yards for households that include parents, a few kids and some pets. But as retirement nears and the kids head off to school, jobs and homes of their own, your need for space can decline.

That may present Canadians entering retirement with an opportunity to sell their home in favour of something smaller and less expensive. Downsizing could be an attractive option.

While you may miss your home and you may find the move stressful, downsizing could allow you to:

Renting after retirement

If you downsize, renting might also be a good option.

Instead of taking on another mortgage after selling your house, renting could allow you to take some of the money from the sale to pay off debts and other expenses. You could also invest it or use it to travel.

Additionally, renting could help you avoid unexpected costs, since most maintenance expenses are typically covered by the landlord.

What's next?

Now that you know more about how to retire with a mortgage, you may choose to meet with an advisor, or if your workplace benefits are with Canada Life, contact a health and wealth consultant to:

  • Understand the challenges of entering retirement with a mortgage.
  • Build a strategy to address your specific needs, help you enjoy your retirement and worry less about finances.

The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. 

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