“Our net average household income over the last three years while we paid this debt was $111,649,” says Trevor, who works for the Canadian government. © 2021 Financial Post, a division of Postmedia Network Inc. All rights reserved. Not only am I a single, first-time homebuyer, I also live in the second most expensive housing market in Canada, Toronto. Emily Tilson*, 66, a retired Hamilton, Ont., nurse, has been living mortgage-free for seven years. Instead of making monthly payments, the MacKenzies (who requested to use a different last name due to the sensitive financial information being shared) put money toward their goal every other week. Read more about cookies here. The more you put down, the less you have to pay back. “Our plan over the next five years to take all that money and save it and invest it for our future home,” Trevor says. And for those who have been able to pay off their mortgage already, the average time it … Building societies lent £12.7billion of gross new mortgages in the first three months of … But Karin Mizgala, a certified financial planner in Vancouver, says there are other things to consider — your tax bracket, for one. But as experts caution, this is an option only for savvy, financially secure investors who have a high tolerance for risk. The study found 16 to 34-year-olds to be more optimistic about when they can expect to be paying a mortgage off than older generations. On average these people have £40,000 left to pay. In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post. Average age for paying off mortgage increases by more than a decade. Among the shows Redmond produces is Burn My Mortgage on W Network. 365 Bloor Street East, Toronto, Ontario, M4W 3L4. In January, the 57-year-old marketing manager made the last $1,600 mortgage payment on her $700,000 three-storey home in a Halifax suburb, a house designed by her father in 1969 that she purchased from him in 2004 for $400,000. The age of becoming mortgage free in the UK now averages more than a decade older than a generation ago. By continuing to use our site, you agree to our Terms of Service and Privacy Policy. Buy a vacation property While Fairchild was busy paying down her mortgage, she was unable to put aside more than $100 a month in RESP savings for each of her school-age boys. Three quarters (75 per cent) of homeowners said they expect to pay off their mortgage in line with their original mortgage term, which on average is 22 years. Canadians now have over two trillion dollars in debt, with mortgage debt making up the vast majority of it, at $1.31-trillion. Fewer than one in four (23%) diverted the mortgage repayment ‘pay rise’ into their pension. She cautions homeowners to “be careful about thinking about your home in terms of an investment — an investment is something you will liquidate for your retirement. I said ‘you can’t afford, send a card’,” says Ms. Andreana, who thinks people should pay off their mortgage by age 50 so they can ramp up their savings for 10-15 years. I plan to pay off my 25-year mortgage 10 years early. Average age people expect to repay their mortgage is 57 and a half years; Some 16 per cent of adults will be over 65, or won't ever clear their home loan; How do you repay sooner? Sure, you could do the financially responsible thing and top up your RRSP, but along with the happy dance that comes with burning your mortgage, you may want to indulge a little. Thank you for your interest in Money Coaches Canada. Kelley Keehn, author of The Woman’s Guide to Money and six other financial books, suggests talking to realtors to help determine what types of home improvement will get you the most bang for your buck. 80 per cent of those with a mortgage in this age bracket believed they would be able to pay it off by the time they turn 65. Here are the details of their plan. However, there is a distinct generation gap when it comes to optimism over paying off their property loans. You might be tempted to “unlock” some of the equity in your paid-off home by borrowing against it and investing in mutual funds or stocks. How one Canadian couple managed to pay off their mortgage in only 5 years. The average homeowner typically makes monthly mortgage payments, so 12 payments in a year. 6. Splurge An open mortgage allows you to make extra payments throughout the year. We ask you to keep your comments relevant and respectful. Once you’ve paid off the mortgage on your principal residence, you may be ready to invest in another property. Paying off a mortgage can coincide with your kids leaving for university. ©2021 Money Coaches Canada. Please try again. This year individuals ages 50 and older can contribute $23,000 to a … “It gives me great pleasure to give gifts that are meaningful.”, 10. A one per cent difference on a $250,000 mortgage could save you about $40,000. The rental income covers all but $150 of her monthly costs. Then there's the fact that many people are staying in work for longer, which means a lack of income won't be an issue. Change your work life In the summer of 2014, they finished paying off the house, and gave themselves a budget break until the end of the year. “It’s a little more freeing, but nothing really changes. Now she plans to more than double that to $2,500 a year per child, which will allow her to get the maximum Canada Education Savings Grant of 20 per cent on the first $2,500 contributed. “Both of us went through university paying our way, and being debt-free was always kind of a goal.”, “When you pay off something quicker, you’re less likely to pay all that interest,” says Rebecca, a speech language pathologist. We apologize, but this video has failed to load. Having the weight of that payment lifted gave Fairchild the confidence to take a $100,000-plus buyout offer her employer proposed to staff. Getting shot of your mortgage by the time you reach retirement is a common and desirable financial goal, but higher property prices and a trend … That’s exactly the point — when you don’t add your money up for something specific, it essentially disappears. Reinvest in your home “But they can make up for this when the mortgage is done. They did it by making annual lump sum payments of $5,000 to $20,000 toward the mortgage principal and by giving up extras such as a second car. Shop around and don’t be afraid to negotiate. And if you opt for low-interest investments such as a GIC, which may pay only two per cent, you might be better off putting that money toward your mortgage and save the five per cent in interest costs. For example, some lenders are realising the fact that, because the average age of a first-time buyer is rising, many will be paying off their mortgage at a later age than has previously been the norm, and some are loosening their restrictions accordingly. “We looked at our finances scrupulously,” explains Rebecca. If you’ve been paying off your mortgage for a few years, you’ll usually have built up a bigger stake in your home than when you first bought it. “The more money you make, the more valuable the RRSP contribution is because you’ll realize more savings,” she says. These payments are applied directly to the principal, saving you thousands of dollars in interest costs over the life of the mortgage. The group says that the average age people expect to repay their mortgage is 57-and-a-half years. “It was inspired by my own experience,” she admits. As a guideline, they used the book “Enough Bull: How to Retire Well Without the Stock Market, Mutual Funds, or Even An Investment,” which recommends paying any debt — including your mortgage — before saving for retirement. By rebekah commane in Market news 16th July 2013 0. Keep your payment the same when you refinance at a lower rate “We lived in inner-city neighbourhoods or out on a farm.” Tilson says being mortgage-free has allowed her to be generous with her four children and five “Some people hate their job, so now they can think about either retiring sooner, working part-time or starting their own business,” says Mizgala. Example: Yes, I would like to receive emails from Money Coaches Canada. While Kit Redmond and her family made do with one vehicle during those years of scrimping and saving to pay off the mortgage, she now drives what she calls her “midlife celebration car” — a red Audi convertible. “The funniest part is it frustrates me that all the money we would have saved would have added up,” muses Rebecca about their savings break. Do you really want to be one of them? The hope is the investment will cover the cost of the loan and also generate extra income. Unauthorized distribution, transmission or republication strictly prohibited. “Every month we went over them together — we had all our receipts and were going over every dollar, from our utilities to extra spending. How one Canadian couple managed to pay off their mortgage in only 5 years, Illustration by Chloe Cushman/National Post, How one woman paid off $100,000 of debt in 5 years, The 17 worst excuses for not saving for retirement, tap here to see other videos from our team, Enough Bull: How to Retire Well Without the Stock Market, Mutual Funds, or Even An Investment. Today, she and her husband each earn six figures, but they’d managed to pay off a large amount of their mortgage when she was a stay-at-home mom and their household income was less than $100,000 a year. “When I was young, my brother — who is ten years older — said, ‘Did you know if you paid your house off in so many years you can save over $100,000? Move one step closer to retirement If you bought at 95% LTV, for example, after several years you may have paid off enough of your loan balance to remortgage at 90% and get a better rate. Put the kids through school. I don’t think we’re done.”. The money you might tap to pay off your mortgage could instead be used to max out your tax-advantaged plans. Customers can access residential mortgages between 5 and 35 years, with a maximum age of 70 at the end of the term. Lindsey Bryant, 38, and her partner Vicki Wright, 35, avoided a 35-year loan by paying off their £160,000 mortgage early and now own a £300,000 outright We’re both more or less type A. We’d set up our spreadsheet and every month we got to see big improvements: our mortgage coming down and our net worth coming up.”, It may have been fun when they looked at the numbers, but in the day-to-day, it wasn’t easy. Canadian household debt has just reached a new record high of 166.9 per cent of disposable income, meaning that the average Canadian owes $1.67 for every dollar they earn. One thing is clear, however: “The closer you are to retirement, the more aggressively you should be trying to pay down your mortgage.” According to a 2010 Royal Bank of Canada poll, nearly 25 per cent of retired Canadians still carry a mortgage on their primary residence. Over-50s fear that they will struggle to get a new mortgage deal. She gave one daughter a second-hand car, treated a grandson to Walt Disney World in Florida, pays for her grandkids’ violin and piano lessons, and helps send them to camp. Answered December 24, 2020. According to the TD Canada Trust report, 80 per cent of Canadians age 45 to 64 say their next move will be to a smaller home. This means that if your mortgage payment is $1,000 you’re paying $12,000 towards your mortgage every year. There was an error, please provide a valid email address. Instead of making monthly mortgage payments, the couple put money toward their goal every other week. (Twelve per cent of boomers plan to purchase a vacation property in their retirement, according to the TD Canada Trust report.) “She bought something she could pay off quicker,” Trevor says. When you make these 26 bi-weekly payments for 1 year (calculated as 52 weeks/2), you have essentially made 1 additional month of mortgage payments. Visit our Community Guidelines for more information and details on how to adjust your email settings. 1. To do that, contribute an extra 20 percent to your monthly mortgage … One in six homeowners will either be over 65 by the time they pay off their mortgage or will never clear the loan, new research reveals. Plenty of people want to still live in their home when they retire.”. The standard advice is to maximize your RRSP and apply your tax refund toward your mortgage principal each year. Reduce the amortization “At some point I may move out there, or sell it for about $400,000 in about 15 years’ time.”, 8. Opt for accelerated biweekly payments We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. This isn’t always the case, however. “Yes, I bought it with cash,” she says proudly. You’ll be making the equivalent of an additional mortgage payment per year, which can take almost five years off your mortgage. Give to others In 2009, shortly after Marianne Rogers* paid off the $143,000 mortgage on the Laval, Que., home she purchased in 1998, she put $45,000 on her line of credit to buy a $200,000 condo in Nanaimo, B.C. It’s a dilemma many Canadians ponder: What should be the biggest financial priority — saving for retirement or paying off the mortgage? This is also known as the accelerated payment option. You still have to pay that loan and now you’ve put your home at risk.”, 9. Another way to reduce the overall cost of your mortgage is to pay off your mortgage early. Paying off a mortgage can coincide with your kids leaving for … This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. For us, it was fun. That’s what Kit Redmond did. My pockets have holes and money just leaks out of them, and I’m okay with that,” she says. This is a popular strategy in Canada. This was an ambitious goal to say the least. “I don’t want to be paying for my kids’ education when I’m fully retired and want to take a trip to the Grand Canyon.”. “It can work if you make more money on the investment than you have to pay in interest, but it can also backfire,” explains Mizgala. This way, more of your payment will go toward the principal. Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. This is where the accelerated payment option can help you shave years off your mortgage term. For example, instead of making your mortgage payments once a month, you can choose an ‘accelerated bi-weekly‘ payment option that cuts your monthly payment into two, with each half payable every 2 weeks. Comments may take up to an hour for moderation before appearing on the site. I thought, ‘That’s kind of crazy,’ and I guess I’ve kind of carried it with me.”. “Once I moved in, we decided to accelerate the payments and find out the maximum amount we could put to the mortgage per month, and sat down to see if it was feasible,” explains Trevor. For example, if you put $1,000 a month into an RRSP from age 50 to 65, you’ll end up with about $260,000, based on a five per cent return.”, 2. “There’s nothing really to show for it. Get the best rate possible Make the biggest down payment you can afford RRSP or mortgage? “It’s an investment for my retirement,” says Rogers, 51. “It’s great to be able to help other families get rid of their mortgage.”, 5. Borrow against your home to invest more aggressively With a 30-year mortgage, make a plan to pay it off in 20, or preferably 15 years, he says. Toronto mortgage broker Paul Roberts says lenders are not keen on giving seniors mortgages because of the ramifications if they can’t pay. “Because my husband and I are older parents, it’s even more important we get as much money as possible locked away now,” she says. If you are part of a couple, you may find one of you can quit work and you can live on one salary instead of two. If they haven’t yet hit university age, you can use the extra cash to top up your RESP contributions. Using our 25-year $400,000 mortgage scenario, your m… If you no longer want the hassle of a large home, you can sell your property, move to a smaller house, condo or apartment, and sock a lot of money away. Undertaking a renovation or an addition once your mortgage is paid off can increase your home’s value and give you more money once you sell it. You can put the reno expense on a line of credit and then pay it off as you would a regular mortgage. Put the kids through school The average age a person pay off their mortgage. Once homeowners reach their 30s they will typically own more than a quarter of their property, rising to half as they enter their 40s. The next issue of Top Stories Newsletter will soon be in your inbox. With no mortgage to worry about, you won’t need as much retirement income. ... Canada after getting married in 2012, it had about $104,800 left of its original $150,800 mortgage from 2009. “We bought cheap houses compared to our friends,” she says. Keehn agrees: “On paper, this sort of thing can look great — you can get a mortgage for 3.5 per cent and your stock portfolio could earn six or seven per cent. Fairchild is among the 44 per cent of Canadian homeowners age 45 and over who have paid off their mortgage, according to the “2010 TD Canada Trust Boomer Buyers Report.” Since the average mortgage payment in Canada is about $1,500, that’s a big chunk of change these folks are able to pocket every month. “We figured we were spending about 54% of our income on our home, — about 37% on our mortgage, and 17% on other costs. With the cost of earning a four- year degree while living away from home hovering around $80,000, your kids are going to need all the help they can get. Curious about what they do with all that money? Where should your money go? Shopping around for a new mortgage could help people pay it off quicker but around one in three over-50s say they have never tried to renegotiate their mortgage. If you don't see it please check your junk folder. Make more payments “We’ll put the next 5 to 7 years of savings toward building a home, as opposed to just purchasing one.”, “You’d think being debt-free would be this crazy, overwhelming feeling, but really it’s not very different,” Rebecca concludes. (You can unsubscribe anytime), #720 - 999 West Broadway Vancouver, BC V5Z 1K5 | 604-877-0977 | 1-855-877-0977 We went out to eat, we went to a hotel, we purchased stupid stuff you want. “When you don’t have a mortgage, you have a lot of freedom — whether it’s choosing a new career or buying the car of your dreams.”. A small regular payment stretched out over a longer amortization period (the total time required to pay off the mortgage) is usually considered an expensive strategy. Meanwhile in Canada Alberta ... have increased and impeded their ability to pay off their mortgage more quickly. 7. When one of Mizgala’s clients pocketed an extra $1,000 a month after paying off her mortgage, she realized she’d be able to retire comfortably in five years at age 63, instead of waiting until 65. You’re living your life, you’re still working, but we still have goals and still want to put that money to something. Around the same time, she decided to take a risk and start her own production company. We’ll even consider customers aged up to … Conversely, if you are in a low tax bracket, you might be better off applying any extra money to your mortgage. The average retirement age for those surveyed was 62, and this group paid off their mortgage at an average age of 55 – a seven year period of mortgage-free income. Most banks will allow you to make lump sum payments each year, for up to 20 per cent of the original borrowed amount. Pensions a low priority . Paying off my mortgage is one of the best things I've ever done for my finances — and my sanity. “If I’d still had a mortgage, there’s no way I’d have taken that offer,” she admits. 4. Here are some of the possibilities for using the extra dough once you are mortgage-free. When Trevor MacKenzie moved into his wife Rebecca’s home in Ontario, Canada after getting married in 2012, it had about $104,800 left of its original $150,800 mortgage from 2009. “The mortgage broker is willing to give you far more than you think is a good number.”. Once her home was paid for, Redmond invested $50,000 in a new kitchen that helped the home command a $740,000 selling price. It was fun and freeing … but ultimately, it’s just gone.”, Now, they’re back to a strict budget, saving the bulk of their income. “It’s important to consider how long you’ll have to live there before recouping your costs,” says Keehn, also the host of Burn My Mortgage. | Privacy Statement | Associates Login, Financial Planning and Retirement Coaching. The truth is, paying off a $100,000 mortgage in a short period of time is extremely difficult without both a sizable and stable income, and relatively few expenses. “There’s no blanket answer for everyone — you have to look at each person’s individual situation,” Mizgala says. We encountered an issue signing you up. ... “Our net average household income over the last three years while we paid this debt was $111,649,” says Trevor, who works for the Canadian government Ten years ago, the now 52-year- old TV executive paid off the mortgage on a Toronto home she and her husband had bought in 1994 for $380,000. 3. We will never share your information and you can unsubscribe at any time. A Mortgage Professionals Canada report finds that most recent homebuyers expect to repay their mortgages in 19.2 years. It was stressful and hard because you saw other people spending money and we had money we could have spent!”, One of the keys to their success, they say, is the fact that when Rebecca initially purchased the house, she chose one she could afford. ... the average expected age was 57 years old. This advertisement has not loaded yet, but your article continues below. But what if the market drops and suddenly your investment doesn’t cover the payment? All Rights Reserved. Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc. A welcome email is on its way. “To me, charity begins at home and with my friends. So were we. Less than two years ago I set a goal to pay off the mortgage early: Before the age of 31. Read our tips for paying off your mortgage. “Lots of people aren’t able to contribute much to their RRSPs when they’re bringing up kids and paying off mortgages, and they feel guilty about that,” says Karin Mizgala, a certified financial planner and CEO of Vancouver-based Money Coaches Canada. “The fact that people increasingly have to work beyond their standard retirement age to pay off their mortgage is a concern,” said David Hollingworth from L&C. grandchildren. Rebecca explains that while she was originally making payments of a little over $700, they bumped that number up to a little over $3,000 starting in April of 2012. Aim to pay off your mortgage in 15 years instead of 25. Diane Fairchild* is in a position most Canadians dream about. Downsize It … Each month you will receive informative articles and helpful tools, tips and resources to take the worry out of money and improve your financial well-being. Paying off a mortgage by the age of 65 is no longer a reality for many.' 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