Retire with a mortgage: Is it possible?
What’s happening behind this question will vary from person to person – this is why I always recommend having a certified financial planner to review your specific situation and your own needs. Allow me to illustrate how mortgage planning can help – even in your retirement years. Open your vision to your whole financial picture!
Can you have a mortgage and still retire? Of course you can, many people do. Some still have a mortgage from before they were retired, while others paid off the mortgage before retiring – yet today they want to boost monthly income and draw value safely from home equity. Arranging a mortgage can open this up for you… And if carrying debt is an issue, remember that someday you may downsize and be debt-free again!
I have clients in their 70’s or 80’s, still involved in a family business. Their income is secure, and this allows them to continue servicing a mortgage. Thus I can say, there’s nothing easier than putting a mortgage in place regardless of age or retirement status, as it fits the income you are earning.
How much income would you say you need in order to continue to fully enjoy your life? How much more would you like to have, beyond what you’re getting now?
If you’ve fully retired, you no longer have a salary, or T4 income to justify what we usually put into a mortgage application. So you may think you cannot qualify for a mortgage. Perhaps you were even told so at the bank or another lender. But with proper care, and attention to the details, you may easily qualify for a mortgage.
Brian Weatherdon, financial planner for Sovereign Management in Burlington, and editorial contributor for Silver and Gold, provides his input on this viewpoint. In prior articles, Brian has mentioned some of the options people can use with mortgage planning in order to support their monthly cash flow. Consider how someone in their 70’s or 80’s may arrange a mortgage at 3% or 4%, so they can lock in a guaranteed life income – even equivalent after tax to GIC’s that used to pay 6% to 12% or more. This is a conversation you can only have with a planner who is insurance-licensed! Done properly it will fit your income needs for life.
A different approach is using your home equity via a line of credit: Let’s say your mother is 80 and needs $2000/month income supplement for the next ten years while she continues living in her home. Suggesting her home is worth $350,000 or more, it would work like this: If she were to use a line of credit to draw $24,000 each year, by the time she sells her home, the total income she would’ve drawn out for herself and her family’s wellbeing would amount to $240,000. – Note, these withdrawals were all tax-free!
She might also have paid interest along the way, or accumulate the interest and pay it off when she sells her home. In either event, the growing home equity should easily cover the debt.
Most people didn’t expect to still be using debt in their retirement, but sometimes debt can bring an opportunity you hadn’t seen before… Or perhaps people’s health, job changes, or family circumstances assisted in carrying some debt into retirement. So again, it is possible to retire while still having a mortgage.
Another example is that of Adam and Ada’s situation (names conspicuously altered, of course), which Brian Weatherdon and I worked on together to resolve: Adam’s job disappeared at age 57, setting them back because they were still carrying a mortgage of $1700/month. Once Adam got working again – for lower pay – they couldn’t see how they would ever pay off the mortgage before retiring.
Our planning process looked deeply at both current and future needs. Currently they needed the freedom to “breathe” and reduce their debt payments to $750/month. In future they needed to be debt free – but when? They actually came to realize it would be ok to still have a small mortgage while in their 70’s. While it would mean continuing mortgage payments of $300 to $500 /month, that would still amount to less than many peoples’ condo fees! So ultimately, our planning process for Adam and Ada meant they could live easier today, and also feel confident about keeping their home as long as they wish into the future.
This discussion shows the value of certified mortgage and financial planners who can serve your financial needs, and a team can work together to create financial solutions for the income and the properties you want to protect and enjoy.
Yes, you can have a mortgage in retirement. In fact, properly conceived, arranging the mortgage may be coupled with a solution that significantly boosts your income as well.
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This column is presented as a general source of information only and not as a solicitation nor is it intended to provide professional advice including, without limitation, mortgages, other credit facilities, investment, financial, legal, accounting, or tax advice. For more information reach the author above, or your professionally authorized/certified financial advisor.
Catherine Evel, AMP is mortgage broker and franchise owner of Dominion Lending Centres, Homestead Financial, in Waterdown Ontario, serving all of southern Ontario and the Golden Horseshoe. She may be reached at 905-690-6834 or email catherine.evel@dominionlending.ca
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