For many people they have a goal to pay off their mortgage and be mortgage free when they are ready to retire. Many more of those same people do not have a real plan of action, how are we going to get there? Fewer still have a mortgage planner on their side, helping them get there. With the historical low interest rates in Canada, others are not focused on paying down the mortgage – some even tempted to plan on prolonging the debt as long as possible – well into their retirement years, while trying to eke out a higher investment return.
Here are a few benefits of having no mortgage payments in retirement:
Having no mortgage gives you peace of mind. Once you eliminate your mortgage, you do not need to worry about the additional cash flow that would be necessary to pay that bi-weekly or monthly payment. I have a friend who paid her mortgage off at a rather young age. She often talks about how stress free it is to have a free and clear home. She feels the freedom that being mortgage free gives her. She can up and go wherever she wants, simply because she does not have to worry about that additional income needed to service that debt.
Having equity will increase your choices in retirement. Without a mortgage you do have complete control over where you live. You can stay where you are for as long as you are comfortable, you can downsize and maybe even buy a little winter get-away home in Hawaii or Mexico or like my sister and her husband – Mesa Arizona, where you will find other snowbirds. Bottom line with a free and clear home, you are free to decide how long and where you want to be and live.
Aggressively paying down your mortgage will help you build equity more quickly. Paying off your home quickly can allow you the flexibility of later using the equity to buy investment property, take the equity out to send your children to university, or for you to return to university to finish that degree. It allows you options when your mortgage comes up for renewal. (Especially with the recent government rule changes on insured mortgages, refinancing your mortgage just got a little tougher… the govt has cut back the maximum loan to value from 85% to 80%. In other others, the govt is out of the insurance business when it comes to refinances) Means if you do not have at least 20% equity in your home when your mortgage comes up for renewal, you will be stuck with the rate and terms your lender offers you.
Trying to pay off your mortgage by the time you retire acts as a forced savings. Making a decision to have a debt-free retirement means you will have to save more to gradually get there. This not only helps as you pay less interest to the bank on your mortgage, but it also motivates you to cut down on wasteful spending. Want to get an idea of how much extra money you could be putting towards your mortgage debt….for one month collect a receipt for everything you buy…everything…each day put the receipts in a bowl or an envelope. Then at the end of the month separate the receipts into the categories of where you spent your money (groceries, gas, meals out, coffees….this one adds up…..) Add up each category and see how much you are spending. Then you can identify areas of opportunities.
Boy it was a real eye opener for one of my clients. Just by making lunch at home for two adults and cutting out daily trips to Tim Horton’s for coffee, they were able to pay off credit card debts. This then allowed them to qualify for the mortgage to buy the home they really wanted to be living in. Now they are focused on following the mortgage plan I helped them set up, so that will get them mortgage free sooner…….ps..They says thanks to my gentle reminders
Paying off your mortgage sooner means you can retire whenever you want. I used to work with a large government agency where the staff gets paid well and they will have a pension when they retire. But for the few that focused on paying off their mortgage, it gave them piece of mind that they could cut out and go do something else, work somewhere else, or simply free to retire whenever they are ready to move on to that next phase of life. It simply equals freedom of choice. Investing in you having the “senior” years of your life free to be and do as you wish.
So…if you have a goal to be mortgage free…. either long before you retire or right around retirement time, then please let me help you to set up that plan, then manage your mortgage along the way to nudge, encourage and support you to achieve your goal.
If you have not already watched the video on my blog “Mortgage Strategies – Would a Ten year Mortgage be right for you? Go back and read the blog, watch the video, then call me for your free report and annual mortgage review.
Please do your friends and family members who have a mortgage a favor, share this blog post with them. I want you and them to reach their goal…mortgage free, so they are free to go do and play whenever and where ever they want
Please email, text or call me if you have any mortgage related questions. I am happy to help.
Enjoy the sunshine Vancouver!