Call it youthful ignorance or true determination – either way, young homeowners expect to free themselves from the shackles of debt sooner than their parents did.
Manulife Bank’s quarterly Debt Freedom Survey reveals that more than four out of 10 Canadian homeowners between the ages of 30 and 39 anticipate being debt-free by the end of their forties. Another third predict they’ll have their debts paid by their fifties.
Reality, however, paints a very different picture.
The survey noted that just seven per cent of homeowners aged 40-49, and 16 per cent aged 50 to 59, have actually managed to achieve debt freedom.
This disconnect between having good intentions and actually following through with them also manifests itself with mortgage prepayments. Prepayment flexibility is one of the most sought-after mortgage features. Yet, CAAMP’s 2011 spring survey found that only 18% of mortgagors actually made a lump-sum prepayment on their mortgage in the preceding year.
Despite the good intentions of many new homeowners, Manulife President and CEO Doug Cognick notes that any good plan is subject to unexpected life events, such as home repairs, illness or job loss.
“Debt-freedom is possible, but it requires a commitment to financial discipline, and for many people, some professional advice on how to plan finances for the long term,” he said.
The average homeowner aged 30-39 has $209,200 in total debt, according to the survey. Those in their fifties have an average of $108,500 of debt.
Surprisingly, the survey showed that 19 per cent of homeowners in their fifties actually increased their debt in the past 12 months. Another sobering statistic in the poll is that 20 per cent of homeowners aged 50-59 either couldn’t foresee when they would be debt free, or don’t expect to ever reach that point.
Steve Huebl, CMT
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