Retire Sans Mortgage

Seniors-MortgagesWe get a stream of emails from seniors with mortgages, some of whom are in financial hurt. It is those stories that inspired this week’s Globe column about mortgages in retirement.

This piece has more of a warning tone than most of our articles. That’s because senior debt is one area where there is legitimate danger on the horizon. The trend towards bigger mortgages in retirement is worrisome for the no less than 22% of Canadians who aren’t saving enough to fund normal consumption.

A remarkable 50% of Canadians homeowners in their 50s are still saddled with mortgages, some of them long-term mortgages. In some cases, they’ve bought so much house, or they spend so much on a monthly basis, that they can’t afford anything but minimum monthly mortgage payments.

Others are unable to shake a big mortgage due to a personal setback caused by divorce, illness, job loss, underemployment and so on.

The extreme cases are older mortgagors who rely solely on the government safety net (OAS, GIS, CPP). While we assume that few of these people have mortgages, we don’t know how many actually do. This is one area where more research is needed.

In any event, if you haven’t saved enough by 65, toting debt into retirement raises your insolvency risk. More and more, as boomers retire in droves, the media will report on folks who are over-indebted and need to sell their homes to make ends meet. It’s a trend that we need to get out in front of.

More: Avoid nightmare on retirement street…

Sidebar: Not all mortgages in retirement are bad. Mortgages and HELOCs are occasionally held by retirees to fund certain income/cash-flow strategies.

Rob McLister, CMT

  1. In UK mortgages there is maximum age limit, lenders will not allow amortization period to exceed retirement age, if it does they require evidence of source of income.
    Don’t see why Canadian mortgages aren’t regulated similarly. As an agent it might reduce my market, but I have seen people struggle and move to social housing.
    It should work in the same way as minimum age.
    Why wouldn’t you lend to a 14 year old? Same reason you don’t lend to over 65.

  2. There is a reason why it is illegal to prejudice on the basis of age.
    A minor is one thing, but if a person is in good health, vibrant, working and has good credit; why should he not be able to get a mortgage? One of the most succesful realtors here in the City is in his early 80’s (although you wouldn’t know it) but should he be denied a mortage to buy a rental property because he’s too old?
    Here’s a better idea; let’s approve those that qualify, and decline those that don’t.

  3. Most “seniors” at 65 have access to CPP and OAS. Does this not fit a lender’s criteria – stable uninterrupted income?
    As long as their debt ratios are within the limits why would you not lend to them?

  4. 60+ mortgage is now the norm in the retirement city of Kelowna. i live in the Okanagan of BC “Napa north”. Many clients coming from the every corner of Canada to retire. So I feel pretty confidant with my comments. Client profile: these clients are retired, derive income from pension incomes and RIFs, they are all taking mortgages when offered. 5 yr at 3% is a no brainer for many. this is the tip of the boomer wave. its the norm here so I’m anticipating a lot more of the same.

  5. if these so called “retirees” have to take out a mortgage to purchase their retirement home, they have no business retiring in the first place.
    it’s one thing to have the financial means to buy a house cash, yet take out a mortgage to take advantage of historically low rates. it’s an entirely different game when you have to take out a mortgage on your “retirement” home because your retirement stash is insufficient.

  6. Sure, and with people in excellent health, living longer and working to 70 or 75 (like half the realtors in Kelowna), 60 is the new 40

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