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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