Should You Really Be Mortgage-Free in Retirement? Not Always.
Across Canada, many homeowners approaching retirement are wrestling with an important question: Should I pay off my mortgage completely—or can my home actually support my financial goals in retirement?
While the idea of being mortgage-free is deeply rooted in Canadian financial culture, today’s economic landscape tells a more nuanced story. The truth is, in many cases, holding a mortgage—or accessing home equity through tools like a reverse mortgage or home equity line of credit (HELOC)—can be the smarter, more strategic move.
Canadian Homeowners Are Sitting on Historic Equity
According to Mortgage Professionals Canada and Statistics Canada, Canadian homeowners are sitting on significant equity—more than 25% on average. At the same time, many are also concerned about rising living costs, inflation, long-term care needs, and outliving their savings.
For many retirees or soon-to-be retirees, a fully paid-off home may provide peace of mind, but it doesn't provide cash flow. With inflation still impacting fixed incomes and investment volatility creating uncertainty, liquidity can be just as important as equity.
The Case Against Rushing to Pay Off Your Mortgage
Paying off your mortgage might seem like the responsible thing to do—but here’s why it might not be the most effective strategy in retirement:
Low interest rates (historically): Even with rates higher now than in recent years, they still tend to trail long-term returns from diversified investment portfolios.
Opportunity cost: If your RRSP or TFSA portfolio is earning 6–8% per year, paying off a 4.5% mortgage could reduce your overall net return.
Reduced flexibility: A home that's mortgage-free but cash-poor can limit your ability to respond to changing needs or unexpected expenses.
Equity keeps growing: Most Canadian real estate markets, have shown consistent long-term appreciation. In many cases, this growth outpaces mortgage interest rates, meaning you can borrow against your home while still maintaining or increasing equity over time.
Strategic Options to Access Your Equity Without Selling
Your home doesn’t have to be an all-or-nothing asset. Here are three ways to unlock its financial potential while continuing to live in it:
1. Refinancing Your Mortgage
If you're carrying a small or older mortgage, refinancing could lower your payments or allow you to tap into equity for planned expenses like home upgrades or helping adult children with their own housing.
2. Reverse Mortgages
Available to Canadians aged 55+, a reverse mortgage allows you to borrow up to 55% of your home’s value—tax-free and without monthly repayments. The loan is repaid when you sell or move. This can be especially useful to:
Supplement retirement income
Delay drawing down RRIFs or government benefits
Fund in-home care or accessibility upgrades
Stay in your home longer, on your terms
3. Home Equity Line of Credit (HELOC)
A HELOC provides revolving credit based on your home’s value. You only pay interest on the amount you use, and it can be ideal for:
Handling irregular expenses
Creating an emergency buffer
Funding renovations or temporary care needs
The Rising Cost of Aging: Why Equity Access Matters
One of the less talked-about aspects of retirement planning is healthcare and long-term care. In many provinces, long-term care waitlists stretch over a year. Most Canadians would prefer to age in place, but doing so comfortably requires funds for support—modifications, private caregivers, or mobility aids.
Your home’s equity can be a practical way to fund:
Aging-in-place renovations
In-home care and part-time support
Out-of-pocket medical expenses
Short-term stays at private facilities while awaiting placement
It’s Time to Rethink What Financial Freedom Looks Like
Yes, being mortgage-free is still a great goal. But it’s not the only version of success in retirement.
The key is balance. You might choose to:
Keep a small mortgage so your investments keep growing
Use a reverse mortgage or HELOC to create cash flow
Combine multiple strategies depending on your income sources and goals
Your home is a store of value—and in today’s retirement planning, that value can be more useful when it’s accessible.
Summary Table: Your Options at a Glance
A Smarter Retirement Strategy Starts With Advice
If you’re nearing retirement, or already there, now is the perfect time to rethink the traditional advice. There’s no one-size-fits-all plan—but there are flexible solutions that help you:
Stay in your home longer
Increase your financial flexibility
Avoid unnecessary investment withdrawals
Support your family or care needs without sacrificing stability
Let’s talk through the options and find what works best for your lifestyle and financial future.
Contact me at (204) 997-5021 or michaelcabral@invis.ca to get started.
Sources:
Statistics Canada – Household balance sheet, national balance sheet and financial flow accounts
https://www150.statcan.gc.ca/n1/daily-quotidien/250305/dq250305a-eng.htmGovernment of Canada – General Information on Long-Term Care
https://srv111.services.gc.ca/generalinfo/indexStatistics Canada – Average Home Equity Data (Table: 14-10-0060-01)
https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410006001RateSpy – What Will Canadians Do With All Their New Equity?
https://www.ratespy.com/what-will-canadians-do-with-all-their-new-equity-072219109#:~:text=Using%20Mortgage%20Professionals%20Canada%20data,now%20have%20over%2025%25%20equity.WOWA – Canada Housing Market Report
https://wowa.ca/reports/canada-housing-marketFisher Investments – Definitive Guide to Retirement Income
https://www.fisherinvestments.com/en-ca/campaigns/definitive-guide-to-retirement-income/1mMorningstar Canada – How to Use Your Home as a Retirement Asset in Canada
https://www.morningstar.ca/ca/news/248172/how-to-use-your-home-as-a-retirement-asset-in-canada.aspx
