We often imagine retirement as a time when major debts, particularly mortgages, are a thing of the past. Yet for a growing number of retirees, that’s simply not the case. Whether by choice or necessity, many individuals find themselves taking out a mortgage after retirement. While this can feel daunting, it can also be a practical financial tool, if used wisely.
Let’s explore the reasons behind this trend, the unique challenges it poses, and how retirees can protect their financial wellbeing while still achieving their housing goals.
Several factors may lead someone to take on a mortgage later in life, and they’re not always rooted in financial hardship. Common motivations include:
Many retirees sell their family home and move to something more suitable - often a condo, bungalow, or accessible home. However, the price gap between the old and new home isn’t always favourable, especially in Canada’s fluctuating housing market. A mortgage can help bridge that gap without draining retirement savings.
Some retirees take out a mortgage to access funds that can be used to help adult children with their own home purchases or education costs. While this reflects a deep commitment to family, it can come with financial risk if not well-planned.
Life circumstances shift. Divorce, the death of a partner, or the need to establish a new household may mean purchasing a new home on one’s own. If assets are tied up in shared property or legal processes, a mortgage may be the only route to secure a place to live.
Some older adults refinance an existing home to fund major repairs, medical renovations, or to consolidate other debts. In this case, the mortgage serves as a financial strategy rather than a necessity, however it still needs thoughtful management.
Some retirees prefer to hold onto investments, rather than cash them out for a home purchase. Kindred member Belinda* is one such person. She wanted to purchase a house; however, her investments were locked in for another two years. Taking on a mortgage allowed her to keep her assets growing while maintaining a diversified financial portfolio.
Although taking on debt post-retirement isn’t inherently bad, it does come with unique considerations:
Most retirees live on fixed incomes, such as pensions or retirement savings. A mortgage payment - especially if interest rates rise - can place added stress on monthly budgets, leaving less room for discretionary spending or unexpected expenses.
Mortgage lenders assess risk based on income and credit. Without a regular salary, retirees may find it harder to qualify for favourable terms. Pensions, government benefits, and investment income count, but not always at full value in the eyes of lenders.
It’s difficult to predict how long retirement will last, and how much it will cost. A mortgage might stretch your financial resources thin, particularly if healthcare needs increase.
Carrying debt into your later years can limit your ability to tap into home equity when you need it most. This may affect your options for downsizing, aging in place, or passing wealth on to your loved ones.
For retirees considering or managing a mortgage, a values-based, stewardship-minded approach can bring clarity and peace of mind. Here are some thoughtful strategies:
Look for someone who understands retirement income planning and will help you assess the impact of a mortgage on your long-term well-being. They can also help you understand the tax implications and role of your home in your broader estate plan.
Explore shorter terms, fixed interest rates, or lines of credit that offer flexibility. Some retirees also consider reverse mortgages, though these require careful discernment and consultation due to their complex structure and cost.
Ensure that your monthly mortgage payment fits well within your income sources. If your income fluctuates (e.g., from investments), consider products that allow prepayments.
An emergency savings cushion can help you avoid falling behind on payments due to unforeseen events, whether it’s a health crisis or unexpected home repair.
Is the mortgage helping you live more comfortably, or is it becoming a burden? Are your housing needs changing? Being open to re-evaluating your living arrangements can help ensure you’re always aligned with your values and financial goals.
There’s no one-size-fits-all answer here. For some, paying off the mortgage quickly brings peace of mind and reduces monthly expenses. For others, especially those with strong investment returns, keeping the mortgage and building equity slowly may be the more strategic choice.
A helpful lens is to consider: What brings you the greatest sense of security and stewardship? If eliminating the debt feels freeing and allows you to live more simply, that’s a good goal. If the mortgage gives you flexibility and supports your overall financial health, paying it off aggressively may not be necessary.
Carrying a mortgage into retirement doesn’t have to mean financial instability. With thoughtful planning, wise stewardship, and support from trusted advisors, it can serve as a tool for comfort, flexibility, and even generosity. After all, our financial choices—even in retirement—can still reflect our values and support the kind of life we hope to live and share with others.
If you would like to discuss mortgages with one of our expert team members, book an appointment today. At Kindred, we’ll help you on your journey to a home of your own.
*Name changed to protect privacy.