Path to mortgage freedom

We all have mortgage freedom until we buy our first home unless we are lucky enough to have the cash to purchase without the financing assistance of a mortgage lender.

We all know that when we buy our first home that it will be decades before we have mortgage freedom again.

So what is mortgage freedom?

Is it the day that you make your final mortgage payment and get to have a mortgage-burning party? The definition needs to be expanded beyond that thought..

My definition of mortgage freedom is not only being able to retire mortgage free or have the ability to be mortgage free, but to also have a source of income that will support the lifestyle you have become accustomed to.

Do you know how much you will need to enjoy a comfortable retirement?

Does it seem unattainable?

Most Canadians have no idea what this number should be and, unfortunately, most are not even thinking about their retirement plan or how important a role your mortgage plays in your retirement wealth.

Canadians are retiring earlier than ever before at an average age of 59, yet the average life expectancy is 84 for men and age 87 for women.

Here are some alarming statistics from some recent surveys regarding retiring Canadians and their debt.

• A recent Sun Life Financial survey found that a quarter of retired Canadians are in debt in their golden years. About 25 per cent of the Canadians polled between the ages of 55-80 years for the Sun Life Financial Barometer said they have debt that ranges from mortgages to car payments.​
• According to a study by Bankruptcy Trustees Hoyes Michalos, “Pre-retirement” Canadians aged 50-59 are taking on an alarming amount of debt and are most at risk of bankruptcy, according to a study that examined some 7,000 insolvency filings.
• Boomers are about $400,000 short of their financial goals in retirement according to a BMO wealth study.

So how does the above information relate to your mortgage?

When you obtain a mortgage, it is most likely the largest financial transaction of your life.

Here’s a thought for you. Instead of focusing solely on the interest rate, perhaps it might be important to consider various strategies that you can utilize within your mortgage that will assist you with your goal of mortgage freedom and financial freedom when you are ready to retire which includes your overall cost of borrowing.

The interest rate is important, but it’s not the most important factor to consider when choosing a mortgage product.

Having the same mortgage strategy your entire life is not always the best financial decision. If you are applying different mortgage strategies at different stages of your life, just like your other investments, it can lead to the financial wealth and the independence you are hoping for in retirement.

Your mortgage is the financial tool that is tied to your largest asset so whether you decide to pay off your mortgage early or keep your other investments liquid, having a strategy and utilizing your mortgage like the financial tool that it really is can help you have the retirement that you desire.

Ask yourself these questions –

• Do you manage your mortgage?
• Do you manage your Equity? Or do you just leave everything alone for the next 25 years and hope all will work out for the best?

Whether you are refinancing or buying a home, you should not be walking away from your bank or mortgage broker without a strategy in place to accomplish your goals not only for the short term, but also for the long term and it shouldn’t look the same through every phase of your mortgage life.

If you answered no to one or both of the above questions, it might be time for a plan and, as a mortgage broker, I have dedicated myself to helping people develop and utilize the right mortgage strategy for their financial goals for now and for the life of their mortgage.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.