May 25, 2021

How to retire with a mortgage

By Anne Levy-Ward

Pay off your mortgage before you retire, they say. Put the money you were spending on your mortgage into retirement savings, they say. But what if you can’t?

If you’re a baby boomer, chances are you bought your first house in your late 20s or early 30s. Then, you had a mortgage-burning party in your early-to-mid 50s. That left you with years to focus on saving for a comfortable retirement.

But many of today’s homeowners are buying later. They’re marrying later. And rising house prices are forcing them to save longer for their down payments. If you’re 35 or older when you buy, you can expect to carry your mortgage well into your 60s. That overlaps with your prime retirement savings years. It can even mean you retire with a mortgage. And that used to be the ultimate financial mistake.

So how do you save if you have a mortgage? And how can you retire with one? 

3 reasons to pay off your mortgage before you retire 

There are three main reasons for paying off your mortgage well before you wrap up your career:

  1. You can redirect that mortgage money into retirement savings.  
  2. You’ll have lower living expenses in retirement, with no mortgage payments to make. 
  3. You’ll be able to unlock more home equity when you downsize and/or move when you retire. 

How can you save for retirement with a mortgage?

But even if your mortgage will be around for years to come, you can still plan for your future. These ideas may help: 

  • Don’t throw all your money at your mortgage. Paying down your principal early on will save you a ton of interest in the long run. But as you chip away at your debt, those extra payments will make less difference to your bottom line. After a certain point, instead of reducing your total interest bill, that money could have more impact on your savings. So, pay what you must. But think also about putting some of your tax refunds, bonuses and other windfalls into your registered retirement savings plan (RRSP). If you can stretch your budget to manage small but regular savings, even better.

  • Aim a little lower when you first buy. Paula MacMillan, CFPTM, CHS, EPC, is a Sun Life Financial advisor in Winnipeg. “Home ownership is a wonderful dream,” she says. “But you have to be realistic. Bloom where you’re planted. Don’t try to grow through the fence.” Your parents may have three bathrooms, a finished basement, a double garage and a big yard. They may live in the perfect neighbourhood. But they likely traded up at least once to get there. MacMillan suggests speaking with a certified financial planner rather than a bank advisor. That’s because the bank has a vested interest in the size of your mortgage.

  • Look at renting out some space. When your family has grown up and gone, how much space will you still need? If your house has a finished basement and zoning allows, think about creating a basement apartment. The rent can help you cover your mortgage payments. And, you can decide whether to continue when you pay off your house.

Is it OK to retire with a mortgage? 

If you expect to have a mortgage when you retire, treat it like a financial fact, not a failure. Build your mortgage payments into your retirement living expenses, and budget accordingly. Remember, you won’t be saving FOR retirement once you’re IN retirement. That means you’ll have that money in hand, regardless of your mortgage situation. And if you decide to sell, you’ll still have some equity.

Note that with an ongoing mortgage, you’ll need to keep yourself and your family protected. Make sure you know the difference between term life insurance and creditor insurance. Mortgage protection insurance is a good idea for anyone with a mortgage, at any stage of life. 

How can you save for retirement when you don’t own a house? 

But what if today’s overheated real estate market has priced you out of home ownership completely? What will that do to your retirement savings?

“Not everyone needs to be a homeowner,” says MacMillan.

It may be the Canadian dream to own your house. And a lot of people are counting on their home equity to help fund their retirement. But there are advantages to being a lifelong renter.

These days, rent is often comparable to mortgage payments, after you come up with a down payment. But what would happen if you invested that down payment amount, instead? Crunch the numbers with an advisor. You can project what your retirement savings would look like in 25 or 30 years. It might surprise you. And that’s not even factoring in the other costs of home ownership, like utilities, property tax and maintenance. Invest some of the money you would otherwise spend on those bills, and see how your savings will grow.

The key thing is to maintain discipline about investing. Treat investing as a fixed rather than a discretionary expense.

Need help deciding what to do? Get expert advice.  

You might have a mortgage. You might not. Either way, an advisor can help you make a retirement savings plan that works for you. Most advisors now offer to meet Clients virtually by video chat. Find an advisor.


This article is meant to only provide general information. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.

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