- Half of Canadian homeowners expect to be carrying a mortgage into their retirement years - More than half report that their retirement savings have been impacted by their debt load and their mortgage - Paying off mortgage prior to retirement can eliminate major debt
TORONTO, ONTARIO--(Marketwire - May 21, 2012) - BMO Financial Group released a study today indicating that many Canadian homeowners are feeling the pinch of balancing mortgage responsibilities with saving for retirement.
The survey, conducted by Leger Marketing, found the following:
- Over half of Canadians expect to carry a mortgage into their retirement years (51 per cent)
- Fifty-two per cent of homeowners feel their debt load or mortgage is hindering their ability to plan or save for retirement
"Paying off your mortgage prior to entering retirement is very important, because it will eliminate a significant amount of debt and keep you from having to manage higher debt loads after you stop working," said Tina Di Vito, Head, BMO Retirement Institute. "When you are no longer receiving employment income, it makes it much harder to let go of large amounts of money."
While saving for retirement and paying off a mortgage can often become competing priorities, many experts recommend finding a balance between both but placing extra focus on paying off a mortgage first.
"If your retirement is only a few years away, it is wise to try and pay off your mortgage before you enter retirement," said Laura Parsons, Mortgage Expert, BMO Bank of Montreal. "On the other end of the spectrum, for younger Canadians entering homeownership, it's important to consider options that will ensure mortgage debt can be paid down faster and well before their retirement years."
Ms. Parsons added that choosing a shorter amortization and taking advantage of pre-payment privileges where possible is one way to achieve a mortgage-free retirement.
"If you're buying a home at the age of 30, the difference between paying off your mortgage at 55 instead of 60 can have a significant financial impact on your retirement picture," said Ms. Parsons.
Regionally, the survey revealed:
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Trying to pay down your mortgage faster? BMO provides the following advice:
Choose a shorter amortization: Choose a mortgage with a shorter amortization, which allows you to build equity in your home. A shorter amortization will help you pay less in total interest, protect against the possibility of rising interest rates and help secure a debt-free retirement.
Increase your payments: Paying a little more on your principle can shorten the length of your mortgage. Rounding up your payments, even by a few dollars, can shave off a few monthly payments at the end of the mortgage.
Switch to bi-weekly: Try to increase the frequency of your payments from monthly to bi-weekly. Bi-weekly payments take advantage of the number of weeks in the year. If you split the full payment into bi-weekly payments, you'll end up paying 26 half-payments, or the equivalent of 13 full payments in one year.
The survey was completed on-line from March 19, 2012 to March 22, 2012 using Leger Marketing's online panel, LegerWeb, with a sample of 1000 Canadian home or condo owners. A probability sample of the same size would yield a margin of error of ± 3.1%, 19 times out of 20.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $538 billion as at January 31, 2012, and more than 47,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.