BMO Retirement Institute: Canadians Should Make it a Priority to Retire Debt Free
TORONTO, ONTARIO--(Marketwire - March 13, 2012) - According to the BMO Retirement Institute, a significant number of Canadians approaching retirement carry mortgage debt - a serious issue given the realities of life after people leave the workforce.
According to Statistics Canada:
- Among those aged 50 to 59, more than three-quarters own their homes and almost half carry a mortgage.
- Further, for those aged 60 to 69, 75 per cent own their homes and more than a quarter still have a mortgage.
"Failing to pay off your mortgage before retirement means you could be carrying significant debt into retirement, which could be a threat to your financial security," said Tina Di Vito, Head, BMO Retirement Institute. "Many retirees have fixed incomes and could find it very difficult to meet their mortgage obligations, especially in the event of sudden increases in interest rates or unexpected expenses."
"Options are available to homeowners who want to be mortgage-free sooner, including choosing a shorter amortization," said Laura Parsons, Mortgage Expert, BMO Bank of Montreal. "A shorter amortization will significantly reduce the amount of interest paid over the life of the mortgage and, perhaps more importantly, the amount of time you carry that mortgage debt."
Ms. Parsons noted that, on a $400,000 mortgage at a 5 per cent interest rate, moving from a 30-year to a 25-year amortization can save upwards of $70,000 in interest over the life of the mortgage, which Canadians can put directly towards their retirement savings.
Other key findings on retirement, mortgages and debt from the BMO Retirement Institute:*
- The two main barriers preventing Canadians from saving for retirement are debt - including credit card and mortgage debt (47 per cent) - followed by everyday expenses (41 per cent).
- Half of Canadians would consider a shorter amortization in order to pay off their mortgage faster.
- Thirty-five per cent believe paying off debt is their number one financial priority, placing it ahead of saving more.
*The survey was completed on-line from February 21 to 23, 2012, using Leger Marketing's online panel, LegerWeb. A sample of 1500 Canadians, 18+, were surveyed. A probability sample of the same size would yield a margin of error of +/-2.5%, 19 times out of 20.
Matthew Duffin, Toronto
Sarah Bensadoun, Montreal
Laurie Grant, Vancouver