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12 Apr


Mortgage Tips

Posted by: Tracy Luciani Price

As some of you head toward retirement it’s time to start thinking about the mortgage you are carrying.

Too often we see clients who wait for a health crisis and then come to us for help. Remember, it’s very difficult to get money from a bank when you are retired. Strategize with us before retirement and you will have peace of mind when you retire.

There is always the option to sell your property but most times people are not ready to give up their homes and more often than not, in this part of Ontario, rent is higher than mortgage payments.

Mortgage Retirement Options

Here are a few ways you can change your mortgage now and protect yourself for the future.

  1. You can take a longer amortization and do an equity take out. That’s means you have cash should the unforeseen happen.  We offer up to 35 year amortizations at low fixed and variable rates.
  2. Take a mortgage/line of credit product. You can go up to 80% of the value of your house if income supports.   When retired and on fixed income this is difficult sometimes, so arrange it beforehand.
  3. Take a line of credit rather than a mortgage. You pay higher rates than on a traditional mortgage but you are out with no penalties when you sell.

Don’t Wait for the Unforeseen

We have helped many homeowners in the area ease into retirement with no worries. If you are retiring in the next five years it makes sense to come and talk to us about your options. Don’t wait for a health crisis or a severance or even a death of a spouse to plan for your mortgage in retirement. You don’t have to feel badly that you have a large mortgage heading into retirement.  The key is making it affordable and without bringing along consumer debt.

Use Prepayment Privilege Rather than a Lower Amortization

One of the common mistakes homeowners make is cranking down the amortization as retirement nears. While that is fine while working keep in mind that the banks tend not to let you increase your amortization once you are at a lower income from retirement or the unforeseen. You are much smarter to take a 25-35 year amortization and utilize the prepayment options at typically 15-20%. Prepaying will reduce your principal while still working, and at retirement you have the option to return to the lower affordable payment if you have increased your mortgage via the frequency pre-payment option.

Amortization Scenarios

Let’s say you have a $250,000 mortgage and you have a 15 year amortization at 3.09%. Your payment is $1790.00 per month plus property taxes. That’s an easy payment for a couple earning $100,000 a year. But it’s a very different story if one of you is either forced into early retirement because of a health crisis or the job becomes redundant.

Now here’s our plan. Prior to retirement, especially if there is a chance you may be given your walking papers or health is already a concern, apply with us for a 35  year amortization at the variable rate of 2.4%, your payment drops to $870. Continue to prepay your mortgage if you wish as much as 50 k per year through either lump sums or monthly increased payments, but keep the lowest payment for reasons mentioned above.

Call Us to Strategize

As we always say, live for today but have a Plan B if life throws you a curve ball. Come and talk to us prior to retiring so you don’t find yourself in a jackpot.