More Canadians are carrying huge mortgages into retirement. Are they in trouble, or is this the new normal?

Shannon Lee Simmons, a financial planner with nearly 20 years of experience, has seen a major shift in the past five years: more clients are approaching retirement with hefty mortgages.
Some of her clients who are just five to 10 years shy of their golden years are still $500,000 away from paying off their mortgage, she says.
“Usually the amount of money that you’d have to save to get that wrestled down (before retirement) is so far past what would be affordable or possible that it’s not in the realm of realistic,” says Simmons, founder of the New School of Finance.
While Simmons believes paying off a mortgage before retirement is still excellent financial advice, it’s getting increasingly harder for Canadians to do so.
A recent report from Statistics Canada reveals that in the first quarter of 2024, Canadian households with a main earner aged 55 to 64 held a combined $315.7 billion (average of $109,337 per household) in mortgage debt, up from $224.2 billion ($83,551) in the same quarter of 2020.
For those aged 65 and older, mortgage debt also grew significantly, to $141.2 billion ($27,441 per household) from $97.2 billion (average of $21,195 per household) over the same period.
The report concluded that retirement-age Canadians who have a variable-rate mortgage or have had to renew in the past two years are contending with higher monthly costs to keep their homes.
From July 2020 to July 2024, Canadians saw a 46.2 per cent increase in mortgage interest costs, mostly due to a series of Bank of Canada rate increases from March 2022 to April 2024, according to the StatCan report.
Elke Rubach, president of Rubach Wealth: Holistic Family Advisors, says Canadians of all income levels are finding it more challenging to pay down mortgages before their second act.
Many Canadians are behind because they fell on hard times during the pandemic, experienced unexpected job losses or health issues, and are trying to survive inflation and the current cost of living crisis. The latter has “stolen the Canadian dream or the Canadian promise,” for many, Rubach says. Home prices have ballooned alongside stagnant wages and higher interest rates. Four in 10 Canadians aged 55 to 64 and nearly three in 10 of those aged 65 and older reported that rising prices were greatly affecting their ability to meet even day-to-day expenses, according to StatCan.
Simmons says that while downsizing to a smaller, cheaper home has traditionally been a popular choice for retirees with large mortgages, many homeowners are now finding it more difficult to part with their homes. One reason is that adult children boomerang in and out of the home much longer than they used to, Simmons says.
The next generation may also not have the ability to afford a home, so parents hold on to the home as a meeting place for family, particularly for holidays, Simmons says.
To manage their mortgage payments, many retirees are extending their careers, she adds. Some continue working in jobs they enjoy, while others calculate how much income they’ll need in retirement and choose a lower-demand job or pursue a passion-based side business.
Experts all agree that when it comes to managing a mortgage debt in retirement, creating a sound budget is key.
“A lot of people are surprised when they do a pre-retirement budget and a post-retirement budget that they can still maintain mortgage payments into retirement,” says Paul Shelestowsky, investment adviser at Meridian Credit Union.
Jason Pereira, partner and financial planner at Woodgate Financial, says living with mortgage debt in retirement isn’t necessarily a problem unless it becomes unsustainable. For instance, if someone has a $700,000 mortgage but also has a $2- to $3-million investment account, it’s less of an issue.
If paying off a mortgage does become burdensome, one option is to extend its life with a longer amortization period, which could go beyond the homeowner’s life expectancy. Your payments would be stretched over a longer period and thus reduced.
Simmons says this is a good option for someone who has no chance of paying off their mortgage without selling.
Pulling equity out of your home, such as a home equity line of credit, also isn’t seen as negatively as it was 10 or 15 years ago, Shelestwosky says. “We’re in a different world financially and people will need to change their thought process,” he says. Home equity is the difference between the value of your home and what you currently owe on your mortgage. As you pay the mortgage down, or if the value of your home increases, your home equity goes up.
While you don’t want to use the equity you’ve built in your home as your primary mode of income, it can help some Canadians achieve retirement goals like travelling, Shelestwosky says.
Victor Tran, mortgage agent at TMG The Mortgage Group, advises that if you do want to tap into your property’s equity, or even refinance, you need to be proactive. If you know at least six to 12 months in advance that your income is going to be reduced, apply for the loan while your pay is still steady and at its peak, he says, otherwise you risk not being approved.
For retirees wanting to shop around for a new mortgage when their term is up, they could run into trouble if their income has dropped, Trans says. He notes that some lenders do lend based on equity or net worth rather than strictly considering income and credit ratings.
Shelestowsky emphasizes that Canadians shouldn’t fall into the trap of thinking “they failed in their financial planning” if they head into retirement with a mortgage.
“To me, it means that maybe you found a balance between saving your money for retirement but also enjoying what you’ve got pre- and post-retirement as well.”