Mortgage Hangover: Why Canadians Can No Longer Count on a Debt-Free Retirement

It used to be a given that Canadians entered their golden years free and clear of mortgage debt. But this assumption is rapidly becoming a relic of the past. As home prices surged and borrowing terms stretched longer, more and more Canadians are now staring down the barrel of a mortgage balance well into their retirement. And frankly, this trend should alarm anyone who ever believed that retirement meant financial freedom.

A recent survey by Royal LePage makes the point bluntly: of those expecting to retire in 2025 or 2026, roughly one in three (29 per cent) plan to continue paying down a mortgage during retirement. Think about that for a moment. A generation ago, most people would have thought twice before carrying debt past age 65; today, it’s practically normal. But “normal” doesn’t mean “healthy.”

There’s a temptation to chalk this up to changing lifestyles—after all, if you buy a home later in life, you’re more likely to have payments stretching into your 60s or 70s. But that only tells half the story. The fact is, people feel squeezed by the price of housing and the necessity of securing a roof over their heads. Many Canadians simply have no choice but to stretch their borrowing. As Royal LePage’s Shawn Zigelstein observes, we’re more inclined to carry debt because it allows us to “use disposable income down the road.” In other words, taking on debt in midlife can feel like the only way to keep up with the market.

But here’s the rub: carrying a mortgage into retirement doesn’t just mean making a few extra payments. It changes the entire retirement equation. If you’re 65, drawing a fixed income, and still sending $1,500 a month to the bank, that’s $18,000 a year that you won’t have for groceries, prescriptions, or the occasional family getaway. And yes, you might argue that home values have skyrocketed—maybe many of these folks have a $2-million asset—but as Bloom Financial’s Ben McCabe warns, “you’ve got a disproportionate amount of real estate wealth versus liquid wealth or income.” A mansion on paper won’t pay for your groceries.

This is where financial planning advice starts to matter—though it’s not always encouraging. Jason Evans, a financial planner, suggests delaying Canada Pension Plan (CPP) benefits until age 70 to maximize lifetime income. It’s hard to fault that logic—if you can hold off, you’ll see bigger monthly cheques. Yet for many, the lure of “I need cash now” is simply too strong. And once you tap into investments to pay your mortgage, you open yourself to market risk. In a downturn, you might end up selling stocks at rock-bottom prices just to make the next mortgage payment. That’s no way to live.

Some retirees turn to Home Equity Lines of Credit (HELOCs) or, for those 55 and older, reverse mortgages. On paper, a reverse mortgage sounds appealing: no monthly payments and a little breathing room in your monthly budget. In reality, it’s a double-edged sword. Yes, you’re effectively replacing a monthly mortgage payment with none, but the debt still accumulates. When you eventually pass away or sell the home, the lender comes calling. And let’s be honest—your heirs might find themselves paying off a sizeable debt just to keep your childhood home.

I’m not saying every retiree should drop everything and downsize tomorrow. But downsizing has become a lifeline for many. Royal LePage’s report shows nearly half of soon-to-be retirees plan to downsize within two years of retiring—most prefer condos, with only a sliver wanting to stick to detached houses. It’s sobering to realize that the dream of a sprawling backyard and a mortgage-free life is giving way to glass towers and smaller footprints.

Yet downsizing isn’t a silver bullet. Condo prices in hotspots like Toronto are predicted to drop by as much as 15 to 20 per cent this year, which could help some buyers—but it could also leave sellers scrambling to find suitable replacements. If you sell at a high point and buy back in at an even higher point, you’ve gained nothing. The market’s volatility means timing is crucial, and many older Canadians lack the flexibility to wait for perfect conditions.

So what’s the takeaway here? If you’re approaching retirement, it’s critical to think long and hard about your housing situation well before you turn 65. Don’t assume that rising home values will automatically translate into comfortable cash flow. Scrutinize the terms of your mortgage, consider the risks of drawing down investments, and weigh the pros and cons of a reverse mortgage. If possible, explore downsizing early—ideally when prices aren’t at their peak.

Ultimately, carrying a mortgage into retirement is not an inevitability; it’s a choice made under pressure. And while it might seem manageable in the short term, it can quickly become a financial albatross. If Canadians want a truly secure retirement, we need to shift our mindset: homeownership is an asset, yes, but it shouldn’t be a debt sentence that follows you into your golden years.