Oct 24, 2026
Paying off your mortgage before retirement can protect you from higher renewal costs when your employment income ends. But putting every spare dollar toward the mortgage can leave you short of savings to cover unexpected expenses.
In a recent Globe and Mail column, personal finance columnist Rob Carrick argued that homeowners should prioritize becoming mortgage-free before retirement, with rising interest rates adding to the risk of carrying debt into their later years. It’s not an unfamiliar from Carrick, who has often suggested that debt-free retirement is a wise strategy for most Canadians.
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But in this current economic environment, this smart strategy might not be the best approach. Tracy Valko, principal broker at Valko Financial, says homeowners need to weigh mortgage repayment against the savings they’ll rely on once they stop working.
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“It doesn’t have to be an either-or decision. It starts with cash flow,” Valko told Money.ca.
Why mortgage debt can be harder to manage in retirement
Mortgage payments that fit comfortably within a working household’s budget can become harder to manage when employment income stops. Retirees may need to cover them with a combination of Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, workplace pensions and withdrawals from savings.
A renewal at a higher rate can put further pressure on that budget. Statistics Canada reported that average mortgage debt among households whose major income earner was aged 65 or older increased by 8.3% in the fourth quarter of 2024 compared with the same quarter a year earlier.
Valko recommends mapping out expected retirement income, including government benefits, workplace pensions and planned withdrawals, to determine whether it can comfortably cover mortgage payments and other expenses.
“The right balance depends on the person’s income, savings, mortgage rate and comfort with debt,” she said.
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Plan for mortgage renewal before you retire
Fixed-rate mortgage holders are protected from changes to their contract rate during the term, but their payments can change when they renew. Borrowers who need to refinance or increase their borrowing may also find it harder to qualify once their employment income ends.
Valko recommends planning ahead, particularly if a mortgage term will end soon after work stops.
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“If the term matures soon after retirement, speak with a mortgage professional well in advance, ideally 12 to 18 months ahead,” she told Money.ca.
Homeowners should test their budget against a higher renewal rate and consider whether a mortgage term that provides payment certainty into retirement would suit their needs.
Switching lenders at renewal may also be an option. Insured borrowers can generally switch without undergoing another mortgage stress test. Since November 2024, eligible borrowers with uninsured mortgages have also been able to make a straight switch between federally regulated lenders without the stress test, provided they do not increase the loan amount or extend the remaining amortization.
Borrowers who want to increase their mortgage, extend the amortization or add a line of credit may need to qualify for additional borrowing.
Don’t sacrifice savings to pay off the mortgage
Paying down a mortgage reduces future interest costs, but using all available savings to clear the balance can leave homeowners without enough cash for unexpected expenses.
“Home equity is valuable, but it isn’t readily available cash,” Valko said. “Accessing it later may require selling the property, refinancing or borrowing again, and approval will depend on the homeowner’s circumstances.”
Retirement contributions also deserve consideration. For some homeowners, continuing to invest while making extra mortgage payments may offer a better balance than directing every spare dollar toward the mortgage.
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“The tax picture matters, too. For someone in a higher tax bracket, an RRSP contribution may provide a valuable tax deduction, while a TFSA can offer flexibility and access to funds that would otherwise be tied up in home equity,” Valko told Money.ca.
Missing an available employer match can also mean leaving part of an employment benefit unused. Investment returns are uncertain, so the choice between investing and mortgage repayment depends on the mortgage rate, time horizon, taxes, risk tolerance and the household’s broader financial plan.
For some homeowners, using mortgage prepayment privileges to reduce the balance while continuing to build accessible savings may offer a better balance.
The aim is to enter retirement with a mortgage payment the household can manage, enough cash to handle unexpected expenses and a plan for paying down the remaining debt.
Becoming mortgage-free can make retirement budgeting easier, but not if getting there leaves too little money to live on.
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Steven Brennan is a freelance finance writer based in Vancouver, BC. He holds a BA and an MA from Maynooth University, Ireland. His work regularly appears at Canadian Mortgage Trends, Lowest Rates, Loans Canada and other Canadian and U.S. brands.
