Mortgage Freedom: Unlock Your Next Financial Chapter

Experts advise strategic planning after paying off home loans

Paying off a mortgage, often the largest financial undertaking for Canadians, marks a significant milestone. However, before indulging in celebratory purchases, financial advisors stress the importance of recalibrating your financial strategy.

Reassessing Your Financial Landscape

The elimination of a mortgage payment frees up considerable cash flow, presenting opportunities for various life goals. Nancie Taylor, an investment advisor with Meridian Credit Union, emphasizes a client-centric approach to this newfound financial freedom.

“My job isn’t to tell them, you should do this and this and this. It’s more about, OK, this is how you looked today. So where do you want to go tomorrow? And it’s interesting where the conversation leads.”

—Nancie Taylor, Investment Adviser

Potential objectives range from early retirement and increased travel to providing financial support for children or grandchildren. However, Taylor cautions that the actual savings may be less than anticipated, as mortgage payments often bundle other costs like property taxes and life insurance.

Beyond the Mortgage Payment

Homeownership still entails ongoing expenses, including utilities, maintenance, and potential upgrades. Major repairs like roof or window replacements, or appliance failures, can significantly impact your budget.

With the mortgage debt gone, this is an opportune moment to tackle other high-interest debts, such as credit card balances. It’s also a prime time to catch up on neglected retirement savings like RRSPs and TFSAs, or educational funds like RESPs.

“If you’ve not maxed out your RRSPs every year and you have a significant amount of carry forward room, then redirecting some of that cash flow will actually give you more in your pocket today,” Taylor noted.

Reviewing Insurance and Estate Planning

The absence of a mortgage debt also warrants a review of life insurance policies. Coverage may now be excessive, prompting a look into other insurance types, such as long-term care insurance.

Becoming mortgage-free is also an ideal juncture to update your will and estate plans, ensuring they reflect your current financial standing.

Crafting a Personalized Financial Roadmap

Sumaiya Bhula, a senior manager at TD, highlights that there’s no universal solution for managing finances post-mortgage. She advises creating a plan tailored to individual long-term objectives.

“The reality is, if you want to continue to build upon your portfolio and your wealth, you need to really look at holistically what your long-term objectives are. That’s where, you know, the plan really comes into place where you look at your cash flow and what should be allocated where and then how much do you still have remaining for X, Y and Z.”

—Sumaiya Bhula, Senior Manager

Having a clear plan for newly available funds is crucial to avoid missing opportunities to advance your financial goals. Taylor suggests that one’s 50s are a critical period for redirecting funds to maximize their earning potential.

A recent report indicates that Canadian household debt reached approximately $2.3 trillion by the first quarter of 2024, underscoring the financial relief many feel after eliminating mortgage payments (Statistics Canada, 2024).