# Mortgage Paydown or NOT???



## Tracker (Mar 22, 2012)

I am retiring next year at age 68 with very limited resources. I do have some money reserves that I have been sitting on for the past year. My present mortgage is at 2.44 per cent for a $220000 mortgage...completely debt free with $100000.00:rolleyes2: from a court settlement.

The wife and I will only have the resources from Canada Pension for our monthly expenses. Should I put some money on my mortgage to help pay it down as rates will rise in first quarter of 2014...or just hold on to the cash and feed it out as my mortgage payments rise?

I feel a lot more secure with cash in the Bank rather then letting some of it go to reduce my mortgage payment a pittance......what do you advise as I know full well that I never will clear the mortgage based on present life span expectancy......

I only follow the market...I don't invest in it....

Any advise would be greatly appreciated....I need a direction?...


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## Just a Guy (Mar 27, 2012)

With limited resources, I'd say don't worry about the mortgage. I don't think your credit score means much at your age. Better to have the cash available for your needs rather than giving it to the bank. They may not give it back to you should the need arise.


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## OptsyEagle (Nov 29, 2009)

At your stage in life, it is my opinion that paying down your mortgage will do more to benefit your heirs then it will to benefit you. If things get tight you can always drop it on to a line of credit and just pay the interest costs. Let the bank take the principle out of your cold dead hand.


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## houska (Feb 6, 2010)

+1. In the grand scheme of things, the value at stake (opportunity cost) is 2.44% per annum on the 100,000. If you thoughtfully put that money in a high interest account you can whittle that down slightly, but it's still very little regardless. The flexibility and freedom to access the money if you would need it in my opinion outweighs that cost. When interest rates rise and it affects you, then you can figure out if it's worth a change in strategy.

Depending on your mortgage, there may be penalties to paying it down more than e.g. 20% per year. I certainly would not pay penalties to do this under the circumstances.

If you want to try, you could see if your lender (bank) would allow you to pay it down (without penalty) and immediately open a HELOC on top with at least the same limit as what you paid down. That would allow you the freedom to access the money when you might need it but not be paying the interest when you do not. However, depending on the circumstances your lender may or may not be willing to do that. In addition, the gov't has introduced new regulation on loan-to-value limits for HELOCs and mortgages. I haven't followed the details, and I don't think with your numbers you should be affected, but it does mean if it is an option worth pursuing you should probably ask now, before the new regulations come in. But if you've got other stresses in your life or tons of things on your to-do list, this type of financial engineering probably is not worth the effort to explore.


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## Ihatetaxes (May 5, 2010)

I would say sell the house and try to buy something less expensive that would eliminate all or most of that mortgage so you can retire truly debt free. Maybe even consider renting for the next few years as the direction of real estate values in many urban centers is not likely headed up much and could be dropping up to 10-15% if the bubble really pops.

What is your house worth?


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## sags (May 15, 2010)

You won't be receiving Old Age Security or Guaranteed Income Supplement?

Pensions are creditor proof (except for the CRA and court judgements), so lenders are not anxious to extend credit to people with only pension income. Money in the bank isn't security for them either, as it can be withdrawn at any time.

So........it could be difficult to borrow in the future.

I would recommend hanging on to the cash, and let the mortgage take care of itself.

If you put the money into paying down the mortgage, you will have everything tied up in one asset that could decline in value.....the house.

JMO


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## Brenner (Jan 17, 2012)

Ihatetaxes said:


> I would say sell the house and try to buy something less expensive that would eliminate all or most of that mortgage so you can retire truly debt free. Maybe even consider renting for the next few years as the direction of real estate values in many urban centers is not likely headed up much and could be dropping up to 10-15% if the bubble really pops.
> 
> What is your house worth?


I agree with this, you need to cash out if 100k is all you have in the bank. The mortgage will bleed your income, dont see how you would have much leftover to enjoy retirement if you only have CPP+OAS x2 even if both are at the max. Hopefully you are healthy now but health care expenses could start rising sharply and could even force a move anyway. But I don't want to fear monger on that, rather, I would sell and live with less stress renting some nice place and being free to take some much earned vacations.


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## themortgageguy (Jun 28, 2012)

I agree with Brenner and I hate taxes. I think think the best option would be to sell the house if that's at all feasible. You don't want to head into retirement with a mortgage and fixed income but this type of decision isn't all financial.

I don't know the details of your mortgage but given the rate I would assume its a short term fixed product or a variable that you signed onto at least a year ago. Remember that the mortgage rates we've had the past couple of years are at historical lows. When you do renew rates could be higher taking even more of a bite out of your fixed income. Not a good situation.

As for the fear of qualifying for a new mortgage, there are lenders that offer pensioners programs that allow for up to 75% GDS/TDS ratios depending on the equity in your home and credit score.

If you're unwilling or unable to sell the house you may want to consider a 10 year fixed mortgage now or after your current mortgage renews (depends on the penalty to break of course) . Higher rate but no risk for 10 years and if money wasn't tight and you weren't retiring I wouldn't even mention it. It would give you a level of control and "sleep at night" as well.

If you don't sell and the finances get extremely tight you could also consider a reverse mortgage if your equity is enough. They are expensive, a last resort (in my opinion) and not for everyone but a life saver for some people tight on funds, wanting to stay in their home and retired.

Hang onto the cash. You may even want to put it into a booster note of some sort for 5 years.






Brenner said:


> I agree with this, you need to cash out if 100k is all you have in the bank. The mortgage will bleed your income, dont see how you would have much leftover to enjoy retirement if you only have CPP+OAS x2 even if both are at the max. Hopefully you are healthy now but health care expenses could start rising sharply and could even force a move anyway. But I don't want to fear monger on that, rather, I would sell and live with less stress renting some nice place and being free to take some much earned vacations.


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