Canadians are increasingly retiring with mortgage debt despite working longer, making the age-old dream of a debt-free retirement home less attainable.
Nearly one-third of Canadians planning to retire by 2026 will still be paying off their mortgage, according to a new report published Tuesday by Royal LePage, marking a significant departure from the long-held expectation of entering retirement debt-free.
The national real estate company found that 29 per cent of Canadians expecting to retire in 2025 or 2026 say they will carry mortgage debt into retirement. Just 45 per cent said their mortgage was already paid off, while only six per cent said it would be paid off before retirement. The question did not apply to 18 per cent of those planning to retire, as they do not own a primary residence.
“The benefits of entering retirement as a homeowner with a paid-off mortgage are clear: more disposable income, insulation from interest rate changes, and even the emotional security that comes from knowing you’ll always have a place to live,” said Phil Soper, president and CEO of Royal LePage. “In the era of rotary phones and station wagons, burning your mortgage was the economic finish line. Today’s retiree reality is much more nuanced.”
Soper noted that while today’s retirees may be financially stable, they are entering homeownership later and, therefore, taking mortgages further into retirement.
“With people buying their first homes later and working longer, it’s increasingly common for Canadians to carry a mortgage well into retirement, often by choice rather than necessity,” he said.
The report found that 46 per cent of soon-to-be retirees plan to downsize before or shortly after retirement. Comparatively, 47 per cent say they plan to stay in their current home.
“Downsizing in retirement is far from a given,” said Soper. “Some see a smaller home as a practical and liberating choice… But for others, there’s no compelling financial reason to move.”
The survey found that standard condominiums are the most popular property type among retirees who downsize, according to 43 per cent of Royal LePage advisors who reported a downsizing trend in their market. Adult living communities catering to those 55 and up followed at 25 per cent, while detached homes made up 16 per cent.
A single-level layout was the most important feature cited by retirees choosing to downsize, followed by proximity to hospitals and amenities, then proximity to family and friends.
Royal LePage pointed to longer working lives, delayed homeownership, and larger mortgage balances as driving forces behind the shift.
Statistics Canada data cited in the release show that 14 per cent of households with seniors earning an income had a mortgage in 2016 — nearly double the rate in 1999.
As affordability continues to erode across the country, younger buyers are also entering the market later. A 2023 Royal LePage report found that 43 per cent of first-time homebuyers were aged 35 or older, up from 33 per cent in 2021.
“Home price appreciation over the past 25 years has been a double-edged sword for today’s retirees,” said Soper. “On one hand, it has delivered unprecedented financial gains. On the other, this generation is far more likely to have carried mortgage balances that would have been unimaginable to their parents or grandparents.”
For a growing number of Canadians, retirement no longer means financial freedom — it just means working longer to afford the home they already live in.