Rich Canadians mortgage their homes by choice

Sixty-seven per cent have the cash to pay off their home



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Sixty-seven per cent of high net worth Canadians (those with $500,000 or more in  investable assets) with a mortgage have the cash to pay off their home—in full—but don’t, according to a new survey for mortgage provider Investors Group.

Their reasons for holding on to the mortgage vary, including tax planning and income-generating rental properties. In Canada, mortgage interest on rental properties is tax deductible.

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“The notion that a mortgage is used only when funds aren’t available to pay cash for your home doesn’t ring true for many wealthy Canadians,” Peter Veselinovich, vice-president of banking and mortgage operations at Investors Group, said in a press release Wednesday.

In all one-fifth of high net worth Canadians have a mortgage, at an average size of $157,000. Thirty-three per cent own more than one property, more than half of them own a recreation property and 42% own at least one investment property.

Also noteworthy is that more than one-quarter of mortgage holders in this high net worth group has no plans to pay off the mortgage before retirement.

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“Cashing in investments to pay off your mortgage before retirement could trigger capital gains. That would mean additional taxes and less money to invest,” Veselinovich said. “Retirees in this financial demographic who are not concerned about meeting their mortgage payments see a tax advantage to maintaining a low-interest mortgage on their homes.”

Investors Group High Net Woth Mortgage Infographic

Data was collected using computer assisted web interviewing (CAWI) via Harris/Decima’s proprietary online panel. Overall, 1,009 general population completes were collected nationally between April 2 and April 12, 2014. In addition, 500 completes were collected from high net worth individuals, defined as those with household investable assets (excluding property) of more than $500,000. For the general population sample, quotas were set by gender, age and region. The general population data were weighted in tabulation to replicate actual population distribution by age and gender within region according to the 2011 Census data. 


6 comments on “Rich Canadians mortgage their homes by choice

  1. I’m currently in this exact position where I’m evaluating if I should aggressively pay off my mortgage or not. I don’t have any income from my primary home (ie: not rental suite or boarder). I’ve always thought that keeping a mortgage is beneficial for rental income property so that the interest can be claimed. There is no reason to keep a mortgage for a primary residence if doesn’t generate income. I’d really appreciate insights from others so please leave a reply!


    • Hey MJ. I’m not an expert, but I have an opinion! LoL. A financial advisor once told me that you are better off to invest “extra money” in an investment, than to double up, or increase payments on your mortgage. For example, $100/mth applied to your mortgage will pay off $30,000, plus substantial interest savings. A mutual fund with $100/mth earning 5% for 20 years would give you $40,000. If you get an 8% return on your investment, you will have $57,000 after 20 years… or…. your investments don’t do well, and you end up loosing money. A hard pill to swallow. (although they will likely rebound in time). As with any investment, your ambition and your risk tolerance will determine the best course of action for you personally. My two cents… pay off your mortgage diligently, but also plan for the future with RRSP’s and TFSA’s. A complete plan for retirement is about more than just your mortgage. Don’t forget RRSP’s could save huge money tax dollars for you if you can stay in a lower tax margin. TFSA’s will provide you with TAX FREE income in retirement. If you’ve maxed out your contribution room on all RRSP’s and TFSA’s… you need professional help… in a good way!


  2. ***More than half own a recreation property and 42% own at least one investment property.

    But the graphic clearly shows that 33% of HNW Canadians own more than one property. From the graphic I would have thought that 42% and the more than half was of the 33%. Poorly written or misleading.


  3. We are in that category of $500K and up in invested assets and yes, we do carry a HELOC on our house used exclusively to borrow to invest. The interest rate is 3% fully deductible at our marginal rates (43% – so the actual cost is 1.71%). We hold some dividend paying stocks in the 5% range, with preferential tax treatment. This does not factor in eventual dividend increases and cap gains. The investment loan is about $50k right now, but we are waiting for a bit of a market pullback to drop in another $50K or so in borrowed cash. Even a 2% interest rate hike to 5% would make the actual cost 2.85%. This is a buy and hold proposition.


  4. Some do, others do not. I do not have a mortage and haven’t had one since 1992 or so. But I see the sense in it as we are in a negative value money market. Where if you can borrow at 3% and invest for 12%, less 4% for taxes you could be 5% in value ahead of the game. Its the fraud govmints pull on pensions, savers, incomes, devalue money faster than most get raises or income.

    But the strategy does carry some risk, what if investments fail to yield the earnings or earnings fall below inflation+taxes? While it might be good for mid-life strategy, its not one you want to carry to retirement.

    Also depends how confident you are in getting a high income stream on the investments.


  5. I am a 64 year old female who has been on my own for a number of years. I began doing this form of investing many years ago after having had a paid off home. I have never looked back and have never paid for a mortgage on any property – since they have all been rental properties. Currently, I own a vacation rental in the BC Rockies which was featured in Zoomers May addition. The topic of the article was “How retirees can earn an income from the equity in their own homes in their retirement”.. I retired at 58 years old. Although still not wealthy (by my terms) I am in this group of $500,000+ in “paid off” assets. Although this form of investing comes with some risks, it can be a very lucrative way to use the money in your home to create wealth. As an aside – I never have earned more than a secretary’s income in a job – therefore, my wealth was all created from this form of investment. However, my investments have each come with at least 6 months of research regarding location, pricing etc. It is not an easy way to sit back and earn money – it does require a lot of work and diligence.


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