CMHC: Canadians Over 55 Are Sitting On Over $277 Billion In Real Estate Debt

Canadian real estate debt is at epic levels, but who are these people borrowing? The Canada Mortgage and Housing Corporation (CMHC) and Equifax provided us with a breakdown of debt, shedding a little light on homeownership at the end of 2017. Despite elevated home prices across Canada, there’s over a million Millennial homeowners. Even more surprising is there’s even more older Canadians with a lot of debt attached to their home.

A Quick Note About The Data

The data we’re using today is from Equifax, and it underestimates the amount of total mortgage debt. For example, Equifax reports the total outstanding mortgage credit at $1.2 trillion at the end of 2017. Meanwhile, the Bank of Canada reported it at $1.49 trillion during the same period. Both exclude private mortgages, an increasingly important part of Toronto real estate. That said, it’s one of the most comprehensive profiles on borrowers. It’s worth a dive through to understand the vast majority of Canadian household debt. Today we’ll just be looking at age cohorts of mortgage holders.

Older Canadians Hold The Majority of Mortgages

Over 1 in 10 Canadians have an active mortgage, the majority held by older Canadians. The data shows 5.94 million active mortgages at the end of 2017. Breaking that down, the largest segment of borrowers are between 45 and 54, holding 1.604 million mortgages. The second largest cohort is between 35 and 44, holding 1.544 million mortgages. Millennials, aged 35 and under, held an estimated 1.009 million mortgages at the end of 2017. People aged 45+ held 57% of the total number of active mortgages.

Canadian Mortgage Holders By Age

The number of mortgages held by Canadians of different age groups at the end of 2017, in thousands.

Source: CMHC, Equifax, Better Dwelling calculations.

Canadians Over 55 Hold Over $277 Billion Worth of Mortgage Debt

Younger Canadian cohorts have the most debt, but older Canadians are far from debt free. Canadians aged 35 to 44 hold $362.4 billion in mortgages, the largest cohort of mortgage holders. The second largest group is between 45 and 55, with $326 billion in mortgage debt. Most interesting is people over 55 still owe a massive $277 billion on their mortgages. Owing over $155k going into your twilight years isn’t everyone’s idea of fun, but whatever floats your boat.

Canadian Mortgage Credit Outstanding By Age

The dollar value total of all mortgages held by Canadians of different age groups at the end of 2017, in millions.

Source: CMHC, Equifax, Better Dwelling calculations.

The most notable takeaways that break narrative are on Millennials and older Canadians. There’s quite a few Millennials that own a home, with nearly 1 in 7 holding a mortgage. Older Canadians, that have been building equity for a long time, are still holding onto a lot of debt. Didn’t the latter buy at the bottom?

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  • Iota 3 months ago

    Be interesting to know if the seniors are holding new debt, or is this debt held from ages ago. Lines for pre-sale condos seem to be composed of more Boomers than Millennials. “investment grade” of course.

    • vnm 3 months ago

      We know boomers have been using their houses like piggy banks, and the bubble has been building for so long that in many cases over time their overall debt been amalgamated and rolled over into increasingly large mortgages. The expectation seems to be that although there’s no way to pay off the mortgage, the plan is to downsize, pay off the debt, and have enough left over to supplement OAS/CPP.
      Going to be a lot of heartbreak as house prices tank amidst rising interest rates, and companies start cutting jobs.

      • Justin Thyme 3 months ago

        When you die, it doesn’t matter if your house is worth $800,000 or $500,000. The money ain’t going to do you any good. When you die with money still in the till, you have missed out on the enjoyment that money could have brought. Vacations, cruises, eating well, good surroundings.

        But if, twenty years before you die, and your house is worth $800,000, and you mortgage to capacity, you have over $600,000 to carry you through. That is a lot of vacations. It is also a very big stock portfolio. A good portfolio returned over 15% last year. That’s $90,000, plus dividends. If the house falls to $500,000, you still have that $600,000 portfolio. You don’t CARE what your house is worth. So WHAT if it drops in value? You weren’t going to benefit from its value anyway, if you don’t act before you die. You have your house to live in, and money in your pocket. You will never see that value when you die. Better to grab that $600,000 when you can enjoy it.

        • vnm 3 months ago

          Right, who cares the kids, frack them!

          • Justin Thyme 3 months ago

            It ain’t the kids anymore, and it ain’t even the grand kids. It is the great grand kids. Your grand kids are probably 40 years old.

            Your kids are well into their 50’s, probably their 60’s, when you die. They are on their own. Fact is, they might be worth more than you are. You got them there, time for YOU to enjoy the money.

            Who deserves the cruise more, your grand kids or you?

    • Robby B 2 months ago

      During the same period, Divorce rates have increased quite quickly for the aged 45-55 in the last 10 years so we can speculate that the outstanding mortgages are due to net new mortgages with double digit years for amortization (buying more with less purchase power or buying for another marriage).

  • Mica 3 months ago

    Only a third is the prime buying age. That’s a little disturbing.

    • Bluetheimpala 3 months ago

      Another example of how the ‘ladder up’ housing model is completely broken and is in the process of normalizing. Will it go back to where it should? I don’t think so but where we’re at right now is unsustainable. That’s what sent off alarm bells for me 2 years ago; how can housing be sustainable when you need $140K+ AND/OR (generally AND) a minimum of $200K when saving rates for the last 10 years have been non-existent. My circle all comes from families with modest means and when none of us can get in or have to beg/borrow to do so, it says something. I know a tech sales guy who makes $150K+ a $24-50K a year in bonus who complains about not having enough money because his fucking mortgage is $800K with $200K down, daycare is $1500 a month, credit card and heloc are hundreds a month. I can assure you he isn’t living in an opulent mansion, just a nice detached in Etobicoke. That conversation was last year when shit was getting frothy…BD4L.

      • Justin Thyme 3 months ago

        But guaranteed he is not going to let his house go, come hell or high water.

        It is not the ones who currently own the houses, it is the ones coming up who are divided into two camps.

        They can buy a house, with some hardship, or it is totally beyond then and will be for a very long time, if not their life. For them, they can only hope that THEIR kids will be able to afford a house.

        • Foxxy 3 months ago

          No they won’t. If that’s the case, of a whole generation shut out from the housing market, then the expectation for their children will shift. It will no longer be a hallmark of success because no one they know (except maybe there grandparents) will own a home, so why should they?

          You inherent your cultural norms and expectations from observing your parents, at the adults in their life adjust to this reality of being perma renters there children will never see the value of owning a home, because why should they?

          • Justin Thyme 3 months ago

            Except that the parents of today are living to see their grand children, even their great great grand children.

            ‘I want to own a house just like yours, great grandpa.’

            ‘You can, great grand child, it is within your reach.’

  • CS 3 months ago

    I have mentioned this before, but my sister in law bought her home 30 years ago for 135000.00. She currently owes over 250000.00 on a wartime bungalow, and shes 54 and her husband is 58.

    But they will tell you how rich they are because their home is worth a half a million dollars. He fixes photocopiers and she runs a home daycare, so no fat pension in their futures….

    I sold my wartime bungalow 3 years ago, because it needed 150000 in repairs. I have no debt, i work part time, i travel, i eat out, and my bank account grows every month.

    They unfortunately have huge debt, mortgage and credit card, and at least 50000.00 in needed repairs (aging weeping tiles and sewer)

    I only add this comnent, because it is unsustainable. They will paying off debt until they die. Even if they sold now, whoever takes on their bungalow is still looking at servicing a debt of over half a million dollars, for a tiny box that is old and still aging. So all that money, is still servicing debt.

    And, they are talking about buying an investment property to rent out…..

    If it werent so horrible, it would be hilarious. These are the people inflating the housing bubble, think about that before you take on any further debt.

    • Rr 3 months ago

      Yes, that sounds like a lot of people who regularly walk into a bank to tap their equity, for a reno, to help adult kids, to buy rental property, to pay off credit cards that are maxed once again. And if the bank says no, there are other options………

    • Justin Thyme 3 months ago

      I all your bluff. No way were wartime houses going for #350,000 30 years ago. I know. We sold our parent’s wartime bungalow then.

      • CS 3 months ago

        135000 dummy.

        And they were selling for 200000.00 three-five years ago.

        Now 425000.00-500000.00


        Learn how to read.

      • Grizzly Gus 3 months ago

        JT, I feel like you have only been half reading the comments before replying recently. He said $135,000.

        • Justin Thyme 3 months ago

          Ouch. Revenge is sweet.

          I interpreted the 1 for a dollar sign and counted the zeros in the 250000 figure. But $135 000 is still too high for a wartime house 30 years ago. No way do his numbers make sense. They look pulled from a hat. 30 years ago, they were going for around $60,000. A 20 year old split level was going for about $120,000 if that in 1990.

          And you still need the income for a $250,000 mortgage, even if your house is worth a million in equity.

          • Grizzly Gus 3 months ago

            30 years ago was 1987. Midway through the last bubble up cycle. Could have easily fetched that much

          • Justin Thyme 3 months ago

            Nope not even close. We sold my parents’ house around 1990. We thought $70,000 would be the extreme upper limit. And it was not a wartime house. Much bigger. And we looked at refinancing our house around this time. Bought in 1980 for $60,000. Refinanced in 1986 for $90,000, and that was high. Interest rates were around 10%. Average industrial wages in 1987 were below $14 an hour. The average price in Canada was $129,000 in 1988.

          • Grizzly Gus 3 months ago

            The average price for Toronto in 87 was 189k. Fewer condos to pull down benchmark. War time bungalows were the condos of that time. Don’t mess with me JT

          • Justin Thyme 3 months ago

            Even if your fact is correct, $189 k for an average house does not allow for $135 K for a wartime house. They traditionally run around 50% of average prices, even now.

          • Justin Thyme 3 months ago

            Find an actual add from 1987 for a wartime house going for $135 k and I will accept the figure as credible.

  • Maggie Kallion 3 months ago

    The lijely reason the Equifax data is understated is because every month some records reported will reject for various types of mismatch errors for name, address, city, province. Equifax & Trans Union both have robust matching criteria to ensure the right info is added to the right customer file so if the info reported does not pass the required threshold, the record is not added to the customer’s file. If the reporting lender does not fix the problem with the info they are reporting, the record will continue to reject…month after month after month. Hence, the understated numbers. This logic applies to all types of credit records…mortgages, loans, lines, credit cards, etc.

    • peter 3 months ago

      This will be danger

    • Robby B 2 months ago

      Bigger issue is not the few data mismatches that occur but rather…
      – Bank of Canada leakage (i.e. private mortgages outside the banking system which also were the cause of subprime mortgages meltdown in the USA).
      – Also consider BoC uses CPI Inflation to set policy but does CPI Inflation really capture prices for what people really spend these days? (i.e. in 2018, people are not really buying milk or apples, its a lot of fast food and restaurants instead lol)

  • Justin Thyme 3 months ago

    ‘Over 1 in 10 Canadians have an active mortgage, the majority held by older Canadians. The data shows 5.94 million active mortgages at the end of 2017.’

    Really, really sloppy statistics.

    if ‘one in ten’ is 5.94 million, there are 59.4 million Canadians, no?

    Except that the population of Canada is only 36.2 million.

    5.9 million is 16% of 36.2 million, not 10%. What gives? Or is the word ‘Over’ a weasel word?

    • Ryan 3 months ago

      I scratched my head on this one too. Why not just say “Nearly 1 in 5 Canadians” … really get more bang for your shock and awe buck that way.

    • Grizzly Gus 3 months ago

      Over 1 in 10 or under 1 in 5 could have been used. The 5.9 million might also include second and third mortgages. Didn’t specify that 5.9 million people hold mortgages

      • vnm 3 months ago

        Exactly, debt financed multiple mortgages, a problem in itself as has been writing about by BD.

      • Justin Thyme 3 months ago

        One in ten means 3.5 million Canadians. That would mean almost 50% have a second mortgage.

        • Grizzly Gus 3 months ago

          Over 1 in 10 could mean 4 million mortgage holders which is only 11% of the population. (assuming 35m total). 4.5m would 13% of the population. Is “over” 1 in 10 really such a ridiculous claim for either of these groups?

          If 10% of mortgage holders have 3 mortgages. That would account for 800k active mortgages or 42% of the 1.9m surplus (if 4m mortgage holders). If 4.5m holders, using the same numbers , 900k active mortgages are covered by this group which represents 64% of the 1.4m surplus. In the former example, 1.5m mortgage holders have more than 1. = 37.5% of mortgage holders. Later example, 950k holders have more than 1. =21% of holders.

          Though I would imagine this is very rare, there are examples of individuals with 4 mortgages on the same property. I also believe there are 120k individuals just in the GTA that own more than 1 property. Someone with 5 properties could equal 5 mortgages or more. Allowing for these individuals would bring the total % of holders with multiple mortgages down even further.

          • Justin Thyme 3 months ago

            By your logic, it is appropriate to say that the average mortgage in Canada is ‘over $10,000’.

            Although it is a true statement, it really isn’t useful.

          • Grizzly Gus 3 months ago

            I’ll take that last reply as a win

          • Justin Thyme 3 months ago

            My original point was ‘sloppy statistics’. That still holds.

  • Justin Thyme 3 months ago

    ‘Owing over $155k going into your twilight years isn’t everyone’s idea of fun, but whatever floats your boat.’

    Reverse mortgages. May the last check bounce. Use every last penny to enjoy your senior years. It doesn’t do you any good when you are dead.

    • Justin Thyme 3 months ago

      It’s not ‘The one who dies with the most money, wins’, it is ‘the one who dies having the most fun, wins’.

      • Tomasz 3 months ago

        Maybe using a bit of your home equity but it would be nice to leave some money for your kids and grand kids. With the price of homes, food, gas, and other going up so constantly (well maybe not the homes at the moment), leaving your heirs some cash $$$$ would really be appreciated.
        Grand kids would have something to get them going from gramps and granny!

        • Grizzly Gus 3 months ago

          Also don’t want to miss time the last check bouncing. Could get caught with your pants down.

          With that strategy I also recommend prepaying your funeral costs. Not leaving the kidos with an inheritance is one thing, leaving them with a 10-20k tab is another.

          • Justin Thyme 3 months ago

            That is the trick – predicting when it is time for the last check to bounce. But you are right, your kids probably do not expect an inheritance (they will be in their 60’s, at least) but they certainly do not want to get stuck with the bills.

        • Justin Thyme 3 months ago

          Your great grand kids. Probably ten or more by then. Not much to leave each one. Your kids will be in their 60’s. maybe their 70’s, when you die. And they will probably be better off than you. So who goes on the cruise, you or them?

          If your kids have any decency in them, they will tell YOU to enjoy the money. They don’t need it.

          Only if your estate is in the millions is it worth passing on.

    • Lahdeedah 3 months ago

      That’s a stupid idea. Real estate is not a vehicle for wealth, it’s a vehicle for debt. Portfolio investing is a vehicle for wealth. It’s liquid, diversified and balanced. Real estate is none of those things.

      Yes, it helps if you made a few hundred grand on the sale of some real estate, provided you bought at the bottom a couple years ago, and have a decent profit margin to enjoy the proceeds of that sale.

      The fact remains, an average joe is not going to become a millionaire on owning a house. But they can become a millionaire if they sell that house, live in a rental instead, and invest the sale profits over several decades, with compounded interest.

      One person retires a millionaire, and one person retires with zilch and a mortgage. Decide which one you want to be.

      • Justin Thyme 3 months ago

        Or if they mortgage that house to the hilt, at peak, and invest it in a portfolio. Then they don’t care what happens to the house value. If it eventually goes up, bonus. If it stays depressed, you have made your fortune in your portfolio.

        • Lahdeedah 3 months ago

          Well, you can’t have both. You’ll be so house-poor from paying off your uber-leveraged house with a maxed-out mortgage and rising interest rates, you won’t have money left to enjoy your life, since all your income is servicing steep, monthly mortgage debt, and the other half is stuffed in a portfolio, assumedly, gaining interest.

          I don’t know why you think mortgage debt is a good thing, or a solution to anything. Probably because you’re a Gen Z and don’t have a mortgage to begin with.

          • Justin Thyme 3 months ago

            With $90,000 a year from your $600,000 portfolio, who cares what happens to your house? In ten years, you are a millionaire twice over. Your house can be worth squat. You got the value out of it when you mortgaged it, when the going was good. The house falls, you still have the million plus portfolio. And you have lived in your own house .

          • John 3 months ago

            90k gain on a 600k portfolio is a completely unrealistic expectation.

            Further, when you leverage at peak, and renew 5 years later with negative equity you now have to sell your investments to pay the Bill’s.

            Look out if your portfolio is down when you have to sell. You’ve now lost money in the stock/bond market AND the RE market.

            You’re off your rocker man.

          • Lahdeedah 3 months ago

            @Justin Thyme, you’re clearly delusional, and have no concept of time, money, value depreciation/appreciation, etc.

            Where are you even getting $600,000 on the net sale of a house, as a Gen Z buyer? (You can’t even afford a house worth $600K at your age). And in what universe do you make $90,000 per annum on a $600,000 portfolio?

            Does it make you feel big to throw around numbers like it ain’t no thang, while you have clearly no grasp on reality?

            Do you even have a mortgage, or a portfolio? (Answer: No, he’s a Gen Z who probably lives with parents and posts on this blog to feel like he’s a big boy who’s adulting).

          • Justin Thyme 3 months ago

            Does it make you look ignorant when you do not understand the realities of the stock market today – 15% gains are not just realistic, they are expected, on a portfolio of $600,000. Obviously, you are not in that league. Having a $30,000 portfolio just does not command the serious attention of the big money managers – the ones who deal only with portfolios larger than half a million.

            The Ontario Teachers Pension Plan 5 year benchmark, which they exceed, is 13% return on equities. And they are relatively conservative.

            If you think a 15% year over year return is impossible, it proves that you are stupid money.

          • Lahdeedah 3 months ago

            Lol, oh grasshopper. You probably only lived through the ‘boom’ years of the post-2008 recession, so all you know is a bull market. Unfortunately, that’s not a condition consistent with history. All markets go down at some point. And all portfolios experience losses. A conservative portfolio balanced in stocks, cash, bonds, etc across different markets, would survive such a catastrophe, in real-time, but your high-risk scenario would not. And you’d probably panic-sell it and take a big loss because you couldn’t stomach a 80% loss overnight. However, your conservative, balanced and diversified portfolio would be humming along with much less losses, and would recover quicker.

            Also, if your money is with a typical manager, they take a 2-2.5% management fee. If your money is with a for-fee manager, they take a 1% fee. So that cuts into your 13-15% gains. A conservative historical average, after fees, is 8%. This model appeals to people with money they want to stay liquid, diversified and balanced, and accessible at any time. If you are risking your money on high-risk assets, you have to be prepared to stomach losses, which means you cannot withdraw your money while it is down in value. The advantage to a ‘boring’ portfolio is that you can withdraw your money more reliably.

            Look at Facebook stock – billion dollar company, ‘too big to fail’, and yet bam, lost several billion dollars in equity in the blink of an eye. Lots of average joes lost a lot of money. A balanced portfolio with ETFs that sample a piece of the market, and other vehicles like bonds, etc, is much safer, and you’d still have your money intact. Only buy single stocks, in large amounts, if you are comfortable with gambling away and losing all that money, literally overnight. Don’t put your eggs in one basket, is the lesson here. Sure, you can get huge gains gambling, but that’s not investing. There is a significant difference.

            I suggest you start reading Garth Turner’s blog The Greater Fool, and you’ll learn all about this. You might even be tempted to demonstrate your ideas in his lively comments section. Just be warned, they are not as kind as the commenters here.

          • Lahdeedah 3 months ago

            15% gains is not impossible at all. You have to define what you’re looking at. I made over 30% gains on Teck.B stock after the 2008 crash. That was easy money cause the only direction it could go was up up up. Was it a crazy gamble? Yes. But I made out ok. We are not in the same market today. Today is volatile as hell (cough Trump cough), and you need to minimize your risk accordingly.

            You come across as arrogant and inexperienced, and you are pretending to be a know-it-all, which you are not. How about you take your $30K portfolio, put all your money on one stock, and let it ride. Then come back here in a year, and let us know if you’ve been humbled by el Market.

          • Lahdeedah 3 months ago

            Furthermore, do you comprehend the meaning of ‘historical average’? Just because a portfolio is foretasted to make 8% on average, does not mean that it will make that this year. It may make more, and it may make less, depending on market conditions. 8% is an average number, based on historical data.

            There is no ‘magic’ portfolio manager out there who isn’t subjected to the very same market conditions as all the other ones, and there isn’t a ‘magic’ portfolio manager who doesn’t charge between 1-2.5% or more for their services. I suggest you get in touch with reality. Pride comes before a fall, as they say.

      • Chris 3 months ago

        “Real estate is not a vehicle for wealth, it’s a vehicle for debt. ”

        Agreed! Anyone who thinks a house is a means for cash is a fool.

  • DeceitinDrugs 3 months ago

    How many people, who bought their homes 20-30+ years ago are now dippinginto a PLC
    (homeequityloans) to help sustain themselves since the 2008 recession? These people can no longer keep up witht he ever increasing cost of living. how many are dipping into PLC for home repairs, vehicle repairs, children’s education and the list goes on. The average income earner no loner has much left after paying mortgage/rent, vehicle Ins/gas, utilities, property taxes, house Ins and food.
    If it wasn’t for property values sustaining these expense burdens, the economy would have tanked a long time ago.

    Added to all of this is not only oil prices driving increased costs but #DirtyMoney extensively being invested in the economy, making it seem more stable than it really is.

    Meanwhile, Trudeau is focused in bringingmore people into Canada and expecting Cdn taxpayers to fund the millions required for Migration/Immigration/refugee programs for people wanting to come to Canada.

    • Justin Thyme 3 months ago

      You are correct. They might be in trouble. All ten of them.

      But the rest ? Doing quite fine, thank you.

      As long as three million Canadians have exuberance, the trend will continue.

      The economy is not defined by those who have no money, but by those who have too much. And there are a LOT (millions) who have too much.

    • Chris 3 months ago

      “Meanwhile, Trudeau is focused in bringingmore people into Canada and expecting Cdn taxpayers to fund the millions required for Migration/Immigration/refugee programs for people wanting to come to Canada.”

      That’s true in a very short term and myopic point of view. There is ample evidence to show how immigration has great long term benefits. So many people hated on Trudeau the 1st for his immigration policies and yet Canada is in a great place now because of it. (For the record, I did not vote for Trudeau!)

  • BirdieB 3 months ago

    It would be interesting to know how many of the Boomers used their mortgages to fund their children’s (millennials) education and/or mortgages.

    • Bluetheimpala 3 months ago

      Unless income and saving rates suddenly skyrocketed it is fair to assume a notable portion of this debt is tied to familial gifting or lending but…remember, the lending wasn’t as binary as old 55+ to young -35…the reality is a lot of older, lower income individuals received funds from their elderly parents. In my mind, someone taking out money from their asset to pay for education or a business venture is somewhat justifiable but what has been going on is renovations, widgets and general stupidity. When people are given something from nothing they suddenly seem to think they are geniuses and the party will never end (like syphilis…reminder: get pills). BD4L.

    • Lahdeedah 3 months ago

      Probably not as many as you think. My parents, both immigrants, with their average salaries, bought their house in the 70s for $60K, with high interest rates of the day. Paid it off in 5 years. Yes, they were insane. Paid for my and my sister’s education out of pocket. And they have a decent retirement portfolio. However, they did not buy anything with the label “luxury this” or “luxury that”, and they didn’t go on exotic vacations every year. They were cheapo and never threw anything out. Lived within their means and burned their mortgage to the ground. Nobody does that these days. Not with record low interest rates that make having debt so affordable and attractive, people would rather hoover up debt than live within their means on a budget.

      • SUMSKILLZ 3 months ago

        My grand patents saved, invested and retired debt free with 1.5 million in the bank (1989). One was a seamstress from the age of 16 until 65; the other a mechanic in a small local indie garage. They took a vacation every 10 years, renovated their one and only home, after 40 years. A whole retirement life of travel was planned out and fully financed.

        On the last day of work, after the goodbye party, the seamstress was on the way to the bank with her last paycheck and was run over by a bicycle. Her brain was destroyed in the collision. Her husband had a major stroke from the stress and died within a year of her accident. She lived 25 more years in a hospital, physically alive, but mentally non functioning.

        You have to live for today, if you defer life too long, your timesheet on earth might punch out before you can collect your rewards. Yes, plan, but keep things in perspective.

        • Lahdeedah 3 months ago

          Sure, live for today, but take pleasure in the things and experiences that you can afford, without hurting ‘future you’ by stacking up ridiculous debt that will hurt your future self.

          Do you really need a Rolex watch? No. You just ‘want’ it. Buy a Timex. Do you need retirement savings? Yes. So figure that out. Use your common sense. And don’t be an easy target for marketers trying to push you on the latest and greatest thing that you don’t actually need.

          People have a hard time discriminating between ‘want’ and ‘need’, as they are vastly different, and are priced accordingly.

  • Canadian in LA 3 months ago

    This doesn’t really break down primary v investment property. There’s nothing wrong with controlling investment property with mortgages. In fact, it would be absolutely silly to own investment properties free and clear. The government devalues the dollar 2%+ every year and there is no interest expense to offset the income. Given that only older folks can afford investment properties, this data actually makes sense.

    I would only worry if the debt is used to finance non-income producing assets like a primary residence or vacations…. Another worry is if there is a lot of debt that can’t be serviced by the rental income… which is obviously the case in Toronto and Vancouver.

  • Justin Thyme 3 months ago

    Now, come on, THINK about it.

    If you have $400,000 equity in your home today, but you KNOW it might fall in value by $200,000, do you just sit thee and let the equity disappear?

    Or do you follow the advice of your financial adviser, mortgage it to the hilt before it drops in value and you LOOSE the equity? The money you have now just evaporates?

    Then invest that money in stocks or some other vehicle besides real estate, and see the money keep going up. Even if your house goes way down, you have locked in today’s equity in some other income-gaining investment. Just siting there, doing nothing, letting the equity just piss away, THAT is stupid money.

    • Grizzly Gus 3 months ago

      You could be right, but your whole plan regarding reverse mortgages unravels if there is any clause that allows the loan to be called in or a power of sale if the value drops below a certain threshold relative to the debt. I don’t know the answer to that question but the fact it is only the most reputable and trustworthy business such as home capital and Equity Bank offering these I would assume there is something nasty there in the fine print.

      Also (in regards to posts above) what do you think happens to that 600k portfolio when the global housing bubbles reverse? Does principal hold? To get that 90k annual return on 600k must have you pretty far out on the risk curve.

      And if you can consistently find 15% returns we should start calling you the Oracle of Ontario. Quit that elementary teacher job and start a fund. Look out Buffet!

      • Justin Thyme 3 months ago

        And why exactly would smart money agree to such a clause?

        But if your house is valued at $800,000, and you mortgage it at 80%, the mortgage is only $640,000 so your house has to fall below this number to trigger a ‘mortgage call’. And even then, you only need to pay down until you reach the trigger level. So you have to cash in some of that $90,000 you made in one year on your portfolio? You still have the original $640,000 portfolio and your mortgage is now down to $550,000. And your house is also worth $550,000 or more. From $800,000 to $550,000 is a drop of 32%. Really, if your house drops by 32%, aren’t you glad you grabbed your money when you could?

        Have you checked the stock market? On $600,000 if your money manager can not get at least 10% you need a new manager. The Dow Jones was up some 13% last year, and that was not a properly managed portfolio. Any good manager should be able to beat the Dow Jones. benchmark.

        Average yields aver the last 40 years on a $600,000 portfolio are around 8%. Your portfolio doubles every 9 years at that rate. In eight years, you could cash in half of your portfolio, pay off the entire mortgage, have your devalued house mortgage free, and STILL have a $640,000 portfolio. Bear in mind, the yields on $600,000 are way higher than you can get on, say, $60,000. It takes a large portfolio to attract the best managers.

        If you left everything as is, all you have is your devalued house.

        Now tell me again, exactly why is it a BAD thing to cash in on your home equity today, by maxing out the mortgage, and investing in something other than real estate? Especially if you thought real estate was going to tank, and otherwise you piss away your current equity? Do you want to just piss away that equity, or do you want to lock it in? And a five year mortgage at 3.09% for excellent credit? If you have a $640,000 portfolio, you get the best rates.

        • Justin Thyme 3 months ago

          The Ontario Teachers Pension Plan five year average return on equity investment is 16%. The bench mark was 14.8%.

        • Grizzly Gus 3 months ago

          Something tells me smart money isn’t dependant on a reverse mortgage to fund their retirement. Also there other choices. I sold last year thinking we were at a peak. I withdrew 100% of my equity which can and has been deployed in other investments. You could also go HELoC at 4% and try to beat that on the spread. Which is 11% in your world. The rate you quoted is legit for a normal 5 year fixed. Do reverse mortgages offer same rate? Also the interest grows on a principal amount that isn’t being repaid so the balance isn’t reduced after 5 years. Using 35% drop as your most recent example, without the compounded growth, I think we both think that is a realistic drop considering you used a 50% drop scenario in your earlier justifications. On the investment side, let’s assume you can grow by 15% a year……. are you not spending any of that growth to fund your retirement? More realistically, when the housing bubbles burst, consumer spending drops, the economy crashes and your 600k portfolio loses 30-50%

          • Justin Thyme 3 months ago

            If you will note, I mentioned nothing about a reverse mortgage. Having a stock portfolio in excess of half a million is not uncommon for the professional 45-55 year old range, even less uncommon for the 55-65 age range. And there are a LOT in this category.

            If they can remortgage their 30 year old house and get another half a mill to invest, you can be assured they will have done it.

            THAT is the smart money.

            Yet the posts in BD seem to be limited in scope to believing that this market is driven by those who can not afford to be in it in the first place, and seems to be restricted to discussions about investing in real estate only, not other venues.

            There are over three million Canadians in the top 10% bracket. Like I said before, THEY are driving the market, not the ones in the bottom 50%. And they are investment savvy. They get at least 10% year over year, not just in some wild year of a housing bubble. If they get 15% on housing in a year, they turn it into REAL investment money.

            Those in the bottom half of the middle class got on the wrong boat, and it is sinking for them. Yes, they are drowning in debt. But for those driving the market, the ones who have hoarded all of the exuberance, it is full speed ahead.

            The market will not be determined by the statistics from the bottom half, but from the top half. And trying to force the top 10% into the same mold as the bottom half just won’t work. They won’t even break out a sweat if rates rise another percent or so, and the BoC knows it.

            The BoC never makes decisions based on what the bottom half is doing. The bottom half is just along for the ride.

    • Chris 3 months ago

      Justin Thyme it’s crazy to think that you’re going to lose something that doesn’t really exist. Equity on a home is just a number made up on a bank statement, manipulated by a market with a lot of irresponsible and greedy wizards behind curtains (aka people flipping properties and acting like real estate is a legitimate investment). To think that you’re going to “lose out if you don’t cash in” is dangerously short sighted.

      If you take out 200,000 equity on a home that is “worth” 600,000 before a market correction, you’re on the hook for the debt when (and it will) the market goes south. It’s not real cash. Telling someone at retirement age to take out equity on their home during a bubble is insanely irresponsible. Stop giving bad advice. Pay down your debts, get into the black, then you can legitimately call yourself wealthy.

  • Chris 3 months ago

    *correction. The house value is a made up number, not the equity.

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