Booming debt?

A recent series of surveys from TD Bank revealed some interesting differences between boomers and their debt across our country. Regardless of the liability landscape from coast to coast, the overarching conclusion of the national study was that 57% of boomers still had a mortgage. What I thought was more interesting was just how much those boomers still had to pay down.

From my own backyard, 41% of Atlantic Canadian home owners surveyed had paid off their mortgage. That’s the good news. What’s worrying is that just under one quarter of them had yet to pay off more than half of their mortgage. The survey also found that most (60%) of Atlantic Canadians would be staying put come retirement so the financial relief of downsizing may not even be a possibility.

Dans Quebec 60% of those surveyed still had a mortgage and half have paid off less than 50% of the balance. Those in Quebec are set to downsize with less than half planning to remain in their current homes. Let’s hope their plans for a physical downsize come with a financial downsize too.

Boomers living in Ontario were most likely to downsize with 86% saying…Heigh-Ho, Heigh-Ho, it’s off to a smaller house they’ll go! I’m left hoping there are a lot of very small and less expensive houses in Ontario or that scenario might cause a few downsizing traffic jams. Only 43% of those homeowners were mortgage-free. What’s more important in my eyes is that one quarter still had a whopping 60% or more left to repay.

Just as they sit in the middle of the country, Manitoba and Saskatchewan sat in the middle of the pack with 45% of their boomers mortgage-free and only having 15% with mortgage balances over 75% of what they started with. Interestingly, they were the most likely to already own a vacation property, and more than half of those surveyed were interested in a property south of the border.

Meanwhile, out in the land of oil and honey, Albertans reported having the lowest mortgages left outstanding with nearly six in ten having shaken off their mortgage monkey. Even better, only one in ten had paid off less than 25% of their dwellings. But don’t everyone else feel bad though. Those stellar homeowners could escalate their debt with a cottage makeover line of credit as they are the most likely to spend their retirement years in their vacation home.

Finally on the West coast, less than one quarter of boomers in B.C. have paid that mortgage off. It’s no wonder with the price of homes there. Making matters worse is that one third of those on the near term track to retirement have more than 60% of their homes left to pay off.

Sure, in every province or region identified in the survey there was number of Boomers with no mortgage to speak of. Now, if I had a dollar for every person who’s told me “I don’t have a mortgage” when they’ve got a giant secured line of credit with a healthy balance on it (a mortgage), well I’d be retiring at 32. I find debt often finds people formulating strange rationalizations. Just last month I received an email from a person looking for some debt advice. When I asked if they had any additional debt besides the mortgage, they said “No, only credit cards and a line of credit”. So, I do wonder if the surveyor’s questions may have delved deep enough to get the most accurate responses from the participants.

This kind of data is so important and sharing it with a client in itself can be a great conversation starter. Keep in mind though that they only asked boomers about mortgages, not other debt they had. As I’ve already stated, people have convenient ways of compartmentalizing debt so as not to look directly at it all at once. Now, I know some would say the mortgages left owing mentioned in these surveys must be concentrated on that younger section of boomers but the survey doesn’t distinguish the debt as it relates to exact age. A reported 40% of Canadians are retiring in debt and 22% say they are accruing new debt in retirement. These facts would suggest there are many boomers very near retirement among that 57% still carrying a mortgage.

When you are talking with your clients about debt be specific about exactly what you mean when you say “debt”. Question what “mortgage-free” means to them. You may find some surprises, but you can’t plan for what you don’t know about.

In my latest blog, I recount a short story of a gentlemen I recently met who shared his elation with his newly-found mortgage freedom. He gives me one detail during the end of our conversation which gives me great insight in to his debt situation. Visit my blog and answer the question “Does he have a mortgage?” at the end of the blog to test your debt detecting abilities.