Canadians Leaning on Home Equity as a Retirement Safety Net

Homeownership: More Than Just Shelter in Retirement

For decades, the ideal Canadian retirement plan was simple—pay off your mortgage, live in your home debt-free, and rely on pensions, RRSPs, and savings. But that blueprint is changing fast.

A growing number of Canadians are looking at their home equity—the difference between their home’s value and any outstanding mortgage—not as a static asset, but as a retirement income tool. This shift is driven by rising property values, growing mortgage debt among retirees, and increased life expectancy.

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The Numbers Tell the Story

Recent surveys paint a clear picture:

• 44% of homeowners now say they plan to sell their home to fund retirement—up from 38% just two years ago.
• 55% of Canadians aged 18–34 believe they’ll tap home equity for retirement. Surprisingly, this is higher than the 41% of those aged 55–64 who plan to do so.
• 29% of Canadians retiring in 2025–26 expect to still have mortgage debt when they stop working—double the percentage from a decade ago.

These figures show that using home equity is no longer just a last-resort option—it’s becoming part of mainstream retirement planning.

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Why Home Equity Is Moving Front and Centre

1. Rising Property Values

Canada’s housing market has seen significant appreciation over the last 20 years. Even with recent price corrections, many homeowners are sitting on hundreds of thousands of dollars in equity. In cities like Toronto and Vancouver, long-time owners may have $1 million+ in equity.

2. Retiring With Debt

Unlike past generations, more Canadians are entering retirement with a mortgage. Higher home prices, longer amortization periods, and refinancing for renovations or debt consolidation have extended repayment timelines.

3. Underfunded Pensions & Savings

With fewer Canadians in defined-benefit pension plans and the cost of living rising, many retirees are facing income gaps that home equity can help fill.

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Common Ways to Unlock Home Equity in Retirement

Downsizing

Selling a larger home and purchasing a smaller, less expensive property can free up significant cash.

• Pros: Instant lump sum, reduced upkeep, lower property taxes.
• Cons: Emotional attachment to family home, moving costs, possible loss of community connections.

Reverse Mortgages

Available to homeowners 55 and older, reverse mortgages allow you to borrow against your home’s equity without making monthly payments. The loan is repaid when you sell or pass away.

• Pros: Age in place, no monthly repayment.
• Cons: Interest compounds over time, reducing inheritance value.

Home Equity Line of Credit (HELOC)

A revolving credit line secured against your home.

• Pros: Flexibility to borrow as needed, interest-only payments.
• Cons: Requires discipline, interest rates can fluctuate, and income verification is still needed.

Cash-Out Refinancing

Replacing your mortgage with a larger one and receiving the difference in cash.

• Pros: Large immediate payout.
• Cons: Extends debt, resets amortization, closing costs.

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Generational Perspectives: Younger Canadians vs. Retirees

One of the most surprising trends is how younger Canadians are embracing the idea of using home equity decades before retirement. Many see homeownership not just as a shelter but as an investment strategy that can supplement or even replace traditional retirement savings.

For retirees, the motivation is more immediate—covering living expenses, health care costs, or helping adult children financially without depleting other investments.

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Risks and Considerations

While tapping home equity can be a lifeline, it’s not without risks:

• Market Fluctuations: A housing downturn could reduce available equity.
• Longevity Risk: Outliving your equity if withdrawals are too high or living costs rise faster than expected.
• Inheritance Impact: Less equity left for beneficiaries.
• Debt Servicing: HELOCs and refinanced mortgages still require payments, which could strain fixed incomes.

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Mortgage.Expert Takeaways

1. Plan Early: If you’re considering using home equity, integrate it into your retirement plan years in advance.
2. Diversify Income Sources: Don’t rely solely on your home—combine equity with investments, pensions, and savings.
3. Professional Guidance Is Key: A mortgage broker can help you compare HELOCs, reverse mortgages, and refinancing options based on your needs.
4. Factor in Lifestyle Goals: Whether you want to travel, help family, or renovate your home, match your equity strategy to your retirement vision.

Home equity is increasingly viewed as a financial safety net in Canada. Whether you downsize, borrow, or refinance, understanding the pros, cons, and timing can mean the difference between a comfortable retirement and one filled with financial stress.
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