I've been reading various threads and articles about the pros and cons of paying off a mortgage before retirement and understand that mortgage rates, investment returns, taxes and other factors are relevant to the calculation of whether it's the best thing to do from a financial perspective.
But leaving the purely financial calculation aside, I'm feeling a lot of stress from holding such a large mortgage in these uncertain times, when we are unwillingly a single income household (and that income is a little uncertain) - in a situation where we're sitting on fairly substantial financial assets.
Here are the basics:
Husband and I are both 56, with no kids (just cats). He's unemployed, severance will run out at the end of August and he's not eligible for unemployment insurance because he moved countries shortly before he lost his job. I'm employed (lawyer) and working from home. But there's about a 25% chance of my losing my job in the next year. (I likely could find another job within a year, though.)
We've got about CAD $3.7 million in financial investments north and south of the border - about 3/5 in registered retirement funds (401ks, RRSPs, IRAs and a small ROTH IRA) and 2/5 in unregistered investments. Sitting on about CAD $90K in cash or near-cash (e.g. money market funds). We also will have some pension income starting at age 65 (three corporate pensions, about $60K per year but only one is inflation protected) and government pensions (US social security and Canadian CPP) at 67+ (about 48K per year).
We'd been renting in NYC (and before that in Paris) for 13 years, so we only got back into the housing market in 2018. Houses in Toronto are expensive, so we've got a CAD $765,000 mortgage on a house worth about $1.3 million (that's what we paid for it two years ago).
I've been making accelerated payments (including an extra $800 per accelerated bi-weekly payment). That gives us a bit of a cushion if we suddenly both ended up unemployed because the extra $800 payments (about $25k in total) are viewed as advance payments on regular mortgage payments due. So we could stop paying the mortgage altogether for about six months without being viewed as going into default.
I am thinking of liquidating some of our unregistered financial investments and paying down the principal of our mortgage by about $100-150K over the next two years. Combined with our regular, accelerated payments, this would get our mortgage down to about $500-550K in two years.
We're currently paying 3.29% on our mortgage and it's up for renewal in January 2021 - we probably can renew in the 2.5-2.75% range.
As I mentioned at the start of this post, this isn't a purely rational/financial decision. Having such a massive mortgage is stressful, especially if we spend the next few years of pre-retirement in a state of job uncertainty. I'd like to get our mortgage down to a level that leaves us with a manageable monthly payment if we both ended up involuntarily retired in the next couple of years. Something in the range of $3K a month. (Right now, with the extra payments, our monthly mortgage payments are closer to $6K per month.) At the same time, I don't want to pull too much $ out of the market and miss out on long-term growth potential.
We're also looking around Ontario about where we might be able to retire to a less expensive house. But we do like our house and its proximity to city amenities. We know that, if we had to, we could downsize and retire to a less expensive house in a remote area (hello, Elliott Lake). But our initial research suggests that the savings aren't that great if we still want to live within a couple of hours' drive of Toronto. (And because I can't see well enough to drive, any new home we choose needs to have basic amenities like shops be reasonably accessible for someone without a car.)
Has anyone else done something similar to this in circumstances like ours? Or are you thinking about it?
But leaving the purely financial calculation aside, I'm feeling a lot of stress from holding such a large mortgage in these uncertain times, when we are unwillingly a single income household (and that income is a little uncertain) - in a situation where we're sitting on fairly substantial financial assets.
Here are the basics:
Husband and I are both 56, with no kids (just cats). He's unemployed, severance will run out at the end of August and he's not eligible for unemployment insurance because he moved countries shortly before he lost his job. I'm employed (lawyer) and working from home. But there's about a 25% chance of my losing my job in the next year. (I likely could find another job within a year, though.)
We've got about CAD $3.7 million in financial investments north and south of the border - about 3/5 in registered retirement funds (401ks, RRSPs, IRAs and a small ROTH IRA) and 2/5 in unregistered investments. Sitting on about CAD $90K in cash or near-cash (e.g. money market funds). We also will have some pension income starting at age 65 (three corporate pensions, about $60K per year but only one is inflation protected) and government pensions (US social security and Canadian CPP) at 67+ (about 48K per year).
We'd been renting in NYC (and before that in Paris) for 13 years, so we only got back into the housing market in 2018. Houses in Toronto are expensive, so we've got a CAD $765,000 mortgage on a house worth about $1.3 million (that's what we paid for it two years ago).
I've been making accelerated payments (including an extra $800 per accelerated bi-weekly payment). That gives us a bit of a cushion if we suddenly both ended up unemployed because the extra $800 payments (about $25k in total) are viewed as advance payments on regular mortgage payments due. So we could stop paying the mortgage altogether for about six months without being viewed as going into default.
I am thinking of liquidating some of our unregistered financial investments and paying down the principal of our mortgage by about $100-150K over the next two years. Combined with our regular, accelerated payments, this would get our mortgage down to about $500-550K in two years.
We're currently paying 3.29% on our mortgage and it's up for renewal in January 2021 - we probably can renew in the 2.5-2.75% range.
As I mentioned at the start of this post, this isn't a purely rational/financial decision. Having such a massive mortgage is stressful, especially if we spend the next few years of pre-retirement in a state of job uncertainty. I'd like to get our mortgage down to a level that leaves us with a manageable monthly payment if we both ended up involuntarily retired in the next couple of years. Something in the range of $3K a month. (Right now, with the extra payments, our monthly mortgage payments are closer to $6K per month.) At the same time, I don't want to pull too much $ out of the market and miss out on long-term growth potential.
We're also looking around Ontario about where we might be able to retire to a less expensive house. But we do like our house and its proximity to city amenities. We know that, if we had to, we could downsize and retire to a less expensive house in a remote area (hello, Elliott Lake). But our initial research suggests that the savings aren't that great if we still want to live within a couple of hours' drive of Toronto. (And because I can't see well enough to drive, any new home we choose needs to have basic amenities like shops be reasonably accessible for someone without a car.)
Has anyone else done something similar to this in circumstances like ours? Or are you thinking about it?
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