For rich Canadians, having a mortgage may not be a necessity but a considered and deliberate investment strategy, finds an Investors Group survey.
A poll of people with investable assets of $500,000 or more, finds 67% of those who have a mortgage also have the cash available to pay for their home in full.
Instead, mortgages are being used in a variety of financial planning tactics, from tax planning to income-generating rental properties.
Property ownership is part of the plan
Overall, 70% of those surveyed say they wouldn’t think about purchasing property without reviewing it as part of their overall financial plan and 46% say they wouldn’t make changes to their mortgage without reviewing it as part of their overall financial plan. One-in-five got advice from their financial advisor on mortgage options that would best suit their financial situation.
Ownership by the numbers:
- 32% of rich Canadians own additional commercial or residential properties;
- 10% own three or more;
- 51% have additional properties for recreational use;
- 42% have investment rental properties;
- 11% have purchased property for their parents or children to live in.
Mortgages in retirement
While some Canadians plan to pay off their mortgage before retirement, more than one-quarter of wealthy people with mortgages don’t have plans to become mortgage-free before retirement.
“Cashing in investments to pay off your mortgage before retirement could trigger capital gains. That would mean additional taxes and less money to invest,” says Peter Veselinovich, vice-president of banking and mortgage operations at Investors Group. “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.”
Limited fear over rising rates
When asked if they were worried about rising rates in the next year, three years or five years, those with any concern amounted to 8%, 14%, and 18% of the overall group in each respective time frame.