Non-mortgage debt a key obstacle to becoming mortgage free
TORONTO, April 5, 2013 /CNW/ - A new CIBC (TSX: CM) (NYSE: CM) poll reveals that Canadian homeowners with a mortgage now believe they will be age 57 on average before paying their mortgage off, compared to age 55 in a similar CIBC poll conducted in 2012. The poll also reveals that while Canadians are taking some positive steps to accelerate mortgage repayment, it is their non-mortgage debt that may be the biggest factor in how quickly they can become mortgage free.
Key poll findings include:
- The average age at which Canadian homeowners with a mortgage believe they will be mortgage free is 57, compared to age 55 in a similar CIBC poll one year ago
- Residents of BC had among the longest repayment expectations in Canada at age 59
- 50 per cent of Canadian homeowners say their non-mortgage debt (credit cards, lines of credit, etc) has increased since they first took on their mortgage. These Canadians were also less likely to be making lump sum payments to their mortgage, citing a lack of funds as the primary reason.
"Being mortgage free sooner can help accelerate retirement savings, but carrying a mortgage into your late 50s can have the opposite effect and make it more challenging to reach your long term savings goals," said Colette Delaney, Executive Vice-President of Mortgage, Lending, Insurance and Deposit Products, CIBC. "If your other debts are heading up, your chances to pay off your mortgage sooner are going down, and that's why you need a clear plan that takes into account debt management, mortgage repayment, and long term savings."
Other Debts Hamper Mortgage Repayment
Among homeowners who say they've taken on additional non-mortgage debt since they purchased their home, only 11 per cent said they had made an extra mortgage payment in the last year - considerably lower than the 19 per cent who were making lump sum payments among those who had not added to their non-mortgage debt. The primary reason noted by Canadians who were not taking steps to repay their mortgage faster was that they simply did not have the extra funds.
"Today's low rates are a great opportunity for Canadians to drive their mortgage balance down, but the advantage is lost if those extra funds need to go towards repaying higher interest debt instead," noted Ms. Delaney.
To minimize your non-mortgage debt and pay down your mortgage faster, CIBC offered the following advice for Canadians taking on a mortgage:
- Talk to an Advisor - Taking your complete financial picture into account when choosing your mortgage can help you pay it down sooner, with particular emphasis on cash flow to help manage the other expenses that come with home ownership. The better you manage the rest of your finances, the faster you'll be able to pay down your mortgage.
- Consider a Mortgage with both a competitive rate and cash back up front - Moving into a new home can incur a number of expenses, some of them unexpected. For some homebuyers, it may make sense to consider a mortgage offer that comes with cash back up front as well as a competitive fixed rate. To meet the needs of new homebuyers, CIBC created a mortgage offering up to 3% cash back plus a competitive rate on a 5-yr fixed, closed mortgage. The cash up front can help to offset moving and other expenses, and avoid incurring debt early on in your mortgage.
- Look at reducing your overall interest costs - If you have accumulated non-mortgage debt since purchasing your home, it's important to look at all of your interest rates and determine your overall borrowing costs. Although you may have a low mortgage rate, your overall average borrowing cost is likely to be higher because of balances on higher interest borrowing options. If you have equity in your home, you may want to consider consolidating your debt with a secured line of credit, like CIBC's Home Power Plan to reduce your overall interest costs, freeing up some of your monthly cash flow and allowing you to redirect some extra money to mortgage repayment.
|Average Age at which Canadians believe their mortgage will be paid off, by region|
|National||57 years of age|
|Atlantic Canada||57 years of age|
|Quebec||57 years of age|
|Ontario||57 years of age|
|Manitoba and Saskatchewan||58 years of age|
|Alberta||57 years of age|
|British Columbia||59 years of age|
|Percentage of Canadians who say they've taken on additional non-mortgage debt since buying a home|
|Manitoba and Saskatchewan||50%|
Results are based on a CIBC poll conducted by Leger Marketing via a Web survey conducted from February 19 to 25, 2013 among a representative sample of 1,503 English- and French-speaking Canadians 18 years of age or older, with a mortgage and responsible for decisions related to their mortgage.. Using data from Statistics Canada, the results were weighted according to gender, age, region, language spoken at home, education and presence of children in the household to ensure a sample representative of the entire population under review. In comparison, a probability sample of the same size would yield a margin of error of ±2.53%, 19 times out of 20.
CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, and has offices in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at www.cibc.com.