Retiring does not mean you can no longer get a mortgage. Many of the downsizers and move-up buyers we work with in Newmarket, Aurora, Barrie and across York Region and Simcoe County are in their sixties and seventies, and plenty of them borrow to make the move work. What changes in retirement is how a lender looks at your income, and which products make the most sense.
How lenders look at retirement income
A lender needs to see steady income that will keep coming. In retirement, that usually means:
Canada Pension Plan and Old Age Security;
a workplace pension;
regular RRIF or annuity payments;
rental income from an investment property;
in some cases, investment income or a plan to draw down savings, which some lenders will count if it is well documented.
Expect to provide pension statements, your notice of assessment and recent bank statements. The clearer your paper trail, the easier the approval.
You still have to pass the stress test
For a new mortgage, lenders regulated by the federal government have to qualify you at a higher rate than the one you will actually pay. For an uninsured mortgage, that is the greater of your contract rate plus 2% or 5.25%. Your pension income has to support the payment at that qualifying rate, not just at your actual rate.
One useful exception: if you already have an uninsured mortgage and move it to another federally regulated lender at renewal, without increasing the amount or the amortization, the stress test does not apply. That gives retirees more freedom to shop for a better rate.
Your main options
A regular mortgage. If your income qualifies, this is usually the cheapest way to borrow. Age alone is not a reason for a lender to say no, and amortization periods can be set to fit your plans.
A home equity line of credit (HELOC). Useful if you want a cushion for renovations, travel or helping family, and only want to pay interest on what you use. It still has to be qualified for, and the payments are yours to make.
A reverse mortgage. For homeowners 55 and older, a reverse mortgage lets you borrow against your home without regular payments. With HomeEquity Bank's CHIP Reverse Mortgage, for example, you can access up to 55% of your home's value, depending on your age, location and the property. The home must be your principal residence, it must be kept in good condition and property taxes must stay up to date. Interest rates are higher than a regular mortgage and the balance grows over time, so it deserves a careful family conversation and independent advice before you sign.
Buying your next home in retirement
A common plan we see is selling a larger family home in York Region and buying something smaller, sometimes in a quieter part of Simcoe County or closer to the kids. The order matters:
Talk to a mortgage specialist first so you know what you can carry, if anything, on the new home.
Know what your current home is worth before you fall in love with the next one. The sale price decides everything else.
Plan the timing. Buying before you sell may need bridge financing. Selling first may mean a short rental. Either can work if it is planned.
Budget for the costs of moving: Ontario land transfer tax on the new home, legal fees, moving and any repairs needed to get your current home ready for market.
A few cautions
Be careful about borrowing in a way that leaves you short of cash later in retirement, and think about how any mortgage fits with your estate plans. If family members are helping or going on title, each person should get their own legal advice.
Our team has been helping families through these moves since 1989. If you are planning a move in retirement, call us at (905) 830-9111. We can tell you what your home is likely to sell for, walk you through the timing, and introduce you to mortgage specialists who work with retirees. For a quick estimate of your home's value, visit MyValue.ca.
This article is general information, not financial or legal advice. Confirm your options with a mortgage professional and your lawyer.
