Your high-net worth clients are proudly Canadian but are increasingly following in the steps of their American counterparts in choosing to carry forward their mortgages well past their ability to retire them.
Many high-net worth Canadians – those with investable assets of $500,000 or more – carry a mortgage as an investment strategy; despite 67 per cent of those polled having the cash available to pay them off in full.
“The notion that a mortgage is used only when funds aren’t available to pay cash for your home doesn’t ring true for many wealthy Canadians,” Peter Veselinovich, vice-president of banking and mortgage operations at Investors Group said.
The strategy many of these Canadians employ is to delay paying mortgages off until after retirement in a bid to save on incurred taxes, according to Veselinovich.
“Cashing in investments to pay off your mortgage before retirement could trigger capital gains. That would mean additional taxes and less money to invest,” Veselinovich said. “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.”
The group of individuals surveyed values property ownership as part of their investment strategy, with 32 per cent of high-net worth Canadians owning additional commercial or residential properties.
51 per cent own additional properties that are used for recreational use; 42 per cent have investment rental properties; and 11 per cent have purchased property for their children or parents to live in.
“It’s good to see that some Canadians are including these important decisions as part of their overall financial plan and engaging experts for advice,” Veselinovich said. “Your current and future business strategy, retirement plans, stage of life and overall financial goals will all influence the mortgage you select.”