Paying off your mortgage is a game-changer. Think hard about what comes next

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Buying a house is the largest purchase most Canadians will ever make and finally paying off the mortgage is likely to be a game changer.

But before the temptation to splurge on a pricey new car or a luxury vacation takes hold, experts say it’s important to review your financial plan for this next chapter to ensure you’re on track for wherever you want to go.

Nancie Taylor, an investment adviser with Meridian Credit Union in Fonthill, Ont., says repaying your mortgage opens up opportunity for all kinds of things.

“My job isn’t to tell them, you should do this and this and this,” she said of her clients.

“It’s more about, OK, this is how you looked today. So where do you want to go tomorrow? And it’s interesting where the conversation leads.”

For some, it might be early retirement, for others it might mean more travel, or helping children or grandchildren financially.

But while a mortgage payment can make up the largest part of the cost of home ownership, it isn’t the only expense, so Taylor says the first step is to figure out just how much cash is being freed up.

“Oftentimes people have their property taxes and their life insurance kind of all built into the payment,” says Taylor, so that means the monthly savings may be less than you were thinking.

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In addition, utilities and the cost of maintenance and upkeep can add up. Appliances break down or wear out and things like roofs and windows need to be replaced periodically, not to mention any desire to update and upgrade your bathroom or kitchen.

Taylor says if you have other debt, especially high-interest debt such as credit card balances, now is the time to address that with your additional cash flow. If you’ve been neglecting RRSP, TFSA or RESP contributions, now is also the time to catch up.

“If you’ve not maxed out your RRSPs every year and you have a significant amount of carry forward room, then redirecting some of that cash flow will actually give you more in your pocket today,” she said.

Repaying your mortgage can also be a time to review other parts of your financial plan such as life insurance to ensure your coverage is still appropriate now that you don’t have the large outstanding debt hanging over your head.

“If you’re debt-free, then maybe you are over-insured now. So it’s a really good time to bring that into light and maybe start looking at other kinds of insurance like long-term care insurance,” Taylor said.

Becoming mortgage free may also be a good time to review your will and estate planning to ensure everything is up to date now that your largest debt is repaid.

Sumaiya Bhula, a senior manager at TD, said there is no one-size-fits-all solution, so it’s important to build a plan that works for you at this key juncture.

“The reality is, if you want to continue to build upon your portfolio and your wealth, you need to really look at holistically what your long-term objectives are,” she said.

“That’s where, you know, the plan really comes into place where you look at your cash flow and what should be allocated where and then how much do you still have remaining for X, Y and Z.”

Taylor says having a plan for the money is key because you don’t want to miss the opportunity to use the additional cash flow to get closer to your financial goals.

“I just think in your 50s, that’s the critical age of making sure that you redirect that money to work as hard as it can for you,” she says.