Carrying a mortgage into retirement changes how much income you need, how much of it comes from taxable withdrawals and, at higher incomes, how much Old Age Security you keep. This page sets out that trade-off and how to plan a payoff date around your retirement date. Renewals and other changes during your term are covered in the renewal and term-changes guides, starting with how to renew.
Why paying off before retirement helps
| Factor | Effect |
|---|---|
| Lower income needed | With no mortgage payment to fund, your retirement income only has to cover your other costs |
| Smaller RRSP/RRIF withdrawals | Less taxable income, so less tax and less exposure to the OAS recovery tax |
| Payment certainty | No renewal at a higher rate on a fixed retirement income |
| Income-tested benefits | A lower income may qualify you for the Guaranteed Income Supplement |
The public pensions most retirees start from
| Income source | Maximum (2026) | Notes |
|---|---|---|
| CPP retirement pension, starting at 65 | $1,507.65/month ($18,092/yr) | The average for new recipients starting at 65 is about $858/month |
| OAS, age 65 to 74 | $762.50/month ($9,150/yr) | The full pension needs 40 years of residence in Canada after age 18 |
| RRSP/RRIF withdrawals | Your choice (RRIF minimums apply) | Taxable income |
| Workplace pension | Depends on the plan | Taxable income |
| TFSA withdrawals | Your choice | Not taxable |
How a mortgage raises the withdrawals you need
A mortgage payment in retirement is paid with after-tax money. If it comes out of an RRSP or RRIF, you have to withdraw more than the payment, because the withdrawal is taxed first.
A retiree pays $1,800 a month on the mortgage, $21,600 a year. If each extra dollar withdrawn from a RRIF is taxed at a marginal rate of 30%, covering the payment takes a withdrawal of $21,600 รท (1 โ 30%) = $30,857 a year.
Your own marginal rate depends on your province and total income; the marginal tax rate calculator shows it. The larger withdrawals also raise your net income, which matters for OAS.
The OAS recovery tax
OAS is reduced by 15% of your net income above $93,454 (2025 income, for payments from July 2026 to June 2027), and for ages 65 to 74 it is fully recovered at a net income of about $152,062. The OAS clawback guide explains how it is calculated and the clawback calculator works it out for your income.
| Net income | Amount above the threshold | OAS repaid (15% of the excess) |
|---|---|---|
| $100,000 | $6,546 | $982 |
| $120,000 | $26,546 | $3,982 |
Because the threshold is high, a mortgage pushes most retirees’ OAS down only when the withdrawals needed to carry it are large.
A payoff plan by age
| Years to retirement | Approaches to consider |
|---|---|
| 15 to 20 | Use your prepayment privileges to raise payments or make lump-sum payments from bonuses and tax refunds; at renewal, choose an amortization that ends before your retirement date |
| 10 to 15 | Put RRSP tax refunds toward the mortgage; pick renewal terms that line up with your payoff date |
| 5 to 10 | Decide whether you will stay in the home, and build savings (a TFSA, for example) earmarked to clear the balance at a renewal date; renewing into a long new amortization lowers the payment but pushes the payoff date past retirement |
| At retirement | Clear the balance at a maturity date, sell and move somewhere cheaper, or plan how the payment will be funded |
Paying off a mortgage early covers the prepayment options in detail.
Working backward from your retirement date
- Note your target retirement age and the years until then.
- Check your balance and the remaining amortization on your latest statement.
- If the amortization runs past your retirement date, work out the payment that would clear the balance by then (an amortization calculator gives it).
- The difference between that payment and your current one is the extra you need each month, or the lump sums that would replace it.
A balance of $300,000 at 4.5%, with 18 years of amortization left, retiring in 10 years:
| Approach | Monthly payment | Total interest |
|---|---|---|
| Current pace (18 years) | $2,022 | $136,835 |
| Paid off in 10 years | $3,103 | $72,376 |
Paying it off by retirement takes about $1,081 more a month and saves about $64,458 in interest, assuming the rate stays at 4.5% through every renewal.
Drawing down an RRSP early. If you retire before your CPP and OAS start, your taxable income in those years may be low, so RRSP withdrawals then can be taxed at a lower rate than they would be later, on top of CPP and OAS. Some people use those years to withdraw from the RRSP and pay down the mortgage; RRSP withdrawal rules covers the withholding tax and how withdrawals are taxed.
When keeping a mortgage in retirement can make sense
| Situation | Why it may work | Risk |
|---|---|---|
| A low locked-in rate | Investments may earn more than the mortgage costs | The rate resets at renewal; markets can fall |
| A rental property mortgage | Interest on money borrowed to earn rental income is generally deductible, and the rent helps carry the payment | Vacancies and rate increases |
| A large TFSA or non-registered portfolio | Returns after tax may exceed the mortgage rate | A market drop early in retirement (sequence-of-returns risk) |
These cases depend on a large portfolio and on accepting investment risk. Whether extra money does more as a prepayment or as an investment is worked through on should I pay off my mortgage or invest?
Downsizing and reverse mortgages
Selling and moving somewhere smaller or cheaper can clear the mortgage and free up equity, at the cost of selling and moving expenses and the land transfer tax on the next home. Downsizing for retirement works through the numbers.
A reverse mortgage lets homeowners aged 55 or older borrow against their home with no regular payments, but the interest compounds on the balance, which reduces the equity left for you or your estate. It is offered by a small number of lenders in Canada; reverse mortgages in Canada compares them and their costs.
Related pages
Sources
The figures and rules on this page come from these sources, last checked against them between September 29, 2026 and October 2, 2026. How we check facts.
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Data table
- Government of Canada: CPP: How much you could receive
- Government of Canada: Canada Pension Plan โ Monthly payment amounts
- Government of Canada: Old Age Security pension recovery tax