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Retired Canadians Need to Retire Mortgages

Written by Posted On Tuesday, 15 August 2000 00:00

Mortgage payments are a financial pressure at the best of times, but after retirement when incomes typically drop as much as 60%, many Canadians feel mortgage payments unduly restrict their lifestyle.

Ontario retirees Irene and Jerome Morel wanted to retire their mortgage since mortgage payments were leaving them house rich and cash poor. They planned to take the $100,000 in their Registered Retirement Savings Plans (RRSPs) and pay off their mortgage, but they didn't like the tax hit they'd take in the process.

"We'd have to pay 30% tax," explained Irene Morel who is on a disability pension. "We talked to our accountant and, as it is set up now, we would benefit very little as it would not leave us enough to pay off the mortgage.

"With no mortgage, no interest payments and still getting our pensions (which are not big), we would have that lovely thing called disposable income which many seniors do not have. We could change our vehicle more often, buy a stove with all elements working, have someone cut the lawn and do the heavy work. We could be more productive in the economy and do some free-wheeling spending."

Since the Morels couldn't accomplish what they would like to achieve with the money they spent years socking away in RRSPs and Registered Retirement Income Funds (RRIFs), they decided to tackle the federal government head on and get the Income Tax Act amended.

"We have two petitions filed (with the federal government) with over 800 signatures from across the country," said Mrs. Morel who has a proven track record with federal petitions since she personally delivered a very successful one to Prime Minister Pierre Trudeau. "We kept the petitions at the donut shop where the Greyhound buses came through. We got the bulk of signatures from the local area, but it was interesting to see places from Ottawa to Red Deer, Alberta, and anywhere in between."

The petitions ask for changes to tax rules that would allow those over 65 or on disability pension to use RRSP and RRIF savings in a one-time payment to retire the mortgage on their principal home (not on the cottage or a condo in Florida). Initially, the Morels felt there should not be any tax payable but they suggested 5% tax in their petitions.

Nearly two-thirds of Canadian households own their own home, but almost half of these properties carry mortgages. Although, nearly 1.3 million homeowners over age 65 are free of mortgage payments, almost as many retired Canadians make mortgage payments that eat up already limited retirement incomes.

"If the government was going to give a definite no, we'd hear back quickly," said Mrs. Morel, explaining that by law the government has to reply to properly filed petitions like theirs within 45 days -- a limit that is long past for both petitions. "We feel we have hit a nerve and hope they are trying to find a way to say yes. It is logical legislation and it is awfully hard for the government to ignore that."

The Morels will help others who would like to submit a petition on this issue. They can be reached at 705-746-9678.

Canada's new breed of "senior" does not fit the passive stereotypes that still abound and with a federal election looming government is just starting to realize that.

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PJ Wade

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