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

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.

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.