Owen Winkelmolen is an Advice-Only Financial Planner and CFP. He founded PlanEasy, an advice-only financial planning practice that makes financial planning easy, accessible, and inexpensive. As an advice-only planner, Owen does not sell products or manage investments. He works collaboratively with clients to build a detailed financial plan and make the most of their money. Through their innovative online platform Owen and his team at PlanEasy help average Canadian households maximize their cash flow by focusing on the right opportunities and help them feel great about their financial future.
In my interview with Owen, we discuss how to best prepare for your mortgage renewal, making lump sum payments vs investing (with higher interest rates this is a hot topic) and how to handle carrying a mortgage into retirement.
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Full Transcript
Sean Cooper:
Welcome to the Burn Your Mortgage Podcast. I’m Sean Cooper and it’s great to be back for another episode. On today’s show I’ll be talking to Owen Winkelmolen.
Owen Winkelmolen is an Advice-Only Financial Planner and CFP. He founded PlanEasy, an advice-only financial planning practice that makes financial planning easy, accessible, and inexpensive. As an advice-only planner, Owen does not sell products or manage investments. He works collaboratively with clients to build a detailed financial plan and make the most of their money. Through their innovative online platform Owen and his team at PlanEasy help average Canadian households maximize their cash flow by focusing on the right opportunities and help them feel great about their financial future.
In my interview with Owen, we discussed how to best prepare for your mortgage renewal, making lump sum payments vs investing (with higher interest rates this is a hot topic) and how to handle carrying a mortgage into retirement.
Without further ado, here’s my interview with Owen Winkelmolen.
Sean Cooper:
Hi Owen, how are you doing today?
Owen Winkelmonlen:
Doing great, Sean, thanks for having me on.
Sean Cooper:
It's wonderful to finally have you on as a guest on the podcast we met up quite a few years ago at the Canadian Personal Finance Conference there. And yes, it's great, the service that you're providing to Canadians. It's similar to how I'm providing myself with great technological solutions when it comes to the financial industry just trying to make the process as simple as possible. Here, I guess hence the name. PlanEasy. You're trying to make financial planning as easy as possible.
So yes, excited to chat with you today about mortgages and financial planning. I mean, not so much mortgages, but I guess it is home ownership and financial planning and how mortgages fit into that there. I mean, I know you're not a mortgage broker, like myself, but so yeah, it'd be great to get your perspective on how you plan some of those things like carrying a mortgage into retirement and things that can be done there as well as mortgage renewals. So yes, I'm excited to chat with you today.
Owen Winkelmonlen:
Excellent. Yeah, I'm excited as well.
Sean Cooper:
Great. So, you had mentioned to me that you have quite a few clients in your 40s, 50s and 60s. And yes, most of their concerns are when it comes to real estate and mortgages. And it's not so much like they're already established, and hopefully they own a property by then. But it's more related to mortgage renewals. So yeah, maybe you can talk a bit about from a financial planning perspective, how do you prepare them for their mortgage renewal? Because yeah, it's more challenging to qualify these days, especially with mortgage rates in the 5 - 6%, sometimes higher, and you have to pass the stress tests, which could mean qualifying it at a rate of 7 - 8%. There. So how do you help them from a financial planning perspective so that they're able to qualify and be able to secure the best mortgage option possible with a broker like myself?
Owen Winkelmonlen:
That's a great question. So when we're doing planning, we're really working collaboratively with the client to really map out the future kind of goals and opportunities and risks. So from a mortgage renewal perspective, we're really anticipating what that might look like in a few years, and trying to avoid potential issues, pitfalls, or maybe there's opportunities as well. And you're right, the environment at the moment is fairly unique.
So when we're planning for mortgage renewals, and a few years with our clients at the moment, you know, there's concerns around what those payments might be in the future, how much they might increase by if they want to shop around for a different rate, you know, what does that look like in terms of pre-qualifying for a mortgage? And they may be making decisions, right? So they might be making decisions around a vehicle purchase, or maybe doing a renovation on the home.
And so we're thinking about, what sort of debt are they bringing on? And does that impact their future mortgage qualification, and the rate increase and the mortgage payment increase in particular is a big concern. So, you know, for our clients in their 40s and 50s. You know, they've got young families, they've got lots of demands on their cash flow on their income, you know, they're saving for retirement or paying off debt, they might have payments on vehicle loans. And so we're really trying to anticipate what those potential mortgage payments could be in the future. And we're trying to prepare in advance so that it doesn't impact their cash flow, or it's not a shock to their cash flow when it happens.
Sean Cooper:
No, that's great to hear that you think about the future like that, because the fact of the matter is, so people are renewing their mortgage, and they're coming off mortgage rates of like 2 to 3%. And it's quite a shock to some of these people to see the payment increase. Now, mind you, doubling of mortgage rates only means about a 30% increase to your mortgage payment, but it is still great to hear that you anticipate that in the future there.
I mean, the mortgage stress test is supposed to help people be able to prepare for higher rates. But it's great that you plan some of that stuff there. Because I think with the higher cost of living, like cash flow is a real struggle for many Canadians, like I recently did a media interview just talking about inflation and the challenging situation with cost of living and how Canadians are taking on like records levels of credit card debt. So I would imagine through good financial planning, you can help mitigate that there. So people aren't having to max out their line of credit and their credit cards and such if they're not matching their cash flow correctly.
Owen Winkelmonlen:
Yeah, that's right. And that's what we see with our clients. Our clients are primarily, you average households, we don't work with business owners, or multiple rental property owners, we really work with individuals and couples, maybe single dual income, and cash flow is important. So even a mortgage increase of $500 a month, 800, 1000, it does have a big impact on their cash flow for the month.
And it might mean forgoing savings for retirement if we're not planning ahead. So for those clients that are expecting an increase, we're trying to anticipate what that would look like, how do we reduce that shock and a few years when that renewal happens, and it's just a little shift over time. And even just knowing mentally in advance that this is coming reduces a lot of burden, you know, sort of mental burden provides some peace of mind, they've got a plan in place, they know what's happening. And they feel good about what that's going to look like over the next few years. Rather than, like you said, being surprised all of a sudden with a $800 increase on their monthly payments.
Sean Cooper:
That's very well said. So I don't mean to put words in your mouth there. But I think the bottom line takeaway from this is before you make any sort of major financial decision, like whether it's taking on a car loan, or car lease or any sort of debt, it's definitely important to speak to a financial planner, just to make sure how that could affect your future financial situation. Because yeah, I can have all sorts of ramifications like not being able to qualify and switch mortgage lenders. And that's just an example of one of them.
So yeah, I definitely think it's smart to speak ahead of time, because if you already set this stuff up, and then you go to the financial planner, or the mortgage broker, there's only so much they can do after the fact. So it's best to run these things by ahead of time, because that way, they could be set up in the best way like it makes the most sense and helps things go smoothly when all these financial professionals are talking to each other, the mortgage broker, the financial planner, the accountant, rather than working like individually, that way you can have like a cohesive team working for you rather than each person kind of doing their own thing.
And then one person, maybe the accountants trying to minimize tax, but then that causes issues with qualifying for the mortgage. So I just find it's better when everyone's working cohesively together, and you run this stuff by the professionals ahead of time, rather than once it's already been set up.
Owen Winkelmonlen:
Yeah, having that plan in place and looking forward, you know, 3, 5, 10 years in advance, you know, anticipating some of those road bumps along the way, and just navigating around them, right, it makes everything so much easier and less stressful when you actually get to that point. You know, there's always things that come up, we can't anticipate, but the more that we can think ahead and plan it out, it just makes everybody's life a little bit easier.
Sean Cooper:
Great! Well, what are the most common questions that I receive is, should I pay down my mortgage? Or should I use the funds for something else like investing? That question comes up quite often, these days, because with the higher mortgage rates, people are seriously considering paying down their mortgage now. What I like to say to people is you can potentially do both, you can contribute to your RRSP and then use the tax refund from that to pay down your mortgage. But, of course, there's not a general answer for everyone. It really depends on each person's individual financial situation, their tax rate and such.
So Owen, and maybe you can talk about how you address that question and help people determine from a financial planning perspective, whether it's better to put all that money towards the mortgage, put it towards investing or a bit of both. How do you tackle that question with your clients?
Owen Winkelmonlen:
Yeah, it's a great question. And I agree, we see it come up more and more. Now, with mortgage rates being higher, you know, there's a guaranteed return for paying off the mortgage. It's also very tactile, it's more tangible than investing. And so it's very attractive, especially now with higher mortgage rates at the moment. And it is all about balance, I think you're right there is that every situation is a little bit different. And you know, there's a tax planning component there.
So for some of our families who are eligible for the Canada Child Benefit, there's a real advantage to making RRSP contributions, because not only are you getting a tax refund, but you're also seeing an increase in your Canada Child Benefit the following year. So sometimes, from a tax rate perspective, we're still prioritizing an RRSP contribution for a family with two or three children. Even though maybe, you know, the expected return on investments is similar. It's just that we get this great tax planning advantage.
Now, I think if we've got a client that, you know, they've got a lot of cash flow, they're able to make RSP and TFSA contributions, if they've got some additional funds and a non registered account, or you know, in a savings account, great opportunity to maybe pay off that mortgage early or make a lump sum payment. And it's also simpler. So I think, you know, one thing to keep in mind is that investing outside of an RSP and TFSA, it does add a bit of complexity, you know, we've got adjusted cost base to worry about, we've got, you know, T3s, T5s coming in every year, you know, we've got all that income that we have to report on the tax return.
And to be honest, making a lump sum payment against the mortgage is just an easy thing to do. So, yeah, there are lots of factors to consider there. I also like to see a bit of a balance, because investing is a sort of a habit, right. And it's a habit that we want to slowly build over time and get more experience with. And having an all or nothing approach of paying off the mortgage versus investing sometimes means that clients haven't gotten that investing experience or haven't had as much of a longer period of investing. And then the ups and downs in the market become a little bit more. Yeah, they're a little bit more sensitive to that.
Sean Cooper:
No, I agree completely. Owen and I made in my personal situation, where I paid off my mortgage and only three years, it was a unique situation, I wouldn't recommend for most people to focus solely on the mortgage, like most people can't pay it off in only three years like I did there, it takes them several years to do it, decades to pay it off.
So I would definitely say a balanced approach is the best way to go, like not all or nothing, you can invest and you can pay down your mortgage. And yeah, there's definitely big decisions to make when it comes to investing. It's not so simple, you have to decide whether it makes the most sense to put your money in an RRSP, TFSA, or non registered account. And that's where accountants and financial planners can really be helpful for you. Because yeah, they can run those different scenarios for you and figure out the optimal amount to put into each account there.
Because as, as you said, Owen it can be quite complicated with like, adjusted cost base and all that there. So that's why working with these professionals like yourself, there can be so handy for Canadians because it's not so simple for the average person to figure out and you really need like a professional in your corner, like yourself to make those big decisions, because it can have major ramifications on your finances later on in life.
And if you make the right decision, they can help you build 10s of 1000s or hundreds of 1000s. If you make the wrong decision there, you can do all the right things and work hard in life, but it can end up costing you quite a bit of wealth as well. So that's why it's so key to work with these professionals early on, so that you're set up powerfully and you're making all the right financial decisions.
Owen Winkelmonlen:
Yeah, I agree. I think it's, you know, I would love to say that all of our clients have unlimited cash flow, and they could do all of the things, but it's just not the case, right? You know, all of the clients we work with, there's a certain amount of money that they have to put towards their financial goals. And as you said, there's lots of competing goals that they want to aim for. So what we're trying to do is help them make the most of whatever they can put towards, you know, savings, debt payments, investing every month, we want to use that the most effective way we can. And that changes over time as well.
So, you know, income changes, tax rates, change, benefits change, you know, goals change. And so we want to anticipate those changes and we have plans for clients where, you know, we're really shifting every few years maybe depending on the situation and family situation. Kids are getting older, our ESPs and we're just trying to make the most of whatever cashflow they have available to put towards their goals, which unfortunately, isn't an unlimited amount. There's always a finite amount and we need to know The best choices with that.
Sean Cooper:
No, I agree completely, very, very well said. So, lastly, it used to be considered taboo to carry a mortgage into retirement. But we're seeing that more often these days, especially with the mortgage sizes that we're seeing, like with our parents' generation, they had mortgages of maybe like 100, or 200,000, or 300,000. But we're seeing fairly regularly these days, people aren't taking on mortgages of almost a million dollars and not just younger folks like people that are closer to retirement as well.
So how do you tackle the whole having a mortgage in retirement there, especially when you're going to be going on a fixed income? I mean, people with working from home perhaps people are extending their careers and not calling it quits like retiring early, it would be interesting to hear like what what kind of trends you're seeing, like whether whether you're really seeing people retiring earlier, or whether you're seeing people continuing to to work and yes, how do you help them from like a cash flow and mortgage perspective when it comes to carrying a mortgage and to retirement there? What are you doing so that they're not caught with a cash flow crunch, especially when they're going on a fixed income?
Owen Winkelmonlen:
Unfortunately, it's a bit more of a common situation that we're seeing at the moment. And even for our families in their 40s. You know, sometimes we're anticipating that if they've upsized their home that that mortgage might extend a bit into retirement. And sometimes it's only a few years, sometimes it's a little bit longer. And so, again, from a planning perspective, we're trying to anticipate that and to see if it's going to be an issue or not from a cash flow perspective. And sometimes it's not.
So sometimes what we're doing is we're saying, Well, we know this, this mortgage is going to extend into retirement, it's going to be a few years, and we have options to maybe add an extra year of work if we need to. But the way we've planned it out, we don't feel like that's necessary. So we sort of talked about the levers that a client might have, as they get closer to that decision point around retirement. But we're not necessarily trying to put all the money against the mortgage to get that mortgage gone by the retirement date. Because sometimes that's not the most efficient use of funds.
So, you know, again, from a tax planning perspective, we might have somebody who's in the peak of their earnings right before retirement, they're in a 40, 50% tax bracket. And although paying off the mortgage might be a great goal. paying off the mortgage early might not be the best use of funds in those few years right before retirement, maybe maximizing the RRSP by doing a bit of tax planning might be the best use of funds at that time. So every situation is a little bit different.
Sean Cooper:
Yeah, no, I agree completely. Like, as I said, it used to be considered taboo carrying a mortgage into retirement, but I kind of look at it this way. Owen, like you have to pay money for living somewhere whether you're renting or owning a property. So might as well at least be building up equity in the property there. You don't necessarily, I mean, I don't mean to sound morbid or anything like that. But you don't necessarily need to completely pay off the mortgage, like as long as the payment is manageable for you, in a worst case scenario, your heirs could simply just sell your property and pay off the mortgage in the end. So rent isn't cheap. These days, with people finding it harder and harder to qualify to buy a property, many people have been pushed into the rental market and rents, I have heard about, like bidding wars with rental properties and not just in the real estate market.
So yeah, I mean, you have to pay money for a place to live, whether it's renting or paying a mortgage. So yeah, might as well at least be building up equity and property there and having something leftover to provide to your heirs there. And yeah, as mentioned, there can be things that we can do like extending the amortization to make the payment more affordable. And it's something that I would definitely say a key point is, it can be challenging to qualify for a mortgage when you're retired. I mean, we get some of these income, like old days security and CPP, and pensions, and it's such there, but definitely a great idea to speak to like a financial planner and mortgage broker ahead of time, because before you retire, incomes probably going to be like quite a bit higher than when you're on a fixed income.
So yeah, if there's any changes that make sense in terms of to the mortgage, you want to get that done ahead of time, even setting up like a home equity line of credit or something like that, or, or changing the mortgage because if you're on a fixed income, especially with the mortgage stress test, it can be quite a bit challenging to get that done. So yeah, the kind of the rules with the banks is when you really need money if it's hard to get the money but when you don't really need the money, that's when the bank's willing to give it to you so it's good idea before you retired is to sit down with the professionals like the financial planner and a mortgage broker and just seeing how we can restructure that stuff. Because when you're on a fixed income, it can be challenging to do that stuff just because you don't have the income to show on paper.
Owen Winkelmonlen:
Yeah, absolutely. And we've done that with a few clients where it just works better for them from a cash flow perspective to before they fully retire, to re-amortize the mortgage to get that home equity line of credit to have that flexibility in place. So that if they want to make lump sum payments against the mortgage in retirement, they can definitely do that. But their cash flow is much more flexible by having that extended amortization.
And in their particular plan, everybody's situation is different. That might be the best solution for them to make the most of their early retirement years that are cash flow. And maybe they plan to downsize in the future anyway. So it's not, it's not a problem having that mortgage extend a little bit into retirement 510 years. And there's stability there. Right. So you kind of mentioned it, you know, rents are expensive, owning a home, even if you do have a mortgage in retirement, owning a home, condo provides a lot of stability. And we don't want to discount the value of that stability in retirement, having that place to live that nobody can take away from you, you know, you've got a mortgage, but it's manageable. We planned ahead, that sort of flexibility can be in sort of stability can be very helpful as well in retirement.
Sean Cooper:
No, that's a really key point. Because with renting, I've heard of quite a few situations where yeah, like the properties being sold, or renovations are happening and that people are forced to move and they don't necessarily want to move. And then basically, like you may have good rent because of rent control. But then you're forced to pay market rent. And yeah, you just don't have that like freedom when it comes to renovations.
And you have to ask the landlord for permission for everything. So I definitely think there are a lot of benefits to owning a home. Of course, it doesn't make sense for everyone there. But just that stability of basically having that place. So that roof over your head and not being able to be told by the landlord that the property is being sold and have to suddenly be moving. Like I really think that stability can't be discounted. It's a really key thing that I'm but definitely there's a mindset shift these days. Because yeah, the old advice from the older generation was pay off your mortgage and not have a mortgage in retirement.
But clearly, it's just not possible these days. So it's key to speak to these professionals like the financial planner or mortgage broker, just so that if you're going to be carrying a mortgage into retirement, that the cash flow situation is manageable there. So perfect. Well Owen, it's been a pleasure having you on the podcast here today. Before I let you go. Is there anything else that you want to add?
Owen Winkelmonlen:
Yeah, no, I did. Thank you for having me. If anybody wants to reach out, they can go to planeasy.ca. They can click Start planning and start a financial plan with us. We have a collaborative platform that we use with our clients. And then you can book a call with one of our advice only financial planners.
Sean Cooper:
Okay, perfect. Thanks very much. It's been a pleasure speaking with you and have a great day.
Owen Winkelmonlen:
Thanks, Sean.
Sean Cooper:
Thanks for listening to another episode of the burn your mortgage podcast. Besides being a podcast host, I'm also an independent mortgage broker. If you or anyone you know, family, friends, co workers or neighbors could ever use any unbiased mortgage advice or a second opinion, feel free to reach out email me at Sean. That's sean@burnyourmortgage.ca or call or text me at 647-867-3711 for a free mortgage consultation. Also be sure to head on over to www.burn your mortgage.ca and sign up for my free weekly newsletter. As a small token of my appreciation, you'll be able to download my ultimate mortgage checklist on choosing the perfect mortgage. I look forward to hearing from you and helping you with all your mortgage needs. Once again, thanks for listening.
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