There has been a change in the financial situation in our generation with respect to our earlier generation. About 30 years ago, our parents tried, and were mostly successful, in paying off their mortgages by the time they turned 40. After attaining this financial freedom, they started enjoying their lives by spending money in areas of their choice and interest. It was possible for them to be debt free so early in their life because at that time, the average mortgage value of a house was about two to three times of a person’s annual income.
The strategy adopted by our parents may not be suitable for us because of the simple reason that the average mortgage value of a house has now become approximately six to nine times of a person’s annual earning. So it is extremely difficult, if not impossible, for an average Canadian to become debt free around their middle age. Waiting to enjoy life till all the loans are paid off may not be a wise decision anymore because you may be able to reach that stage only when you are too old to enjoy things.
A solution to this issue can be to borrow against your existing equityafter you have been able to pay off most of your debts. By doing so, you will be able to invest and spend money in areas of your liking with a comparatively low debt against your name. However, borrowing extra money to enjoy life in the prime should be done only in case it does not put you in additional financial stress. In some situations, it is wise to sacrifice in the house size, thus reducing the mortgage amount, and using the spare money in something you like.
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