If you haven’t already heard, FIRE has taken over the internet. FIRE is Financial Independence Retire Early and to be honest, I hate it. The idea is great. I mean, who doesn’t want to retire before 65? But I think the movement is a bit crazy and there are too many variables to achieve it.

The reality for many Canadians is that home ownership and retiring early might not go hand in hand. How do you choose? Can you have it all? A home that you love and hefty savings that provide freedom to live by your own terms sounds perfect, and according to Statistics Canada findings, 45% of Canadians who plan to retire before the age of 65 agree with you.

How do you plan to retire early?

Two of the major components that determine whether retiring early is for you are your overall cost of living and your passive income. Oh, and money. That’s usually a pretty significant requirement when it comes to financial independence, too. To estimate the exact dollar amount you’ll need, a good starting point would be to calculate assets that are between 10 to 16 times your salary. Either that or find a calculator that can populate a number for you.

But before these steps, it’s ideal to hone in on what early retirement means to you. Do you plan to continue living the same lifestyle you live now? Will you take on a more minimalistic approach? How much are you willing to sacrifice to become a FIRE member? Sit down and write down your goals for early retirement and what you picture life to be. You’re still going to need income when you retire so by knowing what lifestyle you want, you can save accordingly.

At the end of the day, I’m not here to tell you how to retire early. You may have already decided that’s your goal, but have you factored in other expenses such as having children and taking vacations? More importantly, what if you already own a home?

Can you have a mortgage and retire early?

Financial experts often tell you that a key to successful early retirement is avoiding debt in every way possible. However, if you have a mortgage, you could still retire early. For Canadians, this could be tricky since real estate is expensive, but you’re already in the market, then good on you. You’ve already tackled a significant hurdle and depending on your debt-to-income ratio, there are options to pay down your mortgage sooner than originally planned.

One option to eliminate mortgage debt before you retire is speaking with your lender about prepayment privileges to make additional payments. Prepayment privileges are the ability to pay for a part of the mortgage principal before it’s due and without incurring a penalty. Because, yes, there are penalties for paying too much at a time.

If you don’t currently have prepayment privileges, consider searching for the best possible option during mortgage renewal. However, be sure to check first, as some lenders will allow prepayment as a lump sum or scheduled increase to your monthly payments. Of course, you also need to have the funds to make those extra payments.

You can still retire early if you have a mortgage. This just means you need to plan to save enough money to continue making mortgage payments for the first few years into your retirement.

Does the city you own a home impact your chances of FIRE?

Unfortunately (or fortunately), one of the largest factors that will make or break your decision to retire early is the city you live in. If you live in major city markets such as Toronto or Vancouver, retiring early will not be as achievable as someone who lives in Edmonton or Halifax.

Zolo.ca, one of Canada’s leading brokerages for data and knowledge recently released some Canadian real estate trends. Based on this information, we can create a scenario to see how someone can own a home in Canada and retire early.

Let’s say Sheryl is a 25-year-old Canadian resident who works as a Software Engineer earning $100,000 with a 4% annual raise. I realize this is a higher than average income for most people and who gets a 4% annual raise, but play along with me. She is planning to buy a home this year, and retire by 45 years old, leaving her with a 20-year amortization period to repay the mortgage debt. This is what she would be paying for housing in various cities across Canada assuming she had a mortgage rate of 5%.

Vancouver

  • Average cost of home sold: $1.3 million
  • 20% down payment: $260,000
  • Monthly payment made over 20 years (240 payments at 5%): $6,834.10
  • Total payments: $1,040,000 in principal and $600,184.08 in interest for a total of $1,640,184.08

Edmonton

  • Average cost of home sold: $366,000
  • 20% down payment: $73,200
  • Monthly payment made over 20 years (240 payments at 5%): $1,924.06
  • Total payments: $292,800 in principal and $168,974.90 in interest for a total of $461,774.90

Toronto

  • Average cost of home sold: $916,000
  • 20% down payment: $183,200
  • Monthly payment made over 20 years (240 payments at 5%): $4,815.21
  • Total payments: $732,800 in principal and $422,898.94 in interest for a total of $1,155,698.94

Again, the numbers are slightly inflated. Not many people make $100K at 25. You’d never have the same interest rate for 20 years and who has a 20% down payment at 25? I think a 5% mortgage is a reasonable estimate, but I obviously have no idea where things may end. Sheryl may also get married so there’s a second income to consider, but then kids could come into play. Also, the numbers above only factor in housing costs. You still need to save for your early retirement.

After looking at all of the numbers, retiring early and owning a home is a very steep hill to climb. However, if you buy a modest home, and can still afford to save 20-30% of your annual salary towards retirement, it’s possible. But in reality, these numbers only suit a small number of Canadians.

Final thoughts

In the end, the decision is yours. And this includes being realistic with how much sacrifice you’re willing to make for the next 20 years, to both retire early and live life mortgage free. Personally, I’d like to enjoy my life while I’m young, and focus on paying my mortgage down as quickly as possible without kissing my current lifestyle goodbye.