Home equity can represent a double digit boost to retirement income for those that are mortgage free, suggests a study released Monday by Statistics Canada.

StatsCan says that by retirement age, 75% of households are homeowners, and of those, 74% own their homes without a mortgage. “The economic benefit of owning a home is equivalent to the rent that does not have to be paid,” it points out.

Looking at data from the 2006 Survey of Household Spending and the 2006 Census, the study estimates that when the value of home ownership was taken into account for households headed by individuals in the age group 60 to 69, it increased incomes by $5,500 or 10%. For households headed by those in the age group 70 and over, incomes rose by $5,400 or 12%.

The benefit was proportionately greater for those with lower incomes. For households in the age group 70 and over whose household income was ranked in the bottom 20%, home ownership raised incomes, on average, by about $4,200 or 20%. For households in the same age group whose income ranked in the top 20%, income increased by $10,400, but this represented just a 7% income boost.

In the study, net income is defined as gross income less income taxes and payments made for Employment Insurance, life insurance, annuities, and public and private pension plans. The benefit of home ownership is defined as the value of housing services provided by home equity. That value is based on estimates of the financing costs of owning a home and the rents paid for housing.

IE