For many homeowners, the prospect of entering retirement mortgage-free is no longer a given. The Financial Conduct Authority (FCA) has noted that mortgages running beyond pension age are shifting ‘from a niche to norm.’
Former Pensions Minister Steve Webb, recently highlighted, “There is increasing evidence that taking out a mortgage which runs past pension age is an entrenched feature of the mortgage market rather than a temporary blip. This has profound implications for retirement planning.”
The importance of seeking advice
Everyone’s financial circumstances are different, so it’s worth getting professional advice before making decisions. Whether it’s overpaying, switching lenders, exploring equity release or lifetime mortgages, understanding the impact of having a mortgage in later life is essential.
What are your options?
While retiring with a mortgage is becoming more commonplace, there are ways to help manage the financial burden:
Overpay your mortgage
– overpayments can reduce overall interest costs and help clear the debt sooner – even humble overpayments add up
Switch your mortgage
– moving from an interest-only mortgage to a capital repayment option can pay off debt faster
Consider alternative mortgage options
– older borrowers (55+) have more choices, including lifetime mortgages, which let homeowners access equity while staying in their home. In fact, for many homeowners, lifetime mortgages with no early redemption charges are ‘completing the lifecycle’ of owning a home for the rest of their lifetime, while helping to free-up much-needed income during those retirement years.
Equity release and lifetime mortgages will reduce the value of your estate and can affect your eligibility for means tested benefits.
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.