Up until fairly recently, it was more or less taken for granted that homeowners would have their mortgages paid off by the time they retired. Over more recent years, however, it has become increasingly common for people to reach retirement age with mortgages still active. This means they need a strategy for dealing with it. Here are some options.
Retirement age is increasingly becoming just a number. There are definitely still people who happily down tools and head out into the retirement sunset as quickly as they can. There are, however, now also increasing numbers of people who essentially see retirement age as being just a number. They are therefore quite happy to keep working to some extent for some time (possibly not indefinitely).
If you’re one of those people, then you might find it useful to lay the relevant groundwork well in advance of your retirement. If you’re currently employed and wish to remain so, make sure that your employer is happy for you to go on working past retirement age.
Even if they are, it’s advisable to think carefully about what you would do if you were made redundant. This is sensible at any age but has particular relevance to mortgage-holders working past retirement age. Make sure to keep your skills sharp and relevant and consider starting a side-hustle as well.
If you are sure you have enough in your pension to pay off your mortgage, then you’re on firm ground for retirement. It is, however, important that your calculations are accurate. You might, therefore, want to get them double-checked by a financial advisor.
As with working post-retirement, downsizing is seized upon with joy by some retirees but vehemently disliked by others. This is because it’s at least as much a lifestyle decision as it is a practical one. If you’re not sure whether or not downsizing is for you, then you might want to assess your current home’s suitability for ageing in place.
If it’s not suitable, or not ideal, then it’s advisable to look into the practicalities and costs of making it suitable. If you discover that adapting it is not practical, then you know that you are going to have to move at some point in any case. You could therefore look at how to manage this move so it fits with all your goals (financial and lifestyle).
If your home is suitable for ageing in place, then you need to assess both the financial and practical pros and cons of staying in your own home. You can then compare them with your situation if you downsized.
You could try turning your home into a source of income. The obvious way to do this is to rent out a room but there are others.
Using equity release can square the circle between reduced income and a mortgage. It is, however, a massive decision. It should therefore only be taken with proper, unbiased financial advice.
All the signs are that reaching traditional retirement age with a mortgage outstanding is likely to become the new normal. People are buying homes later in life meaning that 25+ year mortgage terms are more likely to go past their 60th and even 70th birthdays. Some people may even opt for longer terms to spread the cost of home ownership.
None of this has to be a problem but it does have to be carefully managed. It’s therefore advisable to get regular advice from an unbiased financial professional. It’s also advisable to enlist the help of a mortgage broker whenever you take out a mortgage (including remortgaging). Both steps will help to ensure that you get a suitable deal for your money.
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