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Do I have to pay off my mortgage before I retire?
There are plenty of options if you don't want to or aren't in a position to pay off your mortgage when you retire, allowing you to continue paying it through your retirement.
Coming up to retirement is a big change in every homeowners life, and being prepared is the key to a happy retirement. Here at We Buy Any House, we've looked into how you can make the most of your retirement, with or without a mortgage; and how you can decide if you want to pay your mortgage off before retirement. You can also look into making your house an asset when you retire here.
The first thing that you should consider is if you have any other debt that is outstanding. If you have credit card debts, or loans that you’re paying back that have a higher interest rate than your mortgage then you may want to consider paying these off before you look at paying your mortgage to save yourself money in the long term.
Another key factor to consider is your pension. If you don’t, it’s worth starting to pay into one early on. If you don’t have a steady pension in place by the time you retire you may want to consider using any savings that you have to fund your retirement rather than paying off your mortgage in one.
What do I need to know about my mortgage?
You will want to check what your mortgage rates are and how much you have left to pay. If your rates are quite high compared to the average mortgage rate, and you still have several years left on your mortgage it might be worth looking into remortgaging to get a better rate and save yourself some money long-term. If the rates are fairly reasonable then you might be happy to continue with the monthly payments, or you might still want to pay it off in full so you don’t have to think about it during your retirement. At this point, it’s a good idea to have a look at your pension and your expected finances for your retirement and work out your monthly income alongside your outgoings plus your mortgage payments. If you are confident that you can pay the mortgage each month and still live a comfortable lifestyle, you have nothing to worry about and can continue with your mortgage as normal. If you find that you may be struggling each month, you can either look into paying off the mortgage or keeping money aside now to save for your retirement to help subsidise yourself.
Are there other things I should consider?
Making that decision will often rely on other aspects; for example, does your mortgage lender charge for overpayments or early repayments for your mortgage? Look into this, and find out if there are any penalties for making overpayments or paying the mortgage off in full before the end. If there isn’t, you have two options; you can choose to make larger payments whilst you’re still working so that when you do retire you don’t have to worry about falling behind, or you can look at paying the mortgage off in full depending if you’re in a position to do so.
Some homeowners decide to pay their mortgage off early, but some decide to use the time before they retire to save as much money as they can to fund their retirement and keep a good amount of savings aside for any potential problems down the line.
You will also want to consider if you are going to downsize or stay in your current house for your retirement. Older homeowners often tend to downsize, saving money and energy for their retirement, and if you’re going to do this then paying the mortgage off early may be pointless when you can pay whatever is outstanding with the proceeds from selling the house down the line. If you’re planning to stay in your current house for your retirement, then you can look again at fully paying off the mortgage and living your retirement free from those monthly mortgage payments.
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