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Should I remortgage when I retire?
If you have plenty of equity in your house it may allow you to pay off your mortgage faster and with lower rates.
When you’re approaching retirement, one of the biggest factors that you need to consider is maintaining your lifestyle on the reduced income that comes with retiring. Lots of retired homeowners consider remortgaging their house to sustain themselves through their retirement; is that the right step for you?
Want to pay your mortgage off faster to get lower rates
Your financial situation has changed and you need a more affordable mortgage- often the most regular reason that a retired homeowner chooses to remortgage after the reduced income.
There are other reasons that you may be considering remortgaging, so it’s worth identifying exactly what you want to get out of the remortgage to decide if it will work for you.
What are the benefits?
Choosing to remortgage your house means you might save money if the interest rate is lower than your current mortgage, or if the repayment term is longer giving you more flexibility each month
You may be able to borrow more against your house to fund whatever project you’re considering for your retirement; whether that be travelling, investing or home improvements
If your current mortgage is interest-only, coming to an end, and you’re not in a position to pay it back in full.
If you’re looking to remortgage in the future but are worried about the rates increasing.
What are the disadvantages?
There are often extra costs upfront
Your lender may insist that you need a full remortgage which could result in a higher monthly rate- especially if you currently have a lifetime tracker rate mortgage
It may not be sustainable on the reduced income that retirement tends to have; it’s important to factor in all of your monthly costs before you commit to a repayment that you might struggle to make each month whilst having a comfortable lifestyle.
What are the extra costs?
Arrangement fees for the new mortgage
Exit fees from your previous mortgage
Valuation fees - you may be able to avoid this if you stay with your current lender and just have a different agreement, but it will depend on the value of your house
Broker fees - mortgage brokers are always recommended to make sure everything is correct, but their prices can add up quickly.
If you’re close to retirement age- this doesn’t mean you can’t remortgage, but lenders are often more hesitant so it’s worth bearing in mind. Often these homeowners consider downsizing instead, depending on what they wanted to remortgage for initially.
Your house value has dropped dramatically since you took out your first mortgage
You have a low credit score.
Remortgaging is a big decision, and you should take plenty of time to think about exactly what you want to achieve from doing it and make sure that you will get those outcomes if you go ahead. If you’re in a position in which you think you’ll struggle to remortgage due to your age or credit score, or you’re not sure that remortgaging will give you the result that you want, get in contact with us at We Buy Any House today for a cash offer on your property and see how we can help you get to where you want to be.
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