Ask the expert: Should I retire when I still have a mortgage?
Mortgage worries overriding retirement excitement? Marianna Hunt is back to take a look over whether retiring while still owing money on your mortgage is a bad idea. I want to retire at 55, which is in five years’ time. However, I still have nine years of repayments on my mortgage. I think I could just [...]
Marianna Hunt addresses whether it is a bad idea to retire while still owing money on a mortgage. She acknowledges that retiring at 55 is desirable, but nine years of mortgage repayments remain. The expert points out that mortgage rates are increasing, and if they reach six percent or more, it may strain retirement finances. Inflation has also risen to 3.1 percent in August, above the Bank of England's target of two percent.
Unexpected expenses in retirement, such as property repairs or care costs, could make it difficult to keep up with mortgage payments.
The expert suggests several options if continuing to pay the mortgage in retirement is too much of a financial burden. One option is to use pension savings to overpay the mortgage. However, this would reduce the amount available for other retirement expenses. Another option is to continue working part-time, which could help cover the mortgage costs.
Alternatively, one could consider a retirement interest-only mortgage, where only the interest is repaid, and the capital is repaid when the borrower dies or moves into long-term care. Lastly, downsizing to a smaller home could help reduce mortgage debt. Ultimately, the expert advises stress-testing retirement plans under various scenarios to determine the best approach for an individual's circumstances.
Written by urgent.news from City AM's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
