Half of mortgages will not be paid off by a borrower’s 65th birthday

The steps you can take to clear down your home loan

According to new figures, one in every two mortgages will not be paid off by the time a borrower reaches their 65th birthday.

That’s right, 52 per cent of mortgages won’t be paid off by the time most people reach their mid-60’s.

Longer mortgage terms mean an increasing number of new borrowers are starting mortgages with terms that extend almost up to the UK’s current average retirement age – 66-years-old.

In comparison, in 2014 only a third of new mortgages went beyond the age of 65.

Many additional factors play into this trend, including people getting mortgages later in life and a need or desire to stretch mortgage payments over a longer period to reduce monthly payments.

Charles Roe, Director of Mortgages at UK Finance, said: “There has been growing demand for mortgages from those aged over 55 and this is set to continue as more people live and work for longer.

“Later life lending both now and in the future will be imperative as existing homeowners look to later life products for accessing equity as they get older.”

Don’t want to keep paying for a mortgage up to your retirement? Consider the following:

  • Take a pension lump sum – If the remaining amount on your mortgage isn’t significant and you are over the age of 55 it may make sense to clear your debt and eliminate interest payments by taking a tax-free lump sum from your pension.

    You can take up to 25 per cent in one go tax-free but if you pay your mortgage off too quickly you may face an early repayment fee.

  • Make mortgage overpayments – Most mortgages will allow you to make small overpayments during the life of the loan. This is usually capped at 10 per cent.
    Be careful, any overpayment above this amount could land you with an early repayment fee.
    However, even small overpayments throughout a mortgage could cut the number of years required to clear it.
  • Equity release – If you already have a sizeable amount of equity in your home and want to clear the remaining debt it might be possible to take out a lifetime mortgage.
    This would allow you to borrow against your home – even opting not to make monthly payments – with the interest payments reclaimed when the house is sold if you go into care or pass away.
  • Remortgage – As long as you aren’t on a fixed-length deal you should be free to remortgage and reduce the loan term with your new lender.
    Even those on fixed-deals can do this once the deal ends. Changing the length of the loan will require you to undergo a new affordability test, as shortening the loan length will increase your monthly payments.

If you are worried you might be paying for a mortgage in later life, seek professional independent financial advice.

Link: One in two mortgages will not be paid off by the borrower’s 65th birthday

Posted in Blog, Wealth Management News.