“I’m going to remortgage so I can reduce my outgoings. Is there anything I should be aware of?”

Switching mortgage can save you thousands and/or cut years off your mortgage term, but the temptation is there to spread the cost over extra years. Try to avoid paying off your mortgage in old age where possible

As many face paying off their mortgage even after retiring, we look at what steps you can take to avoid this. Over the next 30 years many people expect to retire owing thousands on their mortgage. 

However, this is only really the tip of the iceberg as many more will find that due to unforeseen circumstances, such as redundancy, windfalls and inheritances failing to materialise or under performing investments, they are facing this issue too.

 

Is there an easy solution? 

Unfortunately not, but there are a number of steps that people can take to either avoid the situation all together or lesson the burden before it becomes a real worry.

Think about your mortgage term

‘Prevention is better than cure’ as the old saying goes, and in this situation it’s absolutely true. Firstly, people need to remember that while remortgaging for the full term each time they remortgage will reduce their monthly payments, it will increase the length of the loan. This might not seem to be an issue when you are thirty or thirty-five but may lead to remorse later on when you find you are still meeting mortgage payments at sixty when you would rather be saving for retirement.

Make overpayments when you can

Another old statement also holds true in this situation – don’t put off for tomorrow what you could do today. While most people are feeling the impact of the current economic situation, at some point many people find that they either get an unexpected windfall, bonus from work or financial gift. Everyone’s financial priorities are different but making an overpayment on their mortgage does hold long term benefits including a saving of €000’s on interest. See example below

Mortgage Overpayments

Mortgage of €250,000 @ 3.5% = €1,390pm

€100pm extra will clear the mortgage in 22.25yrs and save €15,611 in interest

€200pm extra will clear the mortgage in 20yrs months and save €27,672.14 in interest

What if it’s too late for that?

While these are all preventative measures, they are unlikely to help someone who is 60+. So, what should people in this situation do? Well, firstly they need to ascertain exactly how much they owe, how long they have left to pay it off and if they can make overpayments. 

Often people put their heads in the sand but by ascertaining this basic information, people can then incorporate repayment of this debt into their retirement plans. Having gathered this information, if people realise that they may need to keep repaying their mortgage into retirement, they do need to consider their options.

Get help

While most people – especially the older generation – prefer not to discuss their personal finances, speaking about the issue can help. In order to do this, I would suggest that people consider getting financial advice from a regulated Financial Broker.

This article aims to give information, not advice. Always do your own research and/or seek out advice from a regulated financial broker, before acting on anything contained in this article.

Warning: Your home or property may be repossessed if you do not keep up repayments on your mortgage or any loan secured on it.

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