Why you need financial advice now to avoid retiring with a large mortgage

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Most of us are looking to maximise our income and minimise our debt in retirement – and avoid retiring with a large mortgage. We want to be able to enjoy our later years with a decent income and without having to pay back debts that we racked up during our working life.

However, new figures paint a worrying picture for pensioners with research finding that thousands more people are expected to be retiring with a large mortgage in the next thirty years. If you want to retire having repaid your large mortgage or home loan, you may need to take action now, as we see next.

400,000 people retiring with a large mortgage

New research from the Equity Release Council suggests that 400,000 people over the next thirty years will retire with an average of £52,446 outstanding on their mortgage.

The research also suggests that some people cannot see themselves repaying their borrowing before they retire. Of those aged between 55 and 64, almost a quarter (23 per cent) feel they will finish work owing an average of £66,000, while 17 per cent of 45 to 54 year olds believe they will still owe £48,000 on their mortgage at retirement.

In addition to mortgages, just over a quarter of 55 to 64 year olds expect to enter retirement with credit card debt worth £2,453.
Andrea Rozario, director general of the Equity Release Council said: “The fact that over 400,000 people expect to still be repaying their mortgage when they retire is shocking.

“This suggests that the trend towards people buying homes later in life and remortgaging on a regular basis is having an impact on the type of retirement that people can expect to enjoy.

“With 73 per cent of people intending to use housing equity as part of their later life finances, many are sure to use it to solve the problem of repaying a mortgage or other debt in retirement.”

Stephen Lowe, group external affairs and customer insight director at annuities and equity release provider Just Retirement, said: “Just Retirement recently published findings from the largest study ever undertaken into consumer attitudes and usage of housing equity withdrawal and found similar evidence to that published by the ERC.

“Of those people at and approaching retirement significant numbers continue to have outstanding mortgage debt. What’s concerning is 25 per cent have no plans how to repay the debt and 1 in 4 expect to continue repaying the loan with their retirement income.”

Islay Robinson, director of London mortgage broker Enness Private Clients, urges high net worth finance clients to tackle the issue early. He said: “If you want to enjoy a comfortable retirement than it is important to tackle your large mortgage as early as possible. Ensuring you have a repayment vehicle in place to clear the loan prior to your retirement is crucial. And, it is also important to regularly review your progress towards this goal.”

At retirement, it is likely that your income will fall significantly. And, having to pay a large mortgage may leave you short of cash. Mr Robinson added: “One option is to sell your home and downsize. However, as we have seen over recent years, falls in house price could vastly affect the profit you will get from selling your home.

“In addition, a slow market may mean you can’t sell your property and you may be lumbered with your mortgage for years of your retirement.”

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