In previous years, it was always the expectation that a person’s mortgage would be completely repaid before retiring, so that they could look forward to a debt free retirement without worrying about paying a mortgage.
However, as more borrowers are taking out a mortgage over longer terms, it may not always be possible. Here are some reasons why you don’t need to pay off a mortgage before you retire:
As mortgage rates are at their lowest level since 2009, it may be advisable to use your income to pay off other debts which may have a higher rate of interest. The mortgage should be the last debt to be paid off, especially as the interest rates are so low.
Many people consider using their pension lump sums to pay off a mortgage straight away, so that they can be debt free. However, with interest rates at the level they are, it may be beneficial to consider investing that money elsewhere so that you can focus on building a sustainable income for future years. Advice from a CeMAP trained mortgage adviser could help you decide whether this is the best option for you.
If your retirement income isn’t as healthy as you had hoped, why use it to pay off your mortgage when the interest rates are so low? Consider continuing to pay the mortgage until the term ends, so that you can have a comfortable retirement, although you may want to reconsider if interest rates increase.
Professional advice should be sought to ensure you make the most suitable decision for your circumstances.
