Should you pay off your mortgage before retirement?

October 20, 2015 by Brendan

Advice & Tips

Most people have to obtain a mortgage to buy a home, usually paying it off over the next 25 years or so. For many people, paying off their mortgage and building up some savings is the objective before reaching retirement. However, as savings rates remain low along with mortgage rates, this may not be the most sensible route.

If you have any spare cash to invest, rather than pay off your mortgage early you may want to consider investing in shares. The FTSE100 boasts 9.6 per cent annual returns since its started in 1984, and house prices have risen by 6.1 per cent, it does seem that shares are the more likely choice, although risk is attached to most investments.

Another reason to postpone paying off the mortgage is the historically low mortgage rates that are likely to remain for the next few years. One of the biggest concerns of having a mortgage in retirement is that you may fall into negative equity. However, house prices seem likely to continue to rise and with demand not being able to meet the supply, it seems that prices will continue to soar. Although it may seem tempting to pay off your mortgage and be debt free in retirement, it may be likely that more people will take advantage of some of the lowest mortgage rates and fixed rate deals which are available. Seeking advice from a CeMAP qualified adviser will provide you with the information you require to make a sound decision.