Millions taking mortgage debt into retirement | Personal Finance | Finance

Among the over-55s, one in five expect to service their mortgage into their 70s, while 5 percent say they will never be able to repay the debt. The pandemic has worsened the situation by hitting incomes, although mortgage payment holidays have inflicted little damage so far, as lenders increase monthly payments rather than extend repayment terms. Hargreaves Lansdown personal finance analyst Sarah Coles said millions face the strain of having major debt in older age, and the numbers are growing: “If you are carrying the burden of your mortgage into retirement, it could drain the life out of your golden years.

The average home now costs a record £261,743, some £22,000 more than a year ago, and buyers are struggling to pay down their borrowings in time.

As more young people go into higher education, and graduate with huge debts, they are likely to end up buying their first property at a later age.

Growing numbers are taking out mortgages over a 35-year term to spread the cost, pushing back the date at which they will clear the debt.


It only takes the odd “life hiccup” to run into trouble, Coles said: “If you lose your job, fall ill or get divorced, this could push your final repayment date back.”

Relying on working later in life is a risky strategy, Coles warned, as illness or unemployment could upend your plans.

She said the following tips should help you clear your mortgage before you retire.

• Remortgage to a cheaper deal. This way more of your monthly payments go towards repaying the loan.


• Make overpayments now. Today’s low savings rates means your money works harder paying down debt, but target costlier credit card debt first.

• Work later in life. “If you are well enough, have no caring responsibilities and can find work, this is a sensible option for many,” Coles said.


• Clear it from savings and investments. This may offer peace of mind, but make sure you have enough left for your retirement.

• Use your 25 percent pension tax-free lump sum. Be warned, this could mean you struggle throughout retirement.


• Downsize as soon as you retire. “This can solve the problem, but may not free up as much cash as you hope, and it may be hard to move out of the family home,” Coles said.

Age Partnership senior equity release adviser Andrew Morris said other options include a retirement interest-only mortgage and an equity release lifetime mortgage.

“Equity release allows you to borrow money against the value of your property with no repayments and the right to live there for life. Talk to your family to work out what your options are, and make sure you are claiming all of your state benefits. Consult a specialist adviser,” he said.


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