Re Do I pay mortgage off on retirement

rayfuzz

My apologies if this subject has already been covered, but can anyone advise me. The problem is I have a small mortage, £20000, which should reduce down to about £10000 by the time I retire in 2 years time. I have been told that I am best keeping the mortgage going, re-organising if necessary, the reason given is that if I pay off all debts then as a retired person I will find it difficult to raise an amount of money if required for emergencies whereas if I keep a small mortgage debt then I can always approach the lender for more.In addition the mortgage company would keep the house deeds instead of me paying a bank or solicitor to hold them. I do have a small life policy which would clear the outstanding amount if and when I depart this mortal coil.

MrMicawber_2

If paying off a £10,000 mortgage will cause you difficulties with your savings I would consider getting a part time job to bring the mortgage down further. £10k is obviously a small mortgage by todays standards but the interest will mount up. You need to check to see if there is a point when your lender insists your mortgage is completely paid off.

However, I'd go with your thoughts. You need some emergency savings.

rayfuzz

Thanks for that Mr Mcawber, I had intended to reduce the mortage down to the minimum the Mortgage holder would allow on retirement. My main concern was that I had been told that no one would touch me for any sort of loan as a retiree (?is that the right word) but as an existing mortgage holder I could increase it.
:beer:

seven-day-weekend

Also consider that you no longer need anyone to keep the deeds as all the documents are held electronically at the Land Registry and a LR Certificate is all you need.

You may want to keep the deeds for historic purposes, but they are no longer considered as legal documents.

Eco_Miser

If it's any help, my mortgage now stands at £1 (ONE POUND), my interest rate on that pound is zero %, if needed I could draw down the overpayments I've made, and they are holding the deeds for free.

CLAPTON

what savings will you have if you pay off the mortgage
what income will you have ?

to me it seems daft to keep a loan going 'just in case' you need the money when on a (presumably) low retirement income.
Better to pay of the mortgage and save the money that otherwise was paying the mortgage off... and/or stay working and build up some savings.

Jennifer_Jane

OK - here's what I would do (am doing): I am increasing my AC's on my Company Pension so that I get (as a basic rate taxpayer) 20% (the AC's are paid pre-tax so it's the equivalent of a 20% return on investment).

When I retire in August 09, that money will be payable tax-free as part of my 25% tax-free lump-sum and will have grown to:
- Pay off my mortgage
- allow for a newer car to take me through retirement
- act as a substantial emergency fund.

So, I would work out the costs of the above, say £24000 is required divided by 24 months, and increase my Additional Contributions in my Company Pension to that amount per month. For example £1000 off a basic rate taxpayer's pre-tax salary actually costs you £800.

So, to answer your question, I would pay off the mortgage (my rate is over 5% so quite high).

Jen
x

jennifernil

If the rate of interest on your savings (after tax) is more than the rate on your mortgage, then keep the mortgage, if not then pay it off.

Just because you are retired does not mean you cannot borrow money, as long as you can afford the repayments.

iinvestor

Pay of your loans. Because on your saving you get taxed and on your loan you are loosing money on interest! You can still can get a secured loan in the future even if you are retired. Also by reducing your savings you may qualify for benefits in your retirement, that you previously were not entitled to as you have got lower savings.