Mortgage options for retirement

Natnewb

Hello,
I am currently unemployed and 61 years of age with no children.  I have a small mortgage of 19k (house is worth about £515K). As I have made over payments on my mortgage I am using this to live on which isn't ideal as my monthly payment are gradually rising (currently £250 pcm) I tried to sell my home to downsize but this proved to stressful and my heath suffered so I would prefer just to stay in my house. I would not want a lodger so I am wondering if I can look at releasing some equity to live on for the next 6 years until my state pension kicks in.  I have a small pension pot (just under 50K) so would prefer not to use this, plus it would not last long enough.  I wondered if there are any options in terms on re mortgaging or equity release.  I realise this may be difficult if i have no income but would be grateful for any advice as I cant bear the thought of having t move, mainly for health reasons and the upheaval. Many thanks. 

silvercar

I know you say you are reluctant to touch it, but you could use the private pension pot to get rid of the mortgage entirely. 25% of the pot could be released tax free. In fact, if you have very little income at the moment you may be able to release all 19k tax free. That would still leafiest you with most of the pension pot and no mortgage.

Also check your benefit entitlement.

MWT

Natnewb said:

I would not want a lodger so I am wondering if I can look at releasing some equity to live on for the next 6 years until my state pension kicks in.

You will have equity release options as long as your property is suitable (not close to commercial premises, traditional construction etc.) but you would have to release enough to clear the existing mortgage at the same time.

The bigger question is how much do you need each year to live on and maintain your property for the rest of your life, as the state pension is not going to go very far on its own, and a £50k pension pot will not get you a lot, take a look here for some rough ideas:

https://www.legalandgeneral.com/retirement/pension-annuity/pension-annuity-calculator/

I'm not saying you have to move out, but you do need to be realistic about what it will take to stay there long-term as it would be a shame if you ended up having to leave anyway having wasted money trying to stay...

[Deleted User]

Downsizing to a smaller property with no mortgage will surely be less stressful in the longer term than having to worry about paying off a mortgage and maintaining a larger property? Moving may also release funds to help finance the years from now to state pension age.
Have you checked your state pension forecast?

Your pension pot should grow during the next 6 years too. Are you looking for work whether it be full-time or part-time?

At current values your annual pension would be about £13000 a year (assuming 4% drawdown after taking 12500 tax free from your pension pot of £50000) plus your state pension (again assuming you will get the full amount).

On that amount it would certainly be useful, not to have a mortgage to pay plus have a few thousand in the bank as a back up.

Natnewb

Hello,
Thank you very much for your reply. Yes, I feel this is probably the right direction to go in as it solves many problems. I have paid enough NI for a full state pension so that gives me £12,345 per year plus the private pension. Did you mean £1300 per year from my private pension? I have just checked again and the current value of my private pension is £45K so that would give me £11,250 tax free and then 4% draw down of remaining £33,750 which would be £1,350 per year. So yes, altogether £13000 per year.
Regarding work, I am looking but my health has taken a turn so not sure how feasible it is. I have signed on and am currently using over payments on my mortgage to make up the deficit in income. If i do move I will have to take unto account an income for the next 5 years until the state pension kicks in and when I draw down from the private pension so I imagine 12K a year (60K altogther) should cover it as I know of many pensioners who live happily on this amount, obviously they are mortgage free. So I will take this into account when setting the budget for my next property. 
I really appreciate your advice and would be grateful if you think I have over looked anything. 
One again, many thanks.

[Deleted User]

The current full state pension is £11542 per year so not sure where the £12345 comes from unless you have some additional pension that you are entitled too. If that is the case you will have a income of £13695 a year before tax and
£13470 after tax.

MWT

[Deleted User] said:

The current full state pension is £11542 per year so not sure where the £12345 comes from unless you have some additional pension that you are entitled too. If that is the case you will have a income of £13695 a year before tax and
£13470 after tax.

Many people will have an addition to the full state pension under the transitional arrangements from SERPS or S2P, £12,345, is entirely believable.

[Deleted User]

MWT said:

[Deleted User] said:

The current full state pension is £11542 per year so not sure where the £12345 comes from unless you have some additional pension that you are entitled too. If that is the case you will have a income of £13695 a year before tax and
£13470 after tax.

Many people will have an addition to the full state pension under the transitional arrangements from SERPS or S2P, £12,345, is entirely believable.

Which I did acknowledge in my post.

MWT

[Deleted User] said:

MWT said:

[Deleted User] said:

The current full state pension is £11542 per year so not sure where the £12345 comes from unless you have some additional pension that you are entitled too. If that is the case you will have a income of £13695 a year before tax and
£13470 after tax.

Many people will have an addition to the full state pension under the transitional arrangements from SERPS or S2P, £12,345, is entirely believable.

Which I did acknowledge in my post.

... except it is not paid as an additional pension it is a single payment as part of an individuals state pension entitlement and is shown as such when people query their entitlement online, just highlights that for many of those reaching state pension age these days the 'full state pension' is not just the headline number you see in the press.

Under the old state pension arrangements it was paid separately.

[Deleted User]

MWT said:

[Deleted User] said:

MWT said:

[Deleted User] said:

The current full state pension is £11542 per year so not sure where the £12345 comes from unless you have some additional pension that you are entitled too. If that is the case you will have a income of £13695 a year before tax and
£13470 after tax.

Many people will have an addition to the full state pension under the transitional arrangements from SERPS or S2P, £12,345, is entirely believable.

Which I did acknowledge in my post.

... except it is not paid as an additional pension it is a single payment as part of an individuals state pension entitlement and is shown as such when people query their entitlement online, just highlights that for many of those reaching state pension age these days the 'full state pension' is not just the headline number you see in the press.

Under the old state pension arrangements it was paid separately.

Again I know that the two amounts would be added together as a single payment!!!

Natnewb

I see.because when look online it does show my state pension as  £12,345. I thought I had overpaid my NI!! Well, I have more than paid the required years but that doesn't seem to make a difference to the state pension amount. Pity. Thank you both.