Mortgages after Retirement.
Comments
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I don't think that the psychological benefit of having paid off your mortgage should be ignored. But I suspect it may be people with a lower income or an employment that is not too secure that may receive a bigger benefit from this.
I can second that. Having spent years in the, employment not secure, group the satisfaction of paying the mortgage off was very satisfying. Even if making the final payment was underwhelming. Click of a mouse button,balance zero.,
No bells,marching bands, rounds of applause, nothing! :-)Space available for rent0 -
I'm surprised that some people in retirement choose to keep their mortgages going even although they could pay them off. I've never liked having debts so I paid mine off as soon as the opportunity arose well before I retired.0
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4 possible reasons if you have enough money to pay off the mortgage if you want....I'm surprised that some people in retirement choose to keep their mortgages going even although they could pay them off. I've never liked having debts so I paid mine off as soon as the opportunity arose well before I retired.
1) Investment returns are higher than mortgage interest rates
2) You have a hidden gain from inflation, some of your income rises with inflation but the debt doesnt.
3) Some people may feel more secure having paid off the house, others may feel more secure knowing their assets are easily accessible.
4) If there are no relatives with expectations of being left a small fortune why keep a significant % of ones assets locked away to be realised only after one is dead?
Debt can be a disaster for those that need it but an extremely valuable facility for those who dont.0 -
Because it can make financial sense. Say you have a £150k interest only mortgage and you either have an endowment to pay it off or have a £600k+ pension pot which can service it. If you take a Rio mortgage at 3.75% for 5 years (Leeds BS) you could: 1.) keep the £150k in your pension and after 5 years probably see it grow to £200k - £250k 2.) dump part / all (depending on your circumstances) of the £150k into your pension (over the period) and with the tax relief probably see it grow to £250k - £270k. The cost of the interest payments comes to £28k, meaning you are likely (yes, not guaranteed) to be around £20k up through a pessimistic lens, £100k through optimistic ones. Take your 25% TFLS after 5 years and pay off the mortgage or if Rio rates are still attractive, go again! If 10 year fixed rate Rio's become available it's probably an even better bet. If you plan your pension to have at least the mortgage value remaining when you croak it (hopefully not in the immediate future), you could have quite a tidy sum.0
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With mortgage rates low it's tempting keep the mortgage going and leave the capital invested to hopefully get a better return. This takes guts, good management and it helps if market returns continue to be positive. I had a 15 year, 3.5% regular fixed mortgage (in the US you can lock in a rate for the entire length of the mortgage) and I got 8.5% from my investments so the money I pre-paid on the mortgage would probably have been better put into the market.....there's capital appreciation of the house to be considered too. However, I don't think I was foolish. I thought of my mortgage as a guaranteed 3.5% return and I'm glad that I retired without a mortgage.
My long term plan allowed me to put lots into the markets and also to pay off the mortgage on my main home and a rental apartment. The idea was to have no mortgages when I retired so that my outgoings could be as low as possible to take pressure off my withdrawal strategy. That's worked out well and now my budget is low enough that I don't need to make withdrawals from my DC pensions or investments to support my spending. I am mortgage free and have lots of options if I ever want to tap the capital; I can sell the rental apartment; move into the rental and get more rent from where I live right now; sell both and down size etc. Also my real estate has greatly appreciated over 20 years and so paying the mortgages off at 3.5% was a good deal.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
pensionpawn wrote: »Because it can make financial sense. Say you have a £150k interest only mortgage and you either have an endowment to pay it off or have a £600k+ pension pot which can service it. If you take a Rio mortgage at 3.75% for 5 years (Leeds BS) you could: 1.) keep the £150k in your pension and after 5 years probably see it grow to £200k - £250k 2.) dump part / all (depending on your circumstances) of the £150k into your pension (over the period) and with the tax relief probably see it grow to £250k - £270k. The cost of the interest payments comes to £28k, meaning you are likely (yes, not guaranteed) to be around £20k up through a pessimistic lens, £100k through optimistic ones. Take your 25% TFLS after 5 years and pay off the mortgage or if Rio rates are still attractive, go again! If 10 year fixed rate Rio's become available it's probably an even better bet. If you plan your pension to have at least the mortgage value remaining when you croak it (hopefully not in the immediate future), you could have quite a tidy sum.
Yes the probabilities are that you'll do ok, faith in market returns is what we rely on for our pensions so why not apply that to paying off your house too? However, I don't like having all my eggs in one basket, especially when it comes to the roof over my head. Also you have to factor in any rise in house prices to do a comparison.
Ultimately it's possible to think of scenarios where you do well with an IO mortgage, but it's equally possible to think of ways that they can get you into serious trouble.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
I retired in 2012 at 55 with a reasonable pension and sizeable investments.
We upsized in 2015,and took out a mortgage. My OH is working PT on short term contracts.
Santander gave us a 17 year mortgage, we went for a lifetime tracker at base rate plus 2%.
Even my savings earn more than that. (Santander were borrowing their own money back from me at a loss at one time!)
No plans to clear the mortgage, but I could if I wanted to.0 -
I am 59. I have more mortgages now that ever. because I have invested in property.
Next yearI hope to pay off the mortgages in my own name by selling my most expensive and lowest yielding property - a former home.. Tipped up with the TFLS from some of my pensions. My home and three investment properties are already mortgage free. Those properties in my own name should provide me with enough incometo live comfortably, and then my pensions will provide for some lucury.
I will still have three mortgages for properties owned by my company, though personnally guaranteed. They are set to last until I am in my 70s. .0
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