Worried you’ll still be paying off your mortgage in retirement? New research shows you’re not alone. Here are five tips to help clear the slate before you hang up your work boots.
A new trend is emerging that could leave retired home owners with less money to spend than they expected.
A recent study found at least one-in-three Gen X homeowners expect to be paying off a home loan in retirement.
Gen Xers aren’t alone.
Separate research shows one-in-three Millennials and one-in-four Baby Boomers expect to carry mortgage debt into retirement.
Why does this matter? And is it possible to pay off a mortgage by the time retirement rolls around?
Let’s take a closer look.
Why more Australians have a home loan in retirement
There are several reasons why a growing number of Aussies are retiring with a mortgage.
We are tending to buy a first home later in life.
And homebuyers are borrowing more due to rising house prices.
This has seen the 30 year loan term become pretty standard, up from 25 years in the past.
The upshot is that buying a first home at say, age 35 could mean still paying down a mortgage at age 65, which is close to the average age of retirement.
Below are five simple steps that could help you clear the home loan slate and free up some extra cash for your golden years.
1. Partner with a broker
As mortgage brokers, we’re committed to long-term relationships with our customers.
Our annual home loan reviews play a critical role, ensuring you continue to have the loan that matches your needs throughout your home ownership journey.
This is a key starting point to getting on top of your mortgage balance over time.
2. Don’t see your home loan as a ‘one and done’ product
From your first home loan to your last repayment, life is sure to change.
The loan that was right for you as a first home buyer may not be such a good fit as you progress through life stages.
That makes it worth talking to us regularly to know if you are still getting value from your loan.
Refinancing to a new loan and lender can ensure you enjoy a competitive loan rate, which can help you pay the balance off sooner.
3. Aim to consistently pay a little extra where possible
Consistently paying a little extra off your home loan can reduce your balance, lower future interest charges and fast-track the time taken to pay down your loan.
Even small extra payments made consistently can shave years off your mortgage.
Talk to us to know how much you could save with extra repayments.
4. Consider a home loan offset
An offset account is an everyday account linked to your home loan.
The balance of the account is deducted from your mortgage when it comes to calculating your loan interest payments.
For instance, if you have a mortgage of $500,000 and a balance of $50,000 in the linked offset account, loan interest will be charged on $450,000.
In this way, an offset account can help to lower interest costs over time.
It can make an offset home loan a smart way to put savings to work by paying off your mortgage sooner, while still having spare cash available at-call.
5. Switch up your repayment frequency
The timing of your home loan repayments can make a difference.
Rather than making one monthly payment, it can help to make smaller payments more frequently – either fortnightly or even weekly.
This sees daily loan interest calculated on a lower amount, which can see more of each repayment whittle away at the loan balance.
Paying more frequently can also help you make extra repayments.
For example, when you pay half your monthly repayment every two weeks, you can end up making the equivalent of an extra month’s repayment each year.
Call us to know how much you could save with this strategy.
Talk to us to know more
Whether you’re years or decades away from booking in an over-60s cruise or doing the “big lap”, contact us today for more insights on how you can clear the home loan slate before you hang up your work boots.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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