Three million people, equivalent to one in five mortgage holders, think they’ll still be paying off their mortgage beyond the age of 65, according to new research from L&C Mortgages.
Some of these may be planning to move and downsize once they retire but may still need a mortgage to help fund their next property purchase.
When asked why people think they will pay off their mortgage later than originally planned, over a quarter of respondents (28%) said that it was because they were providing financial support to family.
Mortgage worries
One in four (26%) confess that having a mortgage after the age of 65 makes them feel anxious, whilst almost one in 10 (8%) of those aged 55 or above don’t think they’ll ever be mortgage free.
Many older borrowers choose to work into retirement so that they can pay their mortgages off. More than a quarter (27%) of those who cleared their mortgages after the age of 65 said that they’d had to work for longer to do this.
Nearly a fifth (19%) of those who think they will still be paying off their mortgage beyond 65 are concerned about how they’ll cover the cost of payments as they enter retirement, with many facing lower incomes once they stop work.
Options for older borrowers
The good news is there are plenty of options for homeowners who will still be paying off mortgages in retirement, with growing numbers of lenders catering for an ageing population. Some, for example, don’t impose a maximum age limit for mortgage applicants, instead assessing them on a case by case basis. Lenders will want to see that borrowers will still have a stable income once they retire, so that they can keep up with their mortgage repayments once they’ve stopped work.
David Hollingworth, of L&C Mortgages, says: “Lenders have become increasingly flexible in their approach to older borrowers and the Retirement Interest Only mortgage market is one that is only likely to see more growth.”
Retirement Interest Only mortgages allow older homeowners to make monthly interest mortgage payments until they die or go into long-term care. The capital is only repaid to the lender when the property is sold.
This type of mortgage is likely to be popular with homeowners who currently have interest-only mortgages, where the capital is usually repaid at the end of the mortgage term. According to L&C almost two-fifths (37%) of those with interest-only mortgages don’t yet know how they’ll pay off the remaining sum they owe or aren’t sure how they’ll go about it.
“Although homeowners will, and should, continue to aspire to pay off their mortgage before retirement, the reality for many could mean having a mortgage for longer,” says Hollingworth.
“Anyone feeling anxious about their options shouldn’t panic and should seek expert advice.”
