It’s easy to overlook how you can potentially save money, especially when some payments have stayed the same for many years. Your mortgage, for example, is something you can save money on. However, switching your mortgage deal can feel intimidating with so much choice available. Will it save you money? Is it worth looking into at retirement age?
Whether you plan to retire soon or in a few years, it could be worthwhile looking at a range of options when it comes to changing your mortgage deal. Going into retirement with a better mortgage deal could open up more opportunities with your finances.
Understanding Your Mortgage Options for Retirement
Mortgage lenders can seem inflexible, and you may worry that you don’t have many options. The truth is you have many options, but the main factors lenders take into account are:
- Your age and intended retirement age.
- Your income and pension income.
- The value of your property.
- The outstanding debt on your property.
These factors impact what offers you can get, and typically, the older you are, the more your options will change. However, it’s still worth looking into.
The interest rates set can vary widely from one day to another. So, if your mortgage is variable, you could end up paying more in interest. On a retirement income, this fluctuation can be difficult to budget for.
When to Start Looking at Changing Your Mortgage Deal
A good time to start looking at changing your mortgage deal is a few months before your current deal ends. This will give you plenty of time to find a deal that fits your current situation.
If you want to change your current deal before it ends, do check for any early payment fees. These are a costly way to prevent regular changing of mortgage deals. You can choose to stay with your current mortgage provider or seek out a deal with a new lender — whichever is your personal preference and suits your situation.
Mortgage Deals for Over 50s
Mortgage lenders are happy to consider applications from a wide range of ages. However, their lending criteria take into account your ability to pay back the amount in your lifetime. Your 50s is still an excellent time to change your mortgage deal. Lenders will take into account the amount of equity in your property and your age at the end of the term.
Mortgage Deals for Over 60s
It is possible to get a new mortgage deal in your 60s. Shortening the term of your deal can help you save interest in the long term. Take into consideration that this could put up your monthly payments, so you should ensure you can afford potentially higher repayments.
Mortgage Deals for Over 70s
As you get into your 70s, it may become challenging to change your mortgage deal. However, this doesn’t mean it’s impossible. There are specialist lenders who are happy to work with older homeowners.
Making Overpayments on Your Mortgage
Many mortgage lenders allow you to make overpayments. You can, therefore, shorten your mortgage term and save interest by paying more each month or year. Do check your mortgage terms and conditions to see how much you can overpay to avoid an early repayment penalty.
Equity Release - What Is it and Is It Worth it?
If you are looking to release some extra funds from your home, equity release is one option.
Equity release is where you borrow money against a percentage of the share you own in your home. The lenders will give you a cash lump sum and charge you interest against the amount you have borrowed.
Often called a lifetime mortgage, the amount becomes payable after your death. You have the right to live in the property, and in some cases, you can put aside a set amount of money for your family to inherit.
Releasing equity from your home is a big commitment, so you will ideally think through a range of options before deciding whether this is right for you.
When Shouldn’t You Change Your Mortgage Deal?
There are some circumstances when changing your mortgage deal may not be the best option. As with any big financial decision, you must think it over carefully.
Your Circumstances Will Change Drastically
Mortgage lenders appraise your current financial situation. If your income is likely to drop drastically, lenders may be wary of lending to you. While you cannot account for every situation in life, you can and should be honest with lenders if you think that your circumstances are likely to change.
Large Repayment Fee
Many mortgage deals will have a repayment penalty for leaving the term early. The repayment fee typically reduces over time. However, if you’re still a few years away from the end of your mortgage term, it may not be worth the hefty fee.
Your Home Value Has Dropped
Ideally, your property should have increased in value over time. If your property is in negative equity, however, changing your mortgage deal may cost you more.
Your Credit Rating is Poor
Your credit rating is a crucial contributing factor for lenders. If it’s really low, you may find that your options for changing your mortgage deal are limited. This doesn’t mean you can’t find a good deal. Many lenders specialise in lending to people with low credit ratings. However, spending some time correcting credit rating issues can help you get better interest rates.
Changing your mortgage deal can help you reduce your overall mortgage debt and pay off your outstanding balance. It’s vital to look at all your options, especially if you’re older. Many mortgage lenders are happy to re-mortgage for older people. The most important aspect to remember is to consider your long-term goals and balance those with the outcome of the potential mortgage deal.