Why are one in seven over 70s still paying the mortgage?

Forget freeing up your pension, travelling around the world, and enjoying your golden years, a new study has revealed there's a risk we'll need every penny of our income to keep up our punishing mortgage payments.

The study, by the Saga Equity Release Service, discovered that one in three people over the age of 50, and one in seven over the age of 70, still have a mortgage. On average those with a mortgage in their 70s have £40,000 left to repay.

Why?

There are a number of reasons for this. Perhaps the most common is that people have taken out interest-only mortgages in the past, with no savings or investment vehicle to repay the debt they borrowed. At the end of the mortgage period they were therefore left with the full outstanding amount and no way to repay.

There are also those who have continually tapped into the equity in their home throughout their working life, in order to maintain a lifestyle that's beyond their means. They hoped that house price rises would help wipe out their debt, but they under-estimated just how much they were extracting from their home.

Finally there are those who haven't lived the most straightforward lives. Instead of buying their property young, and gradually paying it off, they may have had debt issues along the way, been divorced and forced to start again financially, or even had their home repossessed. If the window of repaying your mortgage before retirement has shrunk from 30 to 20 years, it's hardly surprising you're left with debts.
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What can you do?

The research found that a third of people over the age of 50 have never tried to renegotiate their mortgage, so there could be serious savings to be made from shopping around for a cheaper deal. This could either be used to make the mortgage debt less onerous on a fixed income, or alternatively if it allows overpayments, it could enable you to pay it off more quickly.

Unfortunately this isn't going to work for everyone. The researchers found that one in 14 people think they were prevented from moving their mortgage to a more competitive deal because of their age. Lenders don't disclose their criteria for deciding whether or not to let you have a mortgage but there's a chance your age could stand in your way.

Alex Edmans, Head of Retirement at Saga Personal Finance, commented: "Millions of older homeowners have found themselves abandoned by mortgage lenders and stuck in uncompetitive deals because of the unfair age restrictions that many lenders have in place. If these people had access to a better deal they wouldn't have to pay as much back each month which would leave them with more money to enjoy their retirement."

Alternatives

If you are retired and cannot afford your mortgage payments, therefore, you may need to consider an alternative solution. Unsurprisingly Saga is suggesting people consider its lifetime mortgages (a form of equity release). This will enable you to free up cash from your home to repay the debt.

However, while it will mean no more monthly payments, it's important to be aware that the interest on this kind of mortgage will roll up, and will need to be repaid when the property is eventually sold. With the cost of interest and fees, those who release equity early in their retirement can easily see their outstanding loan double before it is repaid.

There are lots of people for whom this will not be suitable, so this may mean finding more income elsewhere to pay the mortgage. It's worth examining whether you could receive any additional benefits, and considering whether you could return to some form of work in order to boost your income. In some cases it may be possible to rent out a spare room and cover part of the mortgage payment with the rental income.

Sometimes major lifestyle changes will be necessary. This could include downsizing or relocating, to enable you to pay off the mortgage.

There is no perfect solution. However, it's important to realise that there are solutions available. You don't just have to scrape by, spending a fortune on your mortgage in retirement, because there are always alternatives to consider.

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