Retirement

Are mortgages delaying retirement?

For most 25-35 year olds, getting on the property ladder is at the forefront of their financial focus.

Which makes sense... Owning a property comes with many advantages;

- The ability to store equity in the property
- The potential to profit from continued growth in the housing market
- Having a place to call your own

However, rising housing prices, while nice for those who already own a property, have only made it more of a stretch for first-time buyers to get their foot on the ladder!

In the last few years, there have been measures introduced to help first-time buyers, such as the Help to Buy and Lifetime ISA’s.

In a more recent move, some lenders have started offering maximum mortgage terms of up to 40 years (up from 35 years) and increasing the maximum mortgage age to 70 (up from 65).

So what does this mean?
A longer mortgage term generally results in lower monthly repayments, even though you’ll pay interest over a longer period. Some people may prefer this as it frees up disposable income however, it's worth considering how this might affect your intended retirement age!

For anyone planning to retire at age 65, this would mean taking out a 40-year mortgage at age 25, and for many, owning a property by age 25 is fairly unrealistic. Therefore anyone aged 25+ may need to consider pushing back their intended retirement age to ensure their mortgage is paid off before they stop working.

However, it's not all doom and gloom as lenders will now consider mortgages that run into retirement. This does mean meeting eligibility criteria, such as providing proof of retirement income. This may be difficult for anyone in their late 20’s and early 30’s to determine but could be provided at the point of remortgaging in the future.

Is renting such a bad thing?
If we look at other parts of Europe such as France and Germany, the share of rental property far outweighs home ownership. In Berlin, for example, the rental property share is 90%. Although this means you’ll continue paying rent into retirement, it takes away to pressure of trying to save an enormous deposit. It also means people aren’t fixed to an area, they can travel or move elsewhere at a months notice, without worrying about the time and cost involved with selling a property and most importantly it shouldn’t affect your retirement age as there are no borrowing age/time restrictions and the rent can be built into your retirement planning.

 

Disclaimer :- Your property may be repossessed if you do not keep up repayments on your mortgage

Does retirement really mean no more work?

Does retirement really mean no more work? 

The most common question we come across from employees when it comes to their pension is, what age will I be able to retire? Which makes sense, it’s the whole reason we put money away each month!

Well, according to research completed by the Post Office, 1 in 5 people are forced back into work following their retirement! This is a scenario, I’m sure, that most of us would ideally like to avoid.

This is most likely down to a lack of sufficient planning. For retiring members, it can be complicated trying to figure out not only a life without work but exactly how much they are going to need to get by!

We found from our research that 83% of members are in the dark when it comes to when they will be able to afford to retire, which would go some way in explaining why 1 in 5 are having to return to work after retirement, because of poor planning and uninformed members!

A few things put in place will go a long way ensuring your members are fully informed and aren’t left in a situation where they are forced back into work.

Access to a portal and tools - Providing employees with 24/7 access to an online retirement income modeller is a game changer when it comes to retirement planning and financial education!

Access to advisers - Having a chat with an adviser will go a long way in clearing points up and discussing the numbers further!

Early communication - Communication 5 or more years before retirement means members are 2.5 times more likely to understand when they can afford to retire!

Everyone's circumstances are different, and retirement can throw up some costs that were never expected, but early planning and the correct support can ensure employees are as prepared as possible for a happy retirement!


By David Pugh - Managing Partner

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