For many of us, our home is our biggest financial asset.

And when it comes to getting ready for retirement, paying off the mortgage on that asset can be one of the most effective things we can do.

Here’s what you need to know about mortgages and your post-work life.

Repayments and retirement

Depending on your financial situation, retirement often means a reduced, or fixed, income.

Whatever amount you’re planning to live on when you finish work, the more you can reduce the regular commitments you’re required to cover from that money, the more comfortable you are likely to be.

Not having a home loan should mean that the pension can stretch further – and other investments that boost your retirement income can be used on other expenses. It should mean more money in the budget for fun, or to keep safe for a rainy day, if a mortgage doesn’t have to be paid.

Getting rid of a home loan also removes the uncertainty about future movements in interest rates, which can be hard to budget for if your income is fixed. The peace of mind that you won’t have to find extra money to cover your home loan repayments at the next refix can be invaluable.

Freehold freedom

Owning your own home freehold in retirement also offers flexibility and security.

Unlike someone who is renting, you have the final say on whether you stay in your home – you can’t be asked to move simply because someone else’s circumstances have changed.  You can plan for the future more clearly because you have a good idea of what your ongoing costs will be.

You also have the security of equity built up in the home to underpin your wealth. Subject to lending criteria, if you own your own home and need to access some of the capital in it to meet your costs in retirement, you may have the flexibility of options such as a reverse mortgage if you want to remain in your home. You may also decide to consider downsizing to a smaller or cheaper property if you’re happy to move.

Pay off debt or invest?

Many people nearing retirement are also focused on building their investments.

When you’re deciding on whether you prioritise investing or the repayment of your home loan, you’ll need to consider a range of factors, including your individual circumstances and the return you will get from each.

Because of the interest costs you may save with early repayment, particularly when rates are higher, you may find it’s a compelling option. Weighing it up against the returns you get from other investments will help to determine the best course of action.

Like to talk?

If it’s time to get serious about paying off your home loan, give us a call or drop us an email. We can help you work out the most appropriate strategy to get rid of your debt – and check that your retirement planning more generally is in order.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.