More Than Finances

Get your finances in order!


Retiring with a mortgage: Should you sell your house?

If you are thinking about retiring in the near future, but are worried about how to pay the mortgage, then maybe you should consider selling, paying the mortgage off and downsizing?

With more and more people stepping on to the property ladder later in life, it has become common to carry mortgages well into retirement. Paying off your mortgage and moving is a good idea if you feel that you can’t keep up with the monthly payments after your working wage stops.

Assess your retirement savings

Before you make the transition into retirement, you must assess your savings. If you think you’ve got enough savings to last you through retirement comfortably making mortgage payments then it’s probably best that you don’t budge. .

However, if the interest rate on your mortgage overshadows the growth potential of your savings then paying off your home loan quickly by selling your house may be the best idea for you.

Cashing in your pension early

For some, retirement promises a debt-free life, eliminating monthly payments and bills. If you want to say goodbye to your mortgage for good but don’t have the available funds. you could cash in your pension.

However, this should not be taken lightly, carefully consider the consequences if you are thinking of taking this step.

Downsize your property

Instead of eradicating your mortgage completely, you could always consider downsizing your property and moving the mortgage on to a different building.

Sell your current property to pay off the existing mortgage. Then move to a smaller property where the mortgage payments are much less. You could even apply for a reverse mortgage, available for the over 65s, which converts part of the equity of the home into cash so that the mortgage provider pays money to the borrower.

Home equity

If you are hoping to use your home equity to cover some of your living expenses, then selling up is probably not the option for you. Keeping your existing mortgage will be cheaper than paying off the rest of your housing debt and taking out a home equity loan.

The process behind making a solid retirement plan may seem daunting, and every aspect should be carefully considered before any drastic decisions are made. What is right for some retirees, may not be the right thing for you to do, but it’s good to know that you do have options.


Take Advantage of the Housing Market to Become a Landlord

One way to build wealth is to become a landlord.  As you gain rental properties, you will have more and more passive income at your disposal, which can help supplement your day job income and increase your cash flow.

Take, for instance, Matt and Jessica who bought a home 10 years ago and have been aggressively paying down their mortgage.  Now, they only owe $50,000.  Despite the market, their home has retained its value, and they have $155,000 in equity in the home.

Since they bought the home 10 years ago, they have also saved aggressively by working side jobs in addition to their day jobs—Matt is a D.J. and Jessica is a photographer.  They have banked all of their side job money and now have quite a large amount.  They have decided to take advantage of the historically low interest rates to buy a bigger home.  However, they won’t be selling their current home; they will instead rent it out and become landlords.

If you are in the market for a new, larger home, there are a variety of home loans available to you, so when preparing to buy a bigger home, you need to determine what mortgage is the best fit for you personally.  Should you take out a 5 year adjustable rate mortgage (ARM) and take the chance that mortgage rates will be lower than they currently are, or should you take out a fixed rate mortgage with the assumption that today’s rates are quite good and locking in those rates would be wise.  Using  mortgage calculators as well as talking to a mortgage broker or loan officer can help you choose the mortgage that is right for you.

With careful planning and the right mortgage, you can find yourself in the enviable position where your tenants pay for your own mortgage payment through their rent payment.  Then, you can continue to grow your own wealth and, if you are interested, buy additional properties.

While being a landlord is sometimes difficult, such as when you have tenants who cannot or will not pay or when your property needs to have expensive repairs, it also has many financial perks.  You can grow your wealth and develop a passive income stream that can give you a good return on your money for years to come.

People enter the rental market through a variety of means.  If you are thinking about becoming a landlord, consider waiting until you plan to move to a larger property.  Then, you can use your former home as your first rental property.  You will know exactly how the property has been taken care of and what condition it is in, so you will not have any surprises as you might if you were buying a new property.