How you can manage the mortgage debt on your home

There was a time when retiring with a mortgage debt was almost unheard of.

Most people were lucky enough to buy a house younger in life and have it paid off by retirement.

But an increasing number of older Australians are retiring with mortgage debt, and as a white paper published by REST Industry Super shows, as many as 1 in 5 of us expect to retire with a mortgage debt.

As Mortgage Choice explains, more of are taking on debt later in life and buying houses later in life, leaving us with more debt as we approach retirement.

It also comes down to changes in property prices, with research showing some people who choose to downsize in retirement are having to take out a mortgage when they sell their family home to make up the short fall. And of course, having adult children living with you can also drain your financial resources.

So, what can do you do about mortgage debt and your retirement?

Well, Mortgage Choice has provided Starts at 60 with some simple tips for how you can both minimise your mortgage debt ahead of retirement, and manage your mortgage debt when you retire.

Minimising your mortgage debt ahead of retirement

1. Pay down not-tax deductible debts

According to Mortgage Choice, your first priority should be paying down any non-tax deductible debts such as credit cards and car loans with high interest rates. The theory is that the faster you pay off high interest debts, the quicker you’ll be able to free up your cash flow to pay off your other debts, such as a mortgage.

2. Speak to a financial adviser

It’s the advice we hear often, but how many of us actually use a financial adviser? Finding a financial adviser you trust can help you as you approach retirement. Not only will an adviser be able to give you tups about paying down and paying off your debts, they’ll be able to help you construct a budget. 

3. Create a budget and stick to it

It’s never too late for anyone of us to create a budget. By working with a budget, you’ll be able to keep track of all your incomings and outgoings and know exactly what you make and spend each month. A budget will help you work out what you might be able to cut back spending on, and how you might be able to put extra money towards your debts.

Managing your mortgage debt in retirement

1. Stick to your budget

Remember the budget you set yourself before you retired? Well, revisit and update it to take into account your financial situation in retirement. That way you’ll be able to work out what debts you how remaining, what income you have, such as the pension or superannuation, to pay off you debts and how much your day-to-day expenses are.

2. Downsize your home

As Mortgage Choice pointed out, sometimes downsizing can leave you with a mortgage debt. However, they also advise that downsizing can allow you to sell your home, pay off your remaining mortgage debt and buy a smaller, less expensive home with the profits. If you choose to downsize, however, you should make sure you do the research. It’s important to shop around, make sure you get the best price possible for your home and ensure you make the right financial decision for your current and future financial needs.

Did you retire or expect to retire with a mortgage debt? How did you manage your mortgage debt?