INTRO
Today I have an interesting collaborative post that gives some insight into
an area of retirement that I haven't covered previously here on the blog. My
husband and I have been very diligent throughout our working lives in
putting extra payments into our mortgage whenever possible, our goal was
to have it paid out well before the 25 year lifetime of the loan. We also
didn't move often, so that reduced buying and selling costs.
By the time we reached our 50's we were debt free and that made the
decision for me to retire early a LOT easier. The pressure of being locked
into a mortgage (especially one that's at a higher interest rate than the
current ones on offer) can be very disheartening. So, today's post discusses
an option that might be of interest if you still have those monthly mortgage
payments hanging over your head.
REFINANCING YOUR HOME LATER IN LIFE: HOW TO MAKE IT A SUCCESS
As you approach later life and prepare for the costs of retirement, refinancing can provide great relief for those looking for finance options. The number of Australians retiring with debt has risen astronomically in the last few decades. Around 20 percent expect to retire with mortgages while approximately 10 percent of retirees are still paying off a mortgage. The dream of paying off your home loan before retirement is becoming much more of a common occurrence as the years go by. Refinancing your home close to or during retirement may be a good option if you are looking to cut costs, gain a better deal or consolidate debt as you prepare financially for retirement.BENEFITS OF REFINANCING LATER ON
The number one allure of refinancing is the potential to get a cheaper interest rate than what you had initially negotiated with your lender. With mortgage repayments being the largest expense for retirees, finding a way to cut that cost can make a large difference between you being able to afford retirement comfortably. Also, home interest rates have been low in Australia for the last year and The Reserve Bank thinks consumers can expect the low rates to stick around for the next 3 years. There has never been a better time to grab a better rate on your home loan.
DOES IT MAKE FINANCIAL SENSE TO REFINANCE WHEN YOU ARE OLDER?
Refinancing when you’re older can make financial sense if approached correctly. If you do manage to get a better deal, the money saved can be used to pay off your other debts as your prepare for retirement, like credit card debts. For a growing number of Australian retirees, credit card debts are ruining the tranquility of retirement. Around 26 percent of people who sought counselling from Moneycare were 55 years or older. At least half of them were seeking help for credit card debt. Reducing your mortgage rates and payments could help you get your retirement budget on track, and make more progress towards becoming debt-free in retirement.However, refinancing does not suit every person and it is important to consider all sides before committing. If you are well into your mortgage term, you may not want to start another 30-year term- particularly if you are over 50. If this is the case, you could explore applying for a 15-year remortgage, which also tends to offer a lower rate. It also helps to do your homework to ensure you get a fair deal. With interest rates peaked to jump, remortgaging may not mean you end up getting a better deal. The use of remortgaging comparison tools like a remortgaging calculator can give you an estimate of the rates and monthly repayments you can expect to get.
FACTORING IN YOUR RETIREMENT PLANS WITH REFINANCING
Another thing to think about is the kind of lifestyle and plans you have, before refinancing. Refinancing offers potential savings, but only if you can see the loan through to recoup those benefits. Most applicants who are close to retirement may want to downsize in retirement or end up moving to a more mobile-friendly home, before the term finishes. Refinancing is great for saving money over time. However, remember you will still need to pay upfront costs like closing costs. This may affect your retirement plans, especially if your retirement budget is tight.Of course, you could also think about paying your mortgage off earlier. Making extra payments on your mortgage to pay it off sooner can also save you money in the long run. If you are approaching retirement, it is a good approach to prepare yourself for when that time comes.
WHAT ABOUT YOU?
Are you planning on retiring soon but the mortgage payments are still an
issue? Have you re-financed your loans while interest rates are so low?
There's so many options available to us these days, and I think it's always
worth looking into what's on offer - especially if it could save money that
could be used elsewhere to make retirement that little bit easier.
JUST A FINAL NOTE:
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