Property and retirement: Is my home still affordable in retirement?
For most people, income decreases by around 30 to 40% on retirement. Therefore, home owners should consider the financial affordability of their property in old age early on. Even if affordability is no issue: a property ties up capital which could be used for something else perhaps - an apartment suited to your age, the improvement of living standards or the realisation of a life dream. In any event, it is worth looking into a sale and the potential realisable proceeds.
What you need to know about a mortgage and retirement
Once retired, the same mortgage affordability criteria apply as when working: The burden of the interest, capital repayments due, and running costs of the property should not exceed a third of income. Home owners should thus discuss their situation with the bank early on. You are at an advantage if your mortgage is mostly repaid by the time you retire.
Is it worth keeping your home?
You have grown attached to your home over many years. It is understandable that many home owners primarily focus their energy on the question of how to fund their home after retirement. Increasing repayments, renting or a reverse mortgage can be solutions. The actual pros and cons of staying in your home are somewhat forgotten. Often it is helpful to take a step back and look at the bigger picture. Check your situation: our property guides can help you with this process.
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Frequently asked questions (FAQs)
What happens if I can’t afford the mortgage when retired?
If you can’t afford the mortgage once retired due to a decrease in income (pension), a forced sale may be necessary. This is because pensioners for the most part are not offered second mortgages, and in fact, usually a bank demands that a mortgage is paid back before retirement.
Can I sell a property with a mortgage in place?
You can sell a property even if the mortgage is not fully paid back; the mortgage is generally transferred by the bank to the buyer. There is one condition, however: the bank must accept the buyer, so the mortgage must not be too much for the buyer.
When is it worth me keeping my house or flat?
Nothing will stop you staying in your own home, if: You are not interested in change. If your current situation is still affordable and appropriate even with potential age-related issues (garden maintenance, accessibility, security etc.). If the mortgage is fully paid back or will definitely be manageable once retired. If the financial and personal strain of any necessary renovations or ongoing maintenance remains manageable. And if you don’t need any additional capital for living costs or don’t want more money for an increase in your living standards in retirement.