Millions of homeowners will be mortgage-free later than they expected, according to new L&C research, but there are plenty of things you can do to pay off what you owe sooner.
Around 4 million people, equivalent to around a third (32%) of current mortgage holders, believe their estimated repayment age will be older than they originally thought.
Those aged 55 and over on average think they will still have a mortgage into retirement and will only have fully repaid what they owe once they reach the age of 68. In contrast, the average 18-34 year old believes they will be mortgage-free by the age of 51, whilst the typical 35-54 year old thinks they will have paid off their mortgage by the age of 58.
David Hollingworth from L&C said: “What is becoming increasingly clear is the market has changed, people are facing up to the fact that they are going to have their mortgage for longer. It’s great to see such an optimistic younger generation who think they will be debt free by the age of 51, however the reality for many older borrowers is that they will be paying off their mortgage into retirement and beyond, which is clearly a shock.”
Be mortgage free sooner
The good news is that you may be able to pay off your mortgage early if you manage your finances carefully.
Our research found that nearly a third of customers (31%) are currently sitting on their lender’s Standard Variable Rate (SVR), despite the fact they may be able to make substantial savings by switching to a better deal. If you can remortgage to a lower rate, you may be able to afford to shorten your mortgage term at the same time, allowing you to be mortgage-free sooner.
Making regular overpayments can also help you pay off your mortgage more quickly. If you’re currently tied into a fixed, tracker or discounted deal, most lenders will allow you to pay off up to 10% of your mortgage balance each year without penalty. Before making any overpayments however it’s a good idea to check what your lender will allow you to do.
The younger you can start making overpayments the better, especially as many people take a dip in income once they retire and so may not be able to continue overpaying at this point.
Mr Hollingworth said: “Given people are worried about how they might afford repayments as they get older, proactively taking action now could be the difference between paying off your mortgage before you retire or not.”
When will you be mortgage-free?