More than half a million people aged over 50 years could be forced to sell their properties to pay off interest only mortgages, new research has suggested.
Saga Personal Finance has suggested that many people are facing the burden of mortgage debt as they enter retirement – and some of them have no way of making up the shortfall.
Four in ten over 50s are paying off a mortgage worth an average of £49,000 according to the research, while around 900,000 people in their 70s still face an average mortgage bill of £38,000.
This means those aged over 70 years in the UK are facing a mortgage debt of around £35.2 billion; making money management an incredibly difficult task.
Interest only mortgages provide endowment issues
It is a similar story for 6.3 million over 50s that have interest only mortgages, as two thirds of them said an underperforming endowment would not cover the bill.
Some people reported a shortfall of more than £42,000 and admitted they may even have to sell their properties to cover it.
A third of people would not need to take such drastic measures but for everyone else facing up to the possibility that their dream retirement may not go as planned is a reality. In fact, two thirds of over 50s have already made alternative plans to pay off mortgage debts, using a number of different options.
Finding ways to clear mortgage debt
Some said they would use their savings to cover the debt while 22% said they were making capital payments to reduce the money they owed and 18% would use other investments to make up the shortfall.
Another option taken by 10% of people was to extend the mortgage to allow more time to pay it off but more than one in ten people admitted they have no way of bridging the gap.
Releasing equity could help people overcome their situation and enable them to enjoy their retirement, although it should be given plenty of careful thought.
Retirement is seen as a period of life when people should be able to relax and enjoy what they have previously worked hard for but this can prove difficult if mortgage payments or other debts intervene – showing the need for careful financial management throughout life.
Budgeting with a prepaid card
Saving from an early stage can help boost pension pots while it can also ensure that funds are available to cover unforeseen costs in retirement.
Managing spending throughout life can be made easier with the use of a prepaid card, as it allows for careful fund management.
Only funds on a card can be spent and the lack of a credit facility means debts cannot be built up – ideal for those looking to budget carefully.
The cards can be used in a similar fashion to a credit or debit card for both online and in-store purchases, as well as for withdrawing cash at millions of ATMs across the globe.
