Paying off the mortgage is the dream of many homeowners, but what will you do with all that extra money once you’re free and clear? Well, Saga has investigated, and it seems that many over-50s choose to splash out…
Pay rise put to good use?
The study found that many over-50s choose to spend their mortgage repayment ‘pay rises’ on vacations, home improvements and presents for their children – and with those who find themselves mortgage-free reporting an average monthly income increase of £322, it’s no surprise that they feel in the money.
In fact, 45% paid for home improvements and approximately 40% spent the money on holidays, while 27% decided to buy a new car. Impressively, half put some of their newfound funds into a savings account, but it seems that many aren’t taking a long-term view of the whole situation, with just 23% using the cash to improve their retirement savings.
Pensions not a priority
Later life income is becoming an increasingly hot topic, so it’s disappointing that so few who own their home outright consider putting that extra cash into a pension. Many could build a sizeable pot, too: the average retirement age for those studied came in at 62, but they were able to pay off their mortgage at an average age of 55, providing a seven-year period of mortgage-free income.
When you factor in that pension investments attract tax relief, you’ll get an idea of how big a pension fund those respondents could have achieved if they’d put their new-found cash into a pension. Indeed, we have calculated that if homeowners had funnelled 100% of their monthly mortgage repayments into a pension for those seven years until retirement, they could have saved an additional £40,550 towards their retirement nest egg!
Diverting some – or all – of your freed-up income could well pay off in the long term, and could mean that you’re able to retire sooner than planned.
Maximising your finances in the run up to retirement is vital to make sure you have a comfortable life once work is over, so it makes sense to save as much as you can into a pension.
Restructuring your mortgage or switching to a better deal can bring the watershed of full home-ownership closer. Speak to Frost Financial today and let one of our friendly advisers find the best mortgage deal for you.