Planning for retirement: how to pay your mortgage off beforehand

With many home buyers now being in their late 20’s to mid 30’s by the time they buy their first home, it’s important to take into account where a 25-30 year loan term will place you when buying a home.

As you approach retirement, the last thing you want hanging over your head is a mortgage payment. Achieving a mortgage-free status by retirement not only provides financial security but also allows you to enjoy your golden years without the burden of monthly loan payments.

There is good news, with careful planning and strategic financial management, this goal is within reach for many individuals.

When picturing a mortgage-free retirement, it's essential to assess your current mortgage situation. If you're already on the path to paying off your mortgage and anticipate having a smaller balance by the time you retire, you're in a favourable position. By this stage, a significant portion of your mortgage payments are likely going towards reducing the principal rather than the accruing interest.

One effective strategy to pay off your mortgage quicker is to align your repayment timeline with your retirement goals. Start by determining the age at which you aim to retire and calculate the number of years remaining until that milestone. For instance, if you plan to retire in 20 years, strategize to eliminate your mortgage within that time frame.

To achieve this, consider restructuring your remaining loan balance to be paid off over the designated period, ensuring that your repayments are adjusted accordingly. By committing to this plan, you not only set a clear target, but also actively work toward achieving it.

Additionally, keeping an eye on what the markets and interest rates are doing and using this to your favour, can also help you pay things off sooner. Should interest rates decrease, maintaining your current repayment amount can effectively shorten the loan term, bringing you closer to your goal.

If you have KiwiSaver then this is another thing you can factor in. Here at Loan Market Queenstown we can advise you on the current set up of your KiwiSaver to ensure that it is in the correct fund to help you achieve those future goals. Your mortgage and KiwiSaver align well, so ensuring they are both working towards the same goal is key!

While retirement can seem like a long time off, it’s important to start planning as soon as you can. Not only does it provide financial freedom in your later years, but it also offers peace of mind and greater flexibility to pursue your passions and interests. By taking proactive steps today, you can help to pave the way for a secure and fulfilling retirement tomorrow.

To discuss taking out a loan or determining the best structure of your current loan or KiwiSaver, then get in touch with us by clicking here, and we’ll be in touch. Alternatively you can call us on 03 441 1307.