Mortgage blog: 1 in 3 over-50s may have to sell their home to repay their home loan debt

Posted 20 November 2014

New research has revealed that one in three over-50s could face the prospect of having to sell their home as the only way of paying back their mortgage debt. The study by Saga has found that underperforming endowment policies and an increase in the number of interest-only mortgages mean that thousands of homeowners approaching retirement have no means of paying back their mortgage.

With two in five over-50s paying off a mortgage many homeowners may be forced to sell their home in order to repay their mortgage.

Two-thirds of endowments won’t be enough to repay the mortgage

The research from Saga has found that two thirds of borrowers with an endowment mortgage say that their policy will not clear their mortgage, leaving them with a debt when their mortgage term ends.

The survey found that two in five over-50s are still paying off a mortgage worth, on average, £49,000. Saga says that a third of those questioned would need to sell their homes in order to clear the debt.

When asked how they would clear the shortfall on their endowment policy, a third said they would have to use savings while 22% said that they had already started making repayments to their home loan to reduce the debt.

Worryingly, more than one in 10 respondents admitted that they had no way of bridging the funding gap.

Equity release could be a solution

With many thousands of borrowers facing a substantial mortgage debt, the prospect of selling their home is very real. However, there could be alternative solutions to help older borrowers stay in their homes.

Jeff Bromage, chief operating officer of Saga Personal Finance, explains: "Being saddled with mortgage debt well into your retirement is far from ideal as it means keeping an eye on the coffers when you should be making the most of life. A growing number of people are turning to equity release in order to avoid selling their home; upping sticks is probably the least-favoured option for many facing a shortfall, as their home is so much more than bricks and mortar and will hold so many happy memories.

"If you're over 55 and a homeowner, equity release could be a solution. It gives you access to money tied up in your home, giving you peace of mind and the freedom to enjoy your retirement properly."

While equity release may be an option, experts are urging homeowners to take professional advice.

Keith Osborne, editor, says: “There are lots of ways that you can tackle an endowment shortfall, clear your mortgage debt and remain in your home. The earlier you speak to an advisor or to your lender, the better. This will give you more time to put a plan in place to reduce the shortfall and to help you stay in your home.”

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