Experts give advice on paying off mortgage
Experts have noticed that more Kiwis are dealing with lifelong mortgages, Stuff.co.nz reports.
John Bolton, founder of mortgage broking firm Squirrel, pointed out that 95% of new home buyers are now taking out loans they’ll be paying over 30 years.
Bruce Patten, adviser at Loan Market, said he saw a high percentage of clients aged over 55 who still have home loans – some for their own homes while some for rental properties. As a result, banks are becoming more cautious, so people applying for new loans have to explain how they would pay them off if the repayment schedule would take them past age 75.
"Most people when they take a loan out plan to have it cleared by 55 or 60 but their circumstances, bad business decisions, or a marriage split can make it more of a challenge,” Patten told Stuff.co.nz.
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The experts offered advice to help homeowners pay off their mortgages – something that brokers could share to their clients to lessen their worry.
They advised homeowners to downsize, funnel all extra income into paying off debt, either negotiate with the bank to get the best interest rate or shift to a rival bank willing to offer a better deal, get a boarder, or sell the house and rent instead.
The experts also emphasised the importance of maintaining contributions at KiwiSaver at a level that the homeowner’s employer and the government will match – usually 3% of the person’s income or $1,042 a year, whichever is higher.
Read more: Is paying off your mortgage early worth it?
A reverse mortgage may also be an option as it allows the homeowner to swap a loan they’re paying repayments on to one without repayments. The only drawback is that it can increase quickly and erode the equity a homeowner has in their property as they’re not really paying off what they owe.
