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Are you thinking about a new mortgage for your retirement? It is good to know that there are often more options than you might think. At the same time, different rules apply compared to when you are still working. Whether you want to move, adjust your mortgage, or tap into your home equity, having a clear overview is essential at this stage. In this article, you will read about what to look out for and what your options are.
Taking out a mortgage with a pension income is perfectly possible in many cases. Lenders primarily look at your future, fixed income. This means they assess:
• The amount of your pension income
• Whether this income is stable and lifelong
• Whether your costs remain affordable after retirement
In practice, we often see that people can borrow less than during their working lives. However, that does not have to be a problem, especially if you have built up capital or home equity. Have your mortgage options calculated by one of our specialists.
Your retirement age has a direct impact on your maximum mortgage. Are you still before your retirement age? Then calculations are usually based on two scenarios:
• Your current income
• Your income after retirement
The lender then calculates based on the lower income. This can mean that your maximum mortgage may turn out to be lower than expected. Are you retiring soon or are you already retired? Then your application will be based entirely on your pension income. That is exactly why it is important to gain a clear understanding of your financial situation in advance.
Before you apply for a mortgage, it is wise to request your pension statement. This document provides insight into your expected income after retirement. Via www.mijnpensioenoverzicht.nl, you can see, among other things:
• Your accrued pension
• Your expected gross monthly income
• Your state pension age and benefit
However, we find that many people struggle to interpret this summary in practice. Terms, amounts, and assumptions are not always clear.
Want to know the maximum you can borrow with your pension income? Review your pension statement with a mortgage advisor from Van Loon. This ensures you are working with the correct figures and gives you clear insight.
An interest-only mortgage after retirement is quite common. The main advantage is that your monthly costs are lower because you are not paying off the principal. However, pay close attention to the following points:
• You are not automatically paying off the mortgage
• At the end of the term, you must repay (part of) the debt
• Not every lender accepts a large interest-only portion
Furthermore, this topic is constantly evolving. For instance, the DNB has previously indicated that it wants lenders to tighten their policies on interest-only mortgages. This impacts your options.
In our experience, this type of mortgage can be a good fit for retirement, provided there is sufficient security—for example, if you have home equity or savings to fall back on.
Do you have a home with equity? This provides extra financial flexibility. Equity is created when your home is worth more than your outstanding mortgage. You can utilize this value in several ways:
• To supplement your income
• For renovations or sustainability improvements
• For the purchase of a new home
In some cases, by making smart use of your equity, you can better align your housing costs with your situation, for example by lowering your monthly payments or creating extra financial breathing room.
Important to note: equity is not immediately available as cash. You access it through an (additional) mortgage or another structure, where your monthly costs and risks are reassessed.
In some situations, there is a temporary drop in income, for example when one partner is already receiving the state pension (AOW) and the other is not. This can affect the calculation of your maximum mortgage. At the same time, we see that lenders are sometimes more flexible with this, as the income will rise again in the short term. This varies by provider and requires a careful assessment.
Want to know what is possible in your situation regarding a mortgage in retirement? Schedule a no-obligation appointment with one of our advisors in Breda, Dongen, Leiden, or one of our other locations. We will provide a clear mortgage calculation and show you exactly what is possible in your situation, both now and in the future. Would you prefer a digital appointment? That is, of course, no problem at all.
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