I have a mortgage, and I want to understand how it works after you retire. I talked to the bank, and they said they wouldn’t ask me to repay it but also wouldn’t grant a new one if I wanted to downsize, which is a little disappointing.
I have questions for the members of this forum, many of whom I suspect are retired: Do you have a mortgage? How does it work with your bank? Did they question you when you turned 60 or 65? Did they give you the same sort of runaround?
Obviously, mortgage calculators are just for working people. Does anyone know of a retired mortgage calculator? Does such a thing exist?
After I retired, I applied to Valuu (owned by Swiss Post) for a mortgage.
When I got some offers, I took the best one to my bank, and they made a better offer.
The mortgage calculator is to work out your ability to pay, it makes no difference if you are retired. I know 2 people who had to sell up as when they ended a ‘fix’ they did not earn enough to get a new deal.
The bank tried to refuse to renew the morgage for my retired brother-in-law because his income was not enough. Well it was enough but there is a limit and then the bank says finish. But as it turned out the bank changed its mind so he can stay.
I already talked to the bank about this and was told its very unlikely the bank would try and force you to sell unless you stopped paying the mortgage. Can you imagine the number of properties that would be flood the market if they did this as standard procedure. Who earns 100’000 a year on a pension. I certainly won’t. In that rainer_d link zkb.ch say outright “We won’t question your mortgage. It’s yours even after you retire. That’s our lifelong promise.”
Nothing stopped you paying down the capital to an affordable amount during your working life. It’s not as if interest rates have been high for the last 17 years, you were likely paying less than 1% interest when affordability was 5% so would have been easy to reduce the loan even by 50% over those years with unusually low mortgage rates.
The lifelong promise probably refers to their standard rate for the length of the loan, you need to read the small print.
When we got our mortgage they based their affordablility criteria on our projected income at retirement.
One of the conditions was that a certain percentage (more than the minimum required by law) had to be paid off before retirement which wasn’t difficult to do.
You anyway are supposed to pay of a minimum amount so you end up with, say 33% equity assuming no increase in value.
Then you still have an affordability calculation. It doesn’t really matter whether you have income form a job or from a pension.
I know in Switzerland people don’t like paying down a mortgage, but that would be the simplest way to reduce your mortgage payments.
And people can use the mortgage calculators to do this calculation too. Another option is to buy life assurance to pay off the mortgage in case of death. Banks might be concerned about extending the mortgage if you’re not going to be around to pay it off.
The only issue with continuing the mortgage was that the preferential rate we had because he was an employee had to revert to a normal rate.
So we gave notice that we would pay off the mortgage on his last day of employment rather than continuing with a higher rate into retirement. The account manager then tried to convince us to keep the mortgage, offering a lower rate - but we were done playing their games so told him ‘nope, bye’.
Carrying a mortgage gave us no real financial advantages thanks to the blue passport, so paying off the final tranche heading into retirement was a no brainer for us. If you still have a tax advantage to keeping your mortgage our solution might not be right for you.
Should we wish to take out a new mortgage on another property we would of course need to qualify on retirement income or assets.
But as others have said, a bank is unlikely to care about your retired status unless you suddenly stop paying your mortgage.
One thing to think about, though: What about your estate planning while you have a mortgage? You should discuss this issue with your financial advisor. (Am helping a couple of friends navigate inheritance issues. One situation turned into an absolute nightmare, another settled with relatively little difficulty. Careful planning is key.)
I don’t know how it is now, but back in the day, most mortgages has clauses in them to say that the mortgage crystallised on reaching 60/65 and were payable on demand. Although I never heard of a bank actually doing it. They just won’t give you a new one as you have discovered.
I don’t think there is any thing legally preventing them from granting mortgages after 60/65, just their policy. So shop around and see if some other bank says yes.
What about paying rent in retirement? That’s much more of a risky and variable amount.
My mortgage with ZKB now represents approx 25% of property value. Am 76 and still benefit from former employer’s preferential rate. Costs nearly nothing. Intend taking the loan with me on death…