How Retirees Can Increase Their Mortgage to Access Liquidity: A Step-by-Step Guide

How Retirees Can Increase Their Mortgage to Access Liquidity: A Step-by-Step Guide

In retirement, it’s not uncommon for income to decrease while living costs may rise. One way to access additional liquidity is by increasing the mortgage on your property. However, many retirees are unaware that they can use their property to create financial flexibility without having to sell it. In this blog post, we’ll explain how this works and guide you through the process step by step.

Why Increasing Your Mortgage Can Be Beneficial for Retirees

Increasing the mortgage offers several advantages:

• Access to Capital: You can free up capital from your property without selling it.
• Low Interest Rates: With current low mortgage rates, increasing your mortgage may be cheaper than taking out expensive consumer loans.
• Flexibility: The released capital can be used for various purposes – whether for renovations, supporting family members, or simply covering ongoing costs.

Requirements for Increasing the Mortgage

To increase your mortgage as a retiree, certain conditions must be met. Banks place importance on the affordability of the mortgage and the current value of your property. The following guidelines typically apply:

• Loan-to-Value Ratio: The mortgage should generally be less than 65% of the current market value of your property.
• Affordability: Monthly mortgage interest and additional costs should not exceed 33-50% of your annual income. This includes not only your pension but also potential pension fund withdrawals, investments, or other sources of income.
• Creditworthiness: Even with lower income, your creditworthiness is still a factor. Banks will assess your ability to make the monthly payments.

Step-by-Step Guide to Increasing Your Mortgage for Retirees

1. Assess the Current Value of Your Property

The first step is to determine the current market value of your property. The value may have changed since the original purchase or the last mortgage adjustment. Many banks offer a free evaluation, or you can hire a real estate expert for an accurate appraisal.

2. Calculate the Potential Mortgage Increase

Based on your property’s market value and the existing mortgage, you can calculate how much additional capital you could release through a mortgage increase. For example, if your property is worth 1 million francs and your current mortgage is 500,000 francs, you could – depending on the bank – raise an additional 150,000 francs, as the maximum loan-to-value ratio is often around 65%.

3. Check Affordability

Next, ensure that the additional mortgage costs are affordable. Banks often use a 5% interest rate in their calculations, even if actual rates are lower, to account for future rate fluctuations. Ensure that your total housing costs (mortgage, utilities, and maintenance) do not exceed 33%-50% of your income.

4. Contact IMMANO and Negotiate the Mortgage

Once you know how much capital you need and confirm affordability, you can contact your bank or a mortgage advisor. You should have the following documents ready:

• Proof of retirement income (AHV, pension fund, any other income)
• Asset overview (bank accounts, investments)
• Property valuation

Your mortgage advisor will review the different financing models available that best suit your situation. It’s worth gathering several offers to secure the best conditions.

5. Finalize the Contract and Receive the Funds

If the bank approves the mortgage increase, a new mortgage agreement will be drawn up. Usually, the capital will be paid out as a mortgage loan to your account. You are free to decide how to use the money – whether for renovations, travel, debt repayment, or supporting family members.

Conclusion: Creating Liquidity in Retirement by Increasing Your Mortgage

For retirees, increasing the mortgage is an attractive way to create liquidity without having to sell their home. With careful planning and the right approach, you can benefit from the current low interest rates while ensuring that your monthly payments remain manageable.

Free Mortgage Check for Retirees

Would you like to know if a mortgage increase is an option for you? Contact us for a free mortgage check. We offer non-binding advice and show you how you can use your property to create financial flexibility. Don’t hesitate – we’re here to help you find the right solution for your retirement!