Retired and we still have a mortgage: Is it time to downsize?

We also have additional debts of 15,000 and savings of 60,000. Recently our property was valued at 340,000, the average of four estate agents' valuations. Although we have sufficient joint incomes to fund our current lifestyle, we have very little opportunity to add to our savings.

Please advise if we should be concerned about our financial situation. Should we be seriously considering downsizing, which ideally we would prefer not to do, or perhaps equity release?

WA, Inverness

A IT is impossible to give specific financial planning advice without detailed information regarding your personal circumstances, but here are my thoughts based on what you have told me.

The difficulty with your present situation is that you have more debt than savings. There are a number of financial planning solutions I would want to discuss with you, some more technical than others. I would probably recommend repaying the outstanding debt of 15,000 from your savings as the interest rate being charged on the loan will no doubt exceed that being received on your savings.

Having cleared your additional loan, I would advise you to seek independent mortgage advice around the possibilities of transferring your current interest-only mortgage either fully or partially to a capital and repayment mortgage. The benefit of this type of mortgage would be that you are actually repaying some of your outstanding mortgage loan. In addition, you may want to consider using your existing savings to reduce the mortgage loan further and consider making mortgage overpayments from income.

This is only an option where the increased monthly repayments are affordable. Where any increase in expenditure cannot be sustained, there are a number of ways to realise a cash lump sum and/or income.

The obvious choice is the one you have alluded to, which is to downsize. This would ensure that you kept full ownership of the new property, while freeing up the necessary funds to repay your debt and hopefully leaving you with a suitable emergency fund.

There are a number of alternative products available to you that will make it possible for you to raise cash lump sums or a regular income from your existing property. You will need to seek independent financial advice from firms that can recommend these types of products and are authorised to provide this type of advice by the Financial Services Authority.As this is a specific area of advice, not all firms are able to advise on this type of product.

• Christian Poziemski is a wealth manager within the private client and financial services department of HBJ Gateley Wareing

• If you have a question you need answered, write to Jeff Salway, The Scotsman, 108 Holyrood Road, Edinburgh EH8 8AS or e-mail: [email protected].

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