Are you concerned that if you release equity you will lose all the value in your home if you live a long time? Well, this need not be the case with the growing availability of interest only equity release schemes, these schemes allow you to pay the interest each month and if you do, the debt will never increase, unlike traditional roll-up equity release schemes.
With an interest-paying mortgage, you get a lump sum and make either monthly or ad-hoc payments. This reduces, or stops, the impact of interest roll-up. Some plans also allow you to pay off capital if you so wish. The amount you borrowed is repaid when your home is sold at the end of your mortgage term.
Interest only lifetime mortgages are similar to any ordinary mortgage you may have had in the past except for four very important features
You do not make any capital repayment each month – just the interest
They have no end date and can be carried on for the rest of your life
The interest is normally offered on a fixed interest rate for life rate giving you long term stability
Reassuringly, should your circumstances change and the repayments do become too much, you can simply stop paying at any time without fear of losing your home. Any future interest would simply be capitalised on the debt in such circumstances
So providing you continue making the repayments, an interest only lifetime mortgage will help preserve much more equity in your home than any other form of equity release, whilst still enabling you to release some money from your home now. Not surprisingly they are becoming an increasingly popular way of releasing equity.
Advantages of Interest only lifetime mortgages
- Under an interest only lifetime mortgage providing you pay all payments the debt remains the same
- Interest only lifetime mortgages preserve more equity in your property for either your own use later in life or to leave to children
- Unlike ordinary mortgages, you could benefit from a fixed interest rate for life, giving you security of budgeting as the amount due will not change for the rest of your life/lives.
Disadvantages of Interest only lifetime mortgages
You are agreeing to make monthly repayments for the lifetime of the mortgage – Thus increasing your expenditure compared to having no monthly repayments under a roll up lifetime mortgage
Lending or personal circumstances may change resulting in you finding it difficult, if not impossible, to meet ongoing monthly repayments, when either you or the mortgage lender has the right to switch your plan over to roll up basis meaning you may still see the equity in your property reduce overtime
Should you decide to switch some or all of your interest over to a roll up basis (or because you fail to meet monthly repayments – the lender automatically switches your plan over to a roll up basis), you will incur a slightly higher interest rate and an administration fee for switching it over
What could you do with a lifetime mortgage?
The uses for a Lifetime Mortgage are endless, as long as it’s a legal you can use the money for what you want, here some typical examples:
Family – You could give family members their inheritance earlier, which could help with the deposit on their first home, for example. Doing this would reduce the value of any future inheritance. If you give the money away, the recipient may have to pay inheritance tax in the future.
A holiday – The holiday of a lifetime for you, with friends or for the whole family.
Interest-only mortgage – A lifetime mortgage could be used to repay the balance of an interest-only mortgage. You may have to pay an early repayment charge to your existing lender.
Income – It could supplement your pension income and improve your general standard of living.
Debt– You could relieve the pressure of monthly repayments and pay off any outstanding debts, although it’s important to think carefully about securing a debt against your home.
Home improvement– Many people use a lifetime mortgage to improve their home or make it more manageable so they can stay in it for longer.
How we can help you
- No Negative Equity Guarantee
- No monthly payments, or optional payments
- No need to move home
- Choose from a lump sum, or supplement your income.
- Available from the age of 55 years and upwards
- Protect some equity for inheritance
- We only recommend lenders that are members of the Equity Release Council (formally SHIP)
- Home Reversion and Lifetime Mortgage Schemes available
You should discuss with your family and intended beneficiaries to your Will that you are considering an equity release plan.
You should also seek independent legal advice.
Releasing equity from your home is generally seen as a long-term commitment it is not an ideal for short-term borrowing.
Be confident, our advisers are here to help you make an informed decision and will tell you straight away if equity release isn’t right for you, you may even be eligible for a more conventional type of mortgage
This is a lifetime mortgage or home reversion scheme. To understand the features and risks, ask for a personalised illustration.
There will be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate that it will be £1995 or 1.5% of the loan