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Welcome to Interest Only Lifetime Mortgages
The retired population is becoming increasingly astute in researching the best means of financing their retirement. They have seen the erosion of traditional interest only mortgages offered by the high street banks that previously assisted their retirement finances. We have heard the term ‘interest only time-bomb’ relating to the issue of mortgages with no repayment basis & where subsequent shortfalls will exist.
In response to demand, certain equity release providers have developed innovative mortgages for pensioners which help provide a release of equity, with the ability to manage & control the future balance by making partial repayments. The interest only lifetime mortgage has been created with consideration for the beneficiaries inheritance in mind.
In essence, the interest only lifetime mortgage enables homeowners over the age of 55 to release equity in the form of a tax-free cash lump sum by securing a mortgage on their property. They offer various equity release solutions including debt consolidation, home improvements, gifting to children, new car or whatever else are retirement needs.
Reasons for the Growing Popularity of the Retirement Mortgage
In our advisory role, we regularly witness understandable objection to traditional roll-up equity release schemes. This is due to the compounding effect of the monthly or annual interest & resultant escalating balance. Interest only retirement mortgage plans aim to address these issues by managing the future balance using repayments of interest and even capital, if necessary.
If this type of equity release mortgage is suitable for you, you will retain full ownership of your home and control over your final inheritance. By maintaining interest payments, the amount you borrow never increases and under certain schemes the mortgage balance can reduce, or even be repaid in full! Effectively, the capital and repayment equity release scheme is borne.
Unlike conventional mortgages the interest rate for this type of equity release is usually fixed for life. This gives you the peace of mind & certainty that your monthly repayments won’t increase enabling budget. Alternatively, new voluntary repayment lifetime mortgage schemes avoid the need for income verification under the Mortgage Market Review (MMR), introduced by the Financial Conduct Authority in April 2014.
Lifetime interest only mortgages run for the rest of your life & only repaid when the property is eventually sold. This could be when the last homeowner dies or needs to move into long-term care. At that point, the property is usually sold by the executors in order to repay the mortgage with any remaining balance passing onto the beneficiaries.
Here at InterestOnlyLifetimeMortgage.com we set out to explain how these various forms of lifetime mortgages work and how they can benefit homeowners over the age of 55…