Can I Convert My Interest Only Lifetime Mortgage Plan into a Roll-up Equity Release Scheme?September 25th, 2013
Interest Only Lifetime Mortgages are secured loans that have no fixed term and means they can go on until the end of your life or until the property is sold for some other reason. You are free to make full or partial interest repayments each month and thus have more control on the loan balance. Let’s take a look at interest only lifetime mortgage roll-up options.
The main reason why interest only lifetime mortgages have become so popular within the equity release sector is that they can offer great flexibility and beneficiary protection. They can be suitable for people who can afford to make monthly interest repayments and wish to have more control on their loan.
But it is a common misconception that interest only lifetime mortgages are only suitable for people who can afford to make interest repayments now as well as in the future until the mortgage ends. The fact is that it is possible to switch an interest only lifetime mortgage to a roll up mortgage at any time, should one feel that they are unable to afford the payments, or that a roll-up equity release would be more suitable for any other reason.
Stonehaven’s Interest Select Plan and More2Life’s Interest Choice Plan are the two interest only lifetime mortgages currently on offer, and both allow clients to convert their mortgage to a roll up mortgage at any time, and with no extra fees. Both products allow clients the choice to repay between £25 to the full interest amount each month, making repayment flexible and convenient.
Stonehaven’s Interest Select Plan has a three missed interest payment policy – whereby you are allowed to miss up to three monthly interest payments without any consequences and can continue making payments after this break. However, if you miss more than three payments the mortgage is automatically converted to a roll up lifetime mortgage.
As mentioned earlier, clients can switch to a roll up mortgage at any time by contacting the provider and proceeding forward with the switch. It is also possible to pre-arrange a switch at the future date, so that you can plan repayments for a certain period and switch to a roll up after that to coincide with a particular event such as retirement.
The unique thing about an interest only lifetime mortgage is that the interest rate remains fixed throughout the term of the loan, and this remains the same even if you switch to roll up. However, if the switch happens because you missed payments rather than voluntarily, a 0.2% rise in interest rate will be applied to the conversion with Stonehaven.
By incorporating the roll-over switch facility, then it also protects the mortgagor from ever getting into arrears, which with a residential mortgage could result in creating a poor credit history, or even worse repossession of your home. With the new breed of interest only lifetime mortgages, this can never happen with the roll-up lifetime mortgage switch option.