Can I Make Any Partial Repayments?
Equity release schemes have traditional involved no monthly payments and therefore the interest would roll-up and compound, resulting in the balance increasing over time. However, not every retiree wishes for this as it can erode the value of their estate & ultimately the final inheritance of the children. To prevent this happening lifetime mortgage lenders have now developed flexible equity release schemes whereby this interest and even the principle sum can be controlled by way of managed repayments.
There are currently three ways the equity release balance can be controlled; by making monthly mortgage payments of interest only, a capital & repayment basis with some lenders that will offer a pensioner mortgage, or by voluntary repayments which can be upto a maximum level of 10% of the original capital borrowed.
The monthly interest only lifetime mortgage option will repay the interest only & therefore result in a mortgage balance that will remain level for the duration that payments are maintained. However, should lenders provide a capital & interest mortgage for a set number of years, then the repayments will be calculated by the mortgage lender & will reduce the balance to zero of a number of pre-agreed years.
Finally, voluntary repayment plans from Aviva & Hodge Lifetime can offer either of the above two options, by way of the consumer choosing how much they wish to repay. This could be some or all of the interest charged, or even the full 10% permitted which with Aviva’s Lifestyle Flexible Option will allow the full repayment of the scheme over a 16-17 years period.