Which Mortgage Lenders Offer an Interest Only Lifetime Mortgage in Retirement?September 25th, 2013
Equity release schemes and roll-up lifetime mortgages may be a viable way for homeowners to get an additional income or a capital amount for one off expenses. With such schemes interest rates tend to be higher than traditional mortgages. Additionally, there is the compounding of the interest which means that it is common for people to potentially lose all their inheritance, thereby leaving nothing behind for the children and family. For those who feel this sounds all gloom and doom maybe reassured to know an alternative is available. Instead, why not consider an interest only lifetime mortgage as a great option for those who wish to raise funds against their property, while also protecting their inheritance.
The mechanics of an interest only mortgage are simple in concept. Interest is paid monthly and the original balance on the loan remains exactly the same as long as the monthly payments are maintained. The capital sum borrowed is eventually deducted from the value of the property when it is sold. Obviously, there are certain criteria that must be fulfilled. For instance the value of the property must be above a certain minimum threshold to qualify and a minimum age of 55 applies. While interest only lifetime mortgage schemes are proving to be a very popular option for financial planning during retirement, there aren’t actually many lenders that provide this as an option.
The current trend among traditional lenders is to shy away from lending beyond 75 years. The Halifax Retirement Home Plan which provided an interest only lifetime mortgage solution for pensioners has unfortunately been withdrawn from August 2011. All new residential mortgages from Halifax must now end by the time you attain age 75.
In the past, lenders would automatically renew interest only mortgages; however, with increasing pressure from regulatory authorities, particularly the FSA, on products aimed at the elderly and young families, lenders are beginning to reign in mortgages upon expiry of standard terms or should the applicant wish to borrow extra cash.
Interest only lifetime mortgages have proven to be a good option for pensioners, and some providers do offer niche interest only equity release schemes. With the help of a specialist financial adviser, it is possible to find a suitable product depending on your individual circumstances. Let us consider some options for those interested in an interest only lifetime mortgage.
The most popular option at the moment is the Stonehaven interest only equity release scheme. Stonehaven equity release schemes start at 55 years and can be taken out on properties with a minimum valuation of £70,000. These schemes are available in England, mainland Scotland and Wales. The interest rate on the equity release scheme is secure, with the lowest interest being fixed for life at 6.08% As interest is paid monthly, the interest does not accrue on it and the balance remains the same.
Another option to look at is traditional lenders who consider lending beyond 75 years of age and are subject to certain stringent criteria. For instance, lenders will need to be convinced about the applicant’s financial ability to support the mortgage during old age. Needless to say, this type of loan can be difficult to obtain. As far as an interest only lifetime mortgage goes, a new option has become available from Hodge Lifetime.
The Hodge Lifetime Lump Sum Lifetime Mortgage is a unique product in that while it is set up as a roll-up equity release, 10% of the interest can be repaid annually without penalty. It may therefore even become possible to reduce the balance owed, as paying 10% off the balance per annum is over and above the necessary level to keep benefits. In order to understand the interest only lifetime mortgage market and find an option that suits you, it is advisable to seek help from a specialist financial advice such as Equity release Supermarket on 0800 678 5159.