Options are limited, but there are mortgage lenders that will still lend on an interest only basis in retirement. The problem is that most conventional lenders will only lend for a fixed term of years. This leaves the issue of what to do after this term expires, as there are such limited options, post retirement. Consider exploring your sources for finding such products such as Stonehaven Interest Select range, more2life’s interest choice or Hodge Lifetime’s Flexible repayment plan. These plans are typically known as interest only lifetime mortgage schemes.
Finding Proper Help for Decision Making
Many conventional mortgage lenders will only offer a term of up to the age of 70 or 75 and usually with high street lenders this must be on a capital and repayments basis. For many this would be too expensive as the term will be short in order to pay off the amount borrowed, if they are already in retirement. However, a handful of lenders will lend and these are best sourced by finding an independent equity release adviser who specialises in retirement pensioner mortgages.
Companies such as Compareequityrelease.com and Equity Release Supermarket are specialists in this market and do not be afraid to contact them on 0800 678 595. However, there are exceptions to this rule, albeit not perfect criteria for all.
Stonehavenequityrelease.info is another resource where you can find information on the different equity release schemes available. Two of the most common equity release schemes are roll-up and interest only lifetime mortgages. In order to get an interest only lifetime mortgage, it is a good idea to speak with an independent equity release adviser as previously mentioned. Stonehaven were the forerunners of the interest only lifetime mortgage concept over 7 years ago. This forward thinking company has had its Interest Select Range almost matched by more2life’s Interest Choice plan with the option to repay anything between £25pm upto the full amount of interest charged per month.
What Advisers Provide
The independent equity release adviser will discuss with you your options after completing a full financial factfind exercise. This will gather the hard facts the adviser needs to assess your current situation. By then qualifying your hopes & fears which is commonly known as the ‘soft’ facts, the adviser can then paint a picture of your situation now & where you objectively want to be in the future. This will then have provided sufficient information for the adviser to be able to provide an equity release recommendation. In order to get an interest only lifetime mortgage, your home may have to have so much equity in it. Also, you may have to borrow a minimum amount, usually £10-£15,000.
When speaking with an independent equity release adviser, he or she will tell you that you have the option of a fixed or variable rate. To make sure that your rate doesn't go up to often, you may be better off with a fixed rate. Also, with an interest only lifetime mortgage, the adviser will give you an idea on how much your monthly payment will be by producing a Key Facts Illustration. This is a mandatory requirement of any financial adviser as they have the rules of the Financial Conduct Authority to meet.
An interest only lifetime mortgage allows the balance to remain the same. This is because you are making monthly payments each month of the interest charged. No capital element is touched, unless you select one of the newer types of equity release plans such as the Hodge Flexible Lifetime Mortgage plan which allows the repayments of upto 10% pa of the original capital borrowed. These new type of equity release schemes don’t offer the same discipline by way of monthly payments, but offer the flexibility of allowing upto two payments per year, if required. For many this appeals more than regular payments, as they can decide when to pay, if at all.
An interest only lifetime mortgage will continue to run as long as the borrower requires the loan. When you pass away or leave the home permanently, the loan outstanding will be repaid by the lender. Also, by paying the interest it allows the home to be inherited in its entirely, unlike an equity release roll-up loan where the balance increases, reducing the inheritance accordingly.
When Interest Only is not the Solution
There are going to be times when interest only product are not the best for you and your family. Obviously making monthly payments ensures a better end result; however, you may not have the age or income to make this happen.
To ensure your retirement is better than it would otherwise be, consider the other options available to you. You have the choice of selecting home reversion, lump sum, or drawdown equity releases.
- Lump sum equity release is no different than the interest only plan in terms of age, qualifications, and gaining a sum of money. It differs in that interest compounds onto the principle rather than being paid off. It requires no payment each month. An affordable option, but one with ultimately lower or no inheritance for the beneficiaries at the end.
- Drawdown equity release is different because you take a smaller lump sum in the beginning and then you can access funds as you wish via the creation of cash reserve facility. The interest charged is only on the money you withdraw. You still pay at death or on entry to a long term care facility; however, the payment is usually less, because the interest is less. This could potentially leave inheritance behind like interest only lifetime mortgage plans.
- Home reversion is the best solution if you do not mind selling your home prior to death and guaranteeing an inheritance to your family. You sell a part of your home, gain funds for spending as you wish, and then the remainder of the home is sold upon death with the funds given to your family based on the remaining unsold percentage of the house remaining.
The different options can be located at places offering independent comparison websites. By examining these different websites and speaking with qualified equity release advisers you should be able to find a product that is affordable to you. Your family should be a part of the decision making too, as they will ultimately be affected by your decision to sell your home in return for money now.
