How Just Mortgage Brokers Can Help You
A lifetime mortgage can be an option for those over 55 who are looking for either a lump sum of cash, or regular payments during their retirement years. On most types of lifetime mortgage the borrower makes no repayments towards either the amount borrowed or the interest – the interest therefore builds up on the debt, and the whole amount is paid off when the property is sold.
However, with one particular type of loan – an interest-only lifetime mortgage – the borrower makes a monthly payment to cover the accruing interest. That means that when the time comes to repay the mortgage on the sale of the property, only the amount originally borrowed will be outstanding.
What is an Interest-Only Lifetime Mortgage?
Interest-only lifetime mortgages combine features of interest-only mortgages, which are potentially available to all borrowers, and lifetime mortgages, which are equity release products usually only available to over-55s.
An interest-only mortgage is one on which the borrower only makes payments towards the interest that accrues on the amount borrowed. It can be a good way for those starting out on their career, or who don’t have a massive income, to be able to buy a home at a more affordable monthly payment than on an equivalent repayment (or capital-and-interest) mortgage. It does mean, however, that the borrower will not have paid off any of the loan by the end of the agreed mortgage term. You can find out more about interest-only mortgages here.
Taking out an interest-only lifetime mortgage as a retirement-age equity release plan means that the interest is repaid monthly rather than being rolled up on the amount borrowed. This means that, in comparison with the more usual type of lifetime mortgage, less needs to be repaid when the property is sold after you die or go into long-term care, leaving a larger inheritance for your family or friends.
In much the same way as a regular lifetime mortgage, the amount of money that can be released from your property is based mainly on your age and the market value of your home. The older you are, the more money you will likely be able to borrow.
With an interest-only lifetime mortgage, you can choose how much to pay monthly towards the accruing interest. This may be the full amount, but you can also choose to make a lower payment that doesn’t cover the interest in its entirety. When deciding how much to pay you should take into account the size of the loan, your income level, and the level of inheritance you would like to leave behind. If you take out an interest-only lifetime mortgage and choose to repay the accruing interest in full, you and your estate will benefit from any subsequent increase in the value of your home.
Interest-only lifetime mortgages tend to be quite flexible in comparison to some other financial products. It’s usually fairly easy to switch from an interest-only basis to an interest roll-up basis if you choose to. You can also transfer your interest-only lifetime mortgage to another property if you decide that you want to move house, subject to the lender’s agreement that it is suitable security for the loan. It is important to remember, however, that if you choose to pay off your lifetime mortgage early you may have to pay early repayment charges.
How Just Mortgage Brokers Can Help
An interest-only lifetime mortgage can be a good option for those who are over 55 and looking for a lump sum or regular income, but who also have the capacity to pay a little back on a regular basis. When considering interest-only lifetime mortgages, it’s important to know what is available and explore all of your options.
Get in touch with our team here at Just Mortgage Brokers to let us guide you through your options and help you decide what deal is right for you.