This week’s stock release expert Mark Gregory helps a reader in his 60s but still paying off an interest-only mortgage. Could a lifetime mortgage be a viable option…?
Question
I have an interest-only mortgage with £45,000 remaining. I’m in my 60s, and having that much money on my mortgage is taking a toll on my mental health. Someone mentioned that equity release could be an option – do you think it could be a possibility for me?
My house is worth £350,000. Can I use a lifetime mortgage to pay it off, and can I get a little extra to make some home improvements?
Mark’s answer
I’m sorry to hear that your mortgage is affecting your well-being. Yes, a lifetime mortgage could potentially pay off your existing interest-only mortgage and provide additional money for home improvements. Whether it’s right for you depends on your circumstances and what causes you the most concern.
Your £45,000 mortgage represents around 13% of your house’s value of £350,000. This makes exploring the option worthwhile, although the amount available will depend on your exact age, the lender’s assessment and criteria, and the age of any co-applicants. Any additional loans for improvements and costs should also be included.
The main point is that A Lifetime mortgage It will replace your existing mortgage with a new loan secured by your home. This will settle your current lender’s debts, but you will still owe money under the new arrangement.
The difference is when repayment is required. A traditional interest-only mortgage usually requires repayment of the outstanding principal at the end of the agreed upon term. A whole life mortgage generally has no fixed end date and is usually repaid when you die or move permanently into long-term care – or when the last borrower does so for a joint plan, provided its terms are met. This can be useful if an approaching payment deadline is your main concern.
A Lifetime mortgage with optional repayments It can eliminate the stress of having to make monthly mortgage payments. Interest will be charged, but you can choose to pay it or allow it to be added to the loan.
You maintain ownership of your home and can choose to make voluntary payments of up to 10% of the original amount borrowed to manage the future balance. Paying all the interest as it arises can keep the debt from growing, while partial or occasional payments can slow its growth. Repayment allowances vary between plans, and payments outside those allowances may attract early repayment fees.
However, if you don’t make any payments, interest is added to the loan and additional interest is charged on this increased balance. Over time, the amount owed can increase significantly and reduce the inheritance you leave. If borrowing £45,000 itself is bothering you, it’s particularly important to consider how you’ll feel about a potentially larger balance in the future. The release of additional cash may also impact means-tested benefits.
Your advisor should do so Explore alternatives also. This may include discussing options with your current lender, using available savings, or considering a retirement-only mortgage if ongoing interest payments are affordable.
The personal assessment will show whether you can raise enough to clear the £45,000 and fund the proposed improvements, allowing the charges and any charges on your existing mortgage to be charged. It should also compare total costs and explain how different payment options will affect the future balance.
Our friendly, independent consultants can take you through these options at your own pace. Calls 08008021015 For a free, no-obligation initial consultation. Our consultation fee is only paid if you follow through with the recommendation and your mortgage is completed, and Any other costs It will be explained before you decide.
Meet our expert…
Mark Gregory, Founder and CEO Supermarket stock issuehere to answer your questions. Mark is himself a consultant with over 20 years of equity issuance experience.
He launched Equity Release Supermarket 10 years ago and has developed into one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask a question
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