An interest only mortgage is often a sound financial decision for many couples who are over the age of 60. This is a mortgage that can be taken out to help raise the amount of money a borrower needs, but only requires monthly payments that cover the interest element on the loan. This essentially means that the borrower is protecting the overall value of their home, while keeping a little extra money in their pocket each month. This money is often used to pay off debts or other financial obligations. The interest only mortgage for the over 60s is a sound way to make an investment on your future, but there are also different deals on the table.
There are several benefits to an interest only mortgage for the over 60s. One of the most noteworthy of these benefits is that the capital value of the home is sustained and only interest is being repaid on the loan. Therefore, there can still be some inheritance left for family members. This is because once the couple or individual has passed away, it is not necessary to sell the house to meet the obligations of the loan. A second major benefit is that the home is still owned by the borrower. Therefore, the borrower(s) can still be away from the home for as long as they like.
Understanding the Repayment
It is important to realize that the mortgage does not have compound interest, but depending on your financial situation a sale to repay the loan may need to happen. While it is very possible for the loan to be repaid with other funds, there is also the situation that only a sale of the house will be the repayment option.
1. If you have life insurance or other funds accessible at death or when you move out of your home, you can repay the principle loan amount without selling the home.
2. If you are cash poor without proper life insurance cover than a sale of the home will be necessary to repay the loan.
3. Your family may also be able to raise the money to repay the mortgage at the end of your life, but this puts a burden upon them.
Speaking with your family about your decision to take out an interest only lifetime mortgage is important. Your family will ultimately be the responsible party for the loan whether they have to sell the property, come up with the funds, or can use your life insurance or their inheritance to cover it.
Qualifications Required by Lenders
There are qualifications for an interest only mortgage and they may vary by lender. In essence, the owner(s) of the home must be over 60 years of age and must own the property in question which should be the main residence. Then there are restrictions on the amount of loan that has to be borrowed as well as income type criteria for qualifying.
Alternative Options are Possible
Interest only lifetime mortgages are just one option for individuals over 55 years of age. There are three other lifetime mortgage options called lump sum, ill health, and drawdown. Both lump sum and ill health provide a large one off payment to the borrower based on the housing valuation and a percentage of the equity. Interest is not paid on this loan so there is no need for disposable income. The interest is compounded on the loan until repayment occurs. Ill health lifetime mortgages give out a higher percentage of equity as it is considered that the person will return the money in a shorter time period.
The drawdown option is a small lump sum payment then instalments as needed. The interest is compounded only on the funds that are used rather than the full equity available for the person to take making it cost effective when you do not want to make payments.
An interest only mortgage for the over 60s usually allows borrowers to maintain a higher amount of disposable income each month, as the loan payments only include interest. This is typically very attractive for borrowers who are over the age of 60 as they can have extra income and still be able to leave their home to a family member or child. When income and spending money becomes tighter with age, an interest only mortgage seems to work very well for those individuals and couples who are entering the golden years of their lives. To evaluate all your options visit: http://www.equityreview.com/ or http://www.equityreleases.com/
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