Taking out the right equity release plan can be one of the most important decisions you make in your golden years. If the rates are too high you’ll end up being ripped off; if the rates are low but the equity release scheme doesn’t meet your needs, you’ll still end up wasting money. Getting the right balance is critical, so it is no wonder you are stressed about comparing and ultimately taking out an equity release plan. This article and website compares two Interest Only Lifetime Mortgage plans, the Holmesdale Building Society and the More2Life Interest Choice Plan, and gives the low-down on what makes each of them what they are in order to give you a better idea of how each plan could work in your favour for releasing equity.
An interest only lifetime mortgage is like any other mortgage but with two key differences - there is no maximum term and you don’t have to pay anything back towards the capital until the end of the agreement and are only expected to repay the interest. So, if you are able to afford the interest payments, you can keep the mortgage until you die. This makes it ideal for seniors who want to continue staying in their home whilst enjoying the quality of life that they have worked so hard for.
More2Life Interest Choice Plan:
The More2Life Interest Choice Plan allows clients to pay between 1 and 100% of the monthly interest (subject to a minimum amount of £25 per month). If you can’t afford to pay all of the interest you can elect to partially pay the interest due, thus not having a lot of money going out in one go. Another thing that is appealing about the More2Life Interest Choice Plan is that there is a drawdown option so you can release the money in stages if you would like. You also don’t have to choose a specific time period over which to pay the interest and the loan is repaid when the property is sold, minus the interest you have paid. Finally, this is appealing because unlike many other options of releasing equity anyone, regardless of lifestyle or health conditions, is eligible to apply for this loan.
To apply for this interest choice plan you need to be between the age of 60 and 99, have UK or EU citizenship along with permanent rights of residency and be a UK resident and be able to prove your addresses for the last 36 months. Furthermore, your property must be worth at least £70,000 and you can take a loan out to the value of £1 million. The cap on equity release is based on home value. If your home is worth over £1 million you could potentially take this much.
You do want to be concerned about the interest you pay. Whatever payment you make, if it does not cover the full amount accrued for the month, you will need to pay when you sell the home or die. It could change the amount of inheritance your beneficiaries receive. As a downside it is fairly minimal given the joy you can have in life.
Holmesdale Building Society:
The lifetime mortgage plan from Holmesdale Building Society works in a similar manner to the More2Life Interest Choice Plan. You must be at least 75 years old in order to apply for the loan. With joint application the combined age must be at least 160 years; however, leniency could be considered. It is rare to find a product that allows you to take out an interest only lifetime mortgage this late in life. Average products allow you to be 55 to 75.
The minimum loan that must be taken is at least £26,000 and no more than £100,000 or 25% of valuation (whatever is the least). It is also important to note that a non-refundable arrangement fee of £495 must be paid on application. You can choose to pay your interest in a "rolled up" (all at once) or monthly form.
The interest rate is variable and currently set at 4.89%.
Releasing equity with either of these two schemes may work for you. It is important to realise there is more than one product available to you. You will need to compare all types of lifetime mortgages against the interest only plan. For some making a monthly payment is not possible. Each lifetime mortgage is geared towards specific client needs thus the myriad of choices available to you and your partner or spouse.
Our clients are satisfied with their new lives!
National Equity Release Pension Conference, Bath Street, Bakewell, Derbyshire, DE45 1BX.
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