Interest only mortgages can often prove to be the ideal financial solution for many individuals and couples over the age of 55. An interest only lifetime mortgage can be chosen to help stave off financial troubles, especially those related to increasing debts.
An interest only mortgage is part of a home equity scheme that enables the borrower to pay off only the interest accrued on the mortgage. There are a couple of things that are most important to keep in mind when considering an interest only mortgage. The two biggest things to take notice of are the interest rate and the total amount that is being borrowed. Because interest rates can be variable, they can often get somewhat out of control, leaving the payment much higher than originally anticipated.
The specific mortgage known as an interest only lifetime mortgage is often a great solution for those individuals and couples over the age of 55 or even in retirement. For these folks, an interest only mortgage is one that will factor in the age of the borrower(s). This kind of mortgage allows the borrower to take out an interest only lifetime mortgage to help release the capital that was previously invested in their property and unavailable as cash flow. This capital can then be used toward other debts, financial responsibilities or lifestyle changes. This kind of interest only mortgage can eventually impact the inheritance of the property, but this can often be controlled through very specific products, such as the Stonehaven Interest Select Plan.
Thinking About and Researching Interest Only Options
There are several things to consider before embarking on an interest only mortgage. However, some individuals are unaware that like a conventional mortgage, an interest only lifetime mortgage can be used for a house purchase in London should the applicants age, amount required and type of property fit the property specifications set by the lender.
This extra capital or income can even be used as a very simple way to improve overall quality of life through supplementing pensions or retirement plans. Popularity has risen over the past few years as people opposed to conventional roll-up equity release plans have been researching their options. With affordability in retirement, these people have embarked on plans such as the Halifax Retirement Home Plan and secured an interest only mortgage for the rest of their life.
Exploring Benefits versus Disadvantages
The main reason to take out an interest only loan in any shape or form is to pay off a portion of the loan. In a traditional interest only mortgage a person has 10 years to pay the interest and then the principle balance is due.
In a lifetime mortgage option there may be no limit on time for the loan; however, the payments of interest are still made until the principle balance is paid in full. In this situation disposable monthly income is required to ensure payments are made. The interest is accrued on a monthly basis, but based on the APR of the loan. For a person looking at this retirement option there needs to be funds that can pay the interest off each month.
It can be a catch 22 situation because you take out money for daily living, yet have to pay money towards the loan. This is why before you can obtain the interest only mortgage in a lifetime mortgage package, the company will assess your disposable income. You cannot take out the loan if you do not have income rolling in from somewhere else.
The reason for this type of loan has less to do with daily living expenses and more to do with home repairs, a special holiday, or gifting money to your family members as a means of avoiding inheritance tax payments later on.
Get the Family Involved
Before you take out a lifetime mortgage of any type you should speak with your family. Let them know what you are considering, why you think it is a good idea, and see what they prefer most. In some cases your family might prefer to keep the childhood home and help you financially than to see it sold to repay the principle balance of the loan you would take out.
Speaking with the company offering the financial product is a help to get specific mortgage terms; however, you also need to speak with a financial adviser that is separate from the company. In this way you have more than one perspective, including your families.
Always discuss your financial situation with a qualified independent financial adviser (available here) as these plans are few and far between and require specialist advice to find the right interest only lifetime mortgage plan.
Our clients are satisfied with their new lives!
National Equity Release Pension Conference, Bath Street, Bakewell, Derbyshire, DE45 1BX.
You can also contact us by phone , or you can send us a message here: