Equity Release – The interest doesn’t have to roll up.

By John Cossons, Mortgage and Protection Designer at Anstee & Co.

When you are considering taking an equity release lifetime mortgage one of the main considerations is knowing how much equity you will have left to leave to your next of kin when you pass away.

It is generally well known that with an Equity Release mortgage you are not required to make payments and that the interest charged is therefore added to the loan and the following year you are charged interest on the new higher amount, this continues year after year and is known as compound interest or interest roll-up. At an interest rate of 3%, this means that you would owe double the amount that you borrowed after approximately 23 years and at 6%, it would take around 11 years.

Are there any other options?

It is less well known that you don’t have to do this and that there are now options to make regular or irregular partial repayments. If you were to make payments equal to the amount of the interest each year this would stop the roll-up, meaning that you would only owe the amount that you borrowed at any time in the future.

Can I repay the capital?

Most lenders will allow you to make repayments of up to 10% each year with no penalty. These can usually be made every month, quarter, year or whenever you like, with a minimum of £50 at any one time. By making repayments that are greater than the interest charged each year you will reduce the amount that you owe. What’s more, you can start or stop these whenever you want, giving you the flexibility to choose what you want to do. So, for example, if there are two of you and your joint income allowed you to afford to make a partial repayment now but one of you were to pass away, reducing your income, you could choose to stop paying at that point and the interest roll-up would start from then. This could significantly increase the amount that you can leave to your estate.

What happens if interest rates go up?

As all Equity Release lifetime mortgages have an interest rate that is fixed for life there is no need to worry that your repayments will need to increase, or that the amount that you choose to pay will have less effect on the balance, if the interest rate goes up. You can use this as a lifetime fixed-rate interest-only mortgage with no chance of defaulting because you can choose to stop the payments at any time.

How Anstee & Co can help you with equity release.

We are Independent Financial Advisers (IFA’s). This means that the financial advice we offer is unbiased.

Equity release is not right for everyone. You need to be over the age of 55 and own your property. If you have a family, it is always a good idea to get them involved. So, why not contact us today to see how we can help you? The first meeting is at our cost and without obligation.

Our Head Office is located at –

• Kettering, Northamptonshire

Our advisers live and make use of meeting rooms in-

• Bedford, Bedfordshire
• Wellingborough, Northampton, and Thrapston, Northamptonshire.

Also, we make full use of video conferencing facilities such as-

• Microsoft Teams
• Facetime

Additionally, we can arrange a conference call. There is no need to visit an office as all work can be handled remotely.

Anstee & Co. are proud members of The Equity Release Council.

If you have any thoughts or comments about this article, ” Equity Release – The interest doesn’t have to roll up”, we would love to hear from you.

Finally, the information contained in this article is for information purposes only and does not constitute advice.

These products are Lifetime mortgages. Equity released from your home will be secured against it.