Interest only mortgage. Is downsizing the only option?

interest only mortgage doorThe housing charity Shelter released a report that showed property prices had increased by more than 43 times what they were in 1971. They highlighted that this increase was far in excess of year on year inflation. After building up such a high level of equity in their property over the years, homeowners with a interest only mortgage could sell up, downsize and use the remaining equity to pay their original debt.

At first, this seems a very logical and practical solution. However, it does not take into account that many people would prefer to stay in their own home for as long as possible. The emotional bond to a family home is often very powerful. Memories of happy family gatherings. This then creates a desire to continue living in the family home. Often there is a strong network of friend and family around also.

Sometimes, the reality is that downsizing to a smaller property in the same area may not be financially viable. The sums might not add up once the existing mortgage has been paid off and the costs of moving, particularly stamp duty if applicable, have been taken into account. Downsizing to a different area could be an option, but this potentially moves people away from friends, family and other support networks. This then brings us back to this desire to ‘stay put’.

Could a lifetime mortgage be the solution to an interest only mortgage?

All potential options for repaying a mortgage should be fully explored with one of our independent financial advisers. A possible solution could be a lifetime mortgage.

Lifetime mortgages aren’t for everyone. To start with you must be older than fifty-five years.  They are only available through specialist financial advisers who will tailor their advice to your circumstances. These financial advisers would have taken additional professional qualifications.  At Anstee & Co we have a team dedicated to lifetime mortgages. Lifetime mortgages are sometimes referred to as equity release.

Recent figures show that almost a quarter of lifetime mortgages are being used to repay interest only mortgages. This will allow you to stay in your family home and continue to benefit from potential future increases in property values.

What happens to the mortgage interest?

The mortgage interest is added to the amount owed each month. This means interest is charged on the loan on top of any interest already due therefore the amount owed will grow quickly, reducing the equity left in the home. This is something that’s important for you to understand. To help we will always provide you with a full written illustration.

The lifetime mortgage is usually repaid from the sale of your home when the last surviving borrower dies or goes into long-term care.

With some of the lenders, they offer  additional protections such as optional Inheritance Protection. This will protect a percentage of the home’s sale value after costs. Another, popular option offered by some lenders is the ability to make partial repayments, reducing the amount to be paid back without incurring early repayment charges.

As you can see a lifetime mortgage could provide an option to address the issue of an interest only mort gage shortfall. This would allow you to remain in your home, as well as enjoying peace of mind in your retirement.

How Anstee & Co can help you if you have an interest only mortgage.

Why not arrange a meeting today with one of our expert mortgage advisers. The initial meeting is free. Meetings can be arranged at your home or place of work at a time that is convenient for you.

We also have offices located in-

  • Kettering, Northamptonshire
  • Stamford, Lincolnshire
  • Birmingham, West Midlands
  • London, Central London.

We also make use of meeting rooms located in Northamptonshire, Lincolnshire, Bedfordshire, Warwickshire and Worcestershire.

Anstee & Co are member of The Equity Release Council.

Additional articles written by Peter Anstee

Long-Term Care funding dilemma needs financial planning

Equity Release. Is it the right choice for you?

Credit score and how to improve yours


2018-02-21T15:50:11+00:00 February 22nd, 2018|News|