Interest-only mortgage coming to an end? Let Equity Release help you pay back your original mortgage

5th November 2018

When it comes to mortgages, there are so many factors to consider. One of the most important decisions is whether to apply for a repayment mortgage or an interest-only mortgage. With a repayment mortgage, your monthly payments go towards clearing some of the original loan as well as paying the interest owed on it; with an interest-only mortgage the payments only cover the interest on the loan and you do not repay the original loan amount until the end of term.

If you do have an interest-only mortgage hopefully you have worked out a plan to pay off the capital at the end of the mortgage term. These may include:

  • Cash in savings accounts or cash ISAs
  • Stocks and Shares ISAs
  • Shares, endowment policies or unit trusts
  • Pensions
  • Other assets

It is important that you keep track of these investments to ensure that when your mortgage comes to term you have the financial means to pay back the original loan amount. If you have more than 50% equity in your property and an approved repayment plan in place to pay back the original loan, then your repayment facilities should probably be enough.

But what can you do if you do not have a plan to pay back the original loan? Firstly, do not panic – there are several options that can be considered.

  1. Add up any savings that you could use to start to reduce the original loan. Contact your lender to ask about making overpayments.
  2. Ask you lender about switching to a capital and interest mortgage.
  3. Ask your lender about switching to part repayment and part interest- only mortgage
  4. Extend the term of your mortgage to give you more time to pay towards the original loan.
  5. Use a monthly Budget planner to review how much spare cash you may have each month and start to re-budget your monthly expenses. Try www.moneyadviceservice.org.uk/budgetplanner

Always ask your lender about any fees involved when switching or amending your original mortgage product.

So, how can Equity Release help with paying back an interest-only mortgage?

Clients with interest-only mortgages can pay off their existing loans by taking out a Lifetime Mortgage, enabling then to stay in the home that they love.

So how does it work? It’s simple!

 So, how can Equity Release help with paying back an interest-only mortgage?

Either way you can remain living comfortably in your own home for as long as you choose.

A Lifetime Mortgage – A popular choice

There is around £1.5 trillion in housing equity owned by people aged over 55 years yet only 3%¹ of those eligible have chosen to unlock the value in their homes to meet their current financial needs or dreams. There are an estimated 1.67 million² customers with interest-only mortgages yet 13%³ say they did not have a separate plan in place to pay back the original loan.

If you would like to consider taking out a Lifetime mortgage you must be:

  • Aged 55+
  • Own your own home worth £100,000+
  • Want to borrow a minimum of £10,000
  • Live in England, Wales or Scotland

If your interest-only mortgage is coming to an end, and you think that a Lifetime Mortgage may be right for you, contact Kevin Woods to discuss your situation in confidence, and without charge or obligation of any kind.

Reference:
¹ Silver Spenders, Legal &General Home Finance Ltd, 2018, page 3.
² FCA urges action on interest-only mortgages, FCA, January 2018.
³ GFK. Interest-only mortgages. Consumer research – consumer strategies for repaying the loan at the end of the mortgage term.

Source: www.moneyadviceservice.org.uk

Why not get in touch and see how we can help?

Equity release is the answer to so many financial questions. If you would like to know more about it, and see if it could be the right move for you, please book an appointment or request a call-back