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Using a Lifetime Mortgage to release equity to pay off the remaining capital of an interest only mortgage

paying_off_interest_only_mortgageWe own our home but still have a small interest only mortgage which is coming to an end. We have not really worked out how we are going to repay this and have just received a letter from our lender asking what our plans are. They cannot help as we are both over 65 and as we are retired don’t have enough income to take out a repayment mortgage. We are really worried as we don’t want to lose our home and move away from our friends and family. It’s only a small mortgage and our home has grown a lot in value over the years so we didn’t think we had to worry about repaying the capital.

We have been reading a lot about equity release so contacted the adviser from Apex CB to see if that was an option for us. We discussed this with our daughter who is in agreement that we should seek some advice. She knows this mean the value of her inheritance could be reduced but wants us to have the peace of mind of knowing we have paid off the standard mortgage”

Almost 1 in 4 people over 45 are worried about paying off their mortgages or loans and at least 2.1 million people expect to have to borrow money in retirement to allow them to remain in their homes*.

Providing that the existing mortgage falls within the borrowing limits set by Lifetime Mortgage providers you can provide a lump sum to pay off an existing mortgage, because the amount you can borrow is based on the age of the youngest borrower and the value of the house. Income and expenditure is not taken into consideration. Because there are no monthly payments the debt will rise as interest is added to the loan, however the Lifetime Mortgage is relatively small compared to the value of property. Furthermore, many arrangements allow partial repayments to be made against the interest charge allowing the borrowers to reduce the accrued interest.

The mortgage is repaid when the last person has died or gone into long-term care. At that point the property is usually sold, with the proceeds being used to clear the equity release mortgage. Any remaining balance passes into the deceased person’s estate.

The family realise this is extending their mortgage beyond the original term but, when faced with downsizing, the Lifetime Mortgage provided an ideal solution to remaining in the home they love.

*Aviva Real Retirement Report 2016

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