Thinking of getting an interest only lifetime mortgage can seem to be a good idea when you are trying to make the best of your retirement years. With interest-only lifetime mortgages, borrowers have the option to pay only the interest and not the whole capital amount back.
If you have chosen a plan that will still give an approval to the mortgage interest only equity release plan, you have the option of only paying interest to the lender for the full term of the loan, at the end of which you would owe exactly the amount you borrowed. Obviously to reach this goal of maintaining the same balance of
The interest-only lifetime mortgage scheme contains many advantages such as people can now afford cheaper mortgage repayments in times of financial hardship. This loan is considered to be flexible enough in that it provides applicants with their own choice of repayment vehicle. There is an option of repaying the mortgage early any existing investments prove a success or could downsize in the future if their existing property becomes too much to manage. An interest only mortgage can be a cheaper option than selling up as an option and deciding instead to rent a high value property.
First Time Buyers with Interest Payment Mortgages
First time property buyers can no longer benefit from an interest only loan owing to the fact First time buyers have now been helped with the introduction of the governments help to buy scheme which allows them to source a lower deposit in order to get them on the housing ladder quicker, albeit’s fueling the economic recovery which we’d rather have as a more sustained & gradual, rather than the boom & bust of the past. Therefore, first time buyers must repay the whole capital off during the lifetime of the loan.
Furthermore, it has been left to the elder generation to benefit from the interest only loans. Afterall, they are the ones who have shown a good repayment record and tend to have the greatest amount of equity to act as security for the loan.
Some disadvantages of the interest only mortgages are that there is no capital ever repaid unless and until the investment vehicle is taken out. Investments also have the chance to underperform and this may lead to a loss upon repayment. The mortgage lenders are being pressurized by the FCA to offer capital and a repayment mortgages. In case that the property value of your house dips down, there are chances that you may end up with a negative equity situation. Alternatively, if interest rates rise, you would never happen to take the investment vehicle out.
Going with Lifetime Mortgages
Certainly as a first time buyer you might find the help to buy mortgage more than helpful. In fact for first time buyers looking to use a mortgage to fund a property purchase we recommend on visiting Equity Review first for free independent advice. It ensures that you pay off the loan over a 25-30 year period. However, if you are already in retirement then you’re usually not looking at a mortgage to pay for a new home in most instances.
Instead, you might be looking at an option that allows you to pay off your existing mortgage so that you have fewer expenses and a lower monthly payment on a mortgage. You may also be looking to gain funds for your retirement for that special holiday you never went on. If this is the case then lifetime mortgages with interest repayment options can work best.
The interest payment lifetime mortgage is the same as the traditional loan in which you only pay interest on the account. The difference is that you have the rest of your lifetime to pay the principle balance. In fact you have until death. This means you pay interest and then at death the balance is due. Your family then sells the home. Your family gains the funds to pay the mortgage and what is leftover is given to your family as inheritance. It is a guaranteed inheritance and you have funds to spend during retirement.
You have to be 55 years of age at least to qualify for an interest only lifetime mortgage. You can also take out this type of mortgage past the age of 75 unlike conventional residential mortgages. As long as your property is above £70,000 with little or no existing mortgage then qualification for an interest only lifetime mortgage should be a breeze.
There are other lifetime mortgages that require no repayment until the end including paying interest. This is because the interest adds up until the mortgage is paid off. It can work great for those who have no disposable income. The downside is that inheritance might be called into question. You may not be able to sell the home at death for enough value that pays for the mortgage, interest, and leaves inheritance behind.
Home Reversion for Retirement
Retirement options are not limited to mortgages, as stated on the Equity Releases Website. If you are not a first time buyer, but actually a retiree with a home consider home reversion in which you sell part of the home. You get funds to live with, but there is no need to repay as the home is sold at the end and all portions of the home remaining are sold, where the money is given as inheritance.
Like everything in life, these mortgages have their advantages and disadvantages. It is up to you to decide if the advantages outweigh the disadvantages. But on an overall basis, these interest only mortgages provide a great source of income for the retired and are one of the best ways for them to spend their last few years on earth comfortably.