If you have an interest only mortgage and are approaching the time when it needs to be repaid but don’t have sufficient savings to repay the loan you could be forced to sell your home.
New mortgage rules and tighter restrictions on mortgage lending is making it more and more difficult for older borrowers to get new mortgages or extend the terms of their current interest only mortgage. Having paid the mortgage for many years and made your house your home the thought of having to sell the family home is daunting for many people.
If you are over 55 and in the position of having to find the funds to repay your interest only mortgage have you considered using the equity already in your property to repay your current loan and remain in your home?
Since 1991, according the Nationwide House price index, the value of houses has risen on average by over 5% per year. The value of your home could therefore be considerably higher than the mortgage you need to pay. The difference between what you owe and the value of your home is called ‘equity’. By using Equity Release you can release this money to repay your mortgage and retain 100% ownership of your home, meaning you can benefit from any further house price increases over time.
The most popular type of Equity Release plan is called a Lifetime Mortgage. Unlike a conventional mortgage with a Lifetime Mortgage you do not need to make any monthly repayments. Interest is charged and added to the loan on a monthly basis. This will quickly increase the amount you owe, but the mortgage doesn’t need to be repaid until you die or go in to long term care.
Equity Release is covered by similar regulations to conventional mortgages, but unlike conventional mortgages there are no minimum income requirements and no credit checks. The new mortgage rules have made the criteria around income requirements more and more stringent and older people are finding it difficult to meet these requirements despite have sufficient income to be able to afford a conventional mortgage.
If you have an interest only mortgage you are used to making regular monthly payments and, although you have not been reducing the loan amount, you have been paying off the interest on a monthly basis. With a Lifetime Mortgage there are no requirements to make any form of monthly payments, however if you wish to reduce the interest that is accruing you can make voluntary repayments to reduce part of all of the interest accruing. Some providers will even allow you to make payments to reduce the loan amount as well as the interest, with some providers you can repay the entire loan and interest in as little as 8 years without penalty or extra costs.
If you are looking to get out of the interest mortgage trap without being forced to sell your home, why not contact Your Time Equity Release to find out if you have sufficient equity in your home to repay your current mortgage and possibly have a little left over to spend on whatever you like.
Your Time Equity Release are completely independent Equity Release advisers and can help you find an Equity Release plan that could help you to remain in your home after years of paying the interest on your mortgage.
Equity Release Calculator
Find out how much you could potentially release from the equity in your home with our simple, free and instant Equity Release Calculator.