Equity release and interest-only mortgages

Homeowners needing to repay their interest-only mortgage is one of the main reasons people are considering equity release lifetime mortgages. A lot of people aged 70 plus are coming to the end of their interest-only mortgage with no means to repay this, without selling their home. Often, lenders will not extend the term of the mortgage further, or the homeowner does not have the income in retirement to meet the affordability requirements for a standard or retirement interest-only mortgage. As an equity release lifetime mortgage is not affordability-assessed, this can often be a suitable option for people to repay the current mortgage and remain in their beloved home. Modern lifetime mortgages have the option for borrowers to pay the interest each month, similar to an interest-only mortgage that the borrower is already used to.

Just as perms and mullets seemed like a great idea in the 90s, so did interest-only mortgages. As a result, we're seeing a steady stream of people coming to us at the end of their interest-only mortgage term and quite often equity release proves a good solution. It's not always required, however: some lenders will continue to offer these products to those with glittering financial situations but getting great advice to determine the right route for you is vital. After all, a good hairdresser considers the long-term implications for your hair. A mortgage adviser should do the same for your property.

Finance for older borrowers has been the fastest-growing section of the mortgage market for some time. Whilst not the sole reason, one clear cause is reaching the end of an interest-only mortgage term, with no means to repay. Equity release can be a great option for this, particularly where the borrower cannot afford the payments and has no next of kin. Retired borrowers can now obtain 40-year mortgage terms on repayment and even unlimited terms on certain interest-only deals, so equity release should never be the de facto solution. Our advice is to speak to a broker who covers equity release and all forms of repayment and interest-only mortgages (including RIO). That way you can get the solution with the best balance of cost, term length, early repayment penalties and one that considers the equity you will leave to your next of kin.

Without question, there's a growing amount of people coming to the end of their interest-only mortgage with insufficient means to clear the debt. The easy answer is to downsize but in reality, this can be hard to accomplish. The costs associated with even smaller properties have risen substantially, which often means there isn't enough of a carrot to dangle to tempt someone to leave their family home for, say, a small flat. Coupled with the emotional attachment to the existing home we see more people looking for solutions to stay where they are. Equity release isn't, and shouldn't be the default answer though. These people must speak to an adviser qualified to look at all aspects of retirement lending, such as mortgages from mainstream lenders, RIO options, as well as equity release. It's crucial to go to someone who can access all areas.

Interest-only mortgage without repayment strategy is something we are seeing more and more, with limited knowledge of solutions, the clients can find themself at 6's & 7s.

It is easy for a broker of financial professionals to look at age, income and asset value and predetermine equity release as a solution. With the right assessment and customer fact-find, we often find solutions within the retirement-only product offering (RIO), which can be more flexible, this gives the client breathing space before the need for equity release is required.

With requirements around living costs, care, family gifts and support, and debt consolidation, later-life lending solutions it is a vital tool for financial advisors. understanding the compound effect of Equaity release rates and max to loan helps to give customers great advice.