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Understand Your Retirement Mortgage Options

Explore the key benefits of releasing equity from your home as the solution to your debts problems!

Retirement is large business now for many companies. They are there to make sure that people have options when it comes to retirement time and so they have the money they need when they retire. The business of retirement is a large part of any economy as well. Historically people are working longer and later into life than ever before. Yet you might have options like the interest only lifetime mortgage that could prevent such a thing, or even assist whilst in retirement.

Even with this in mind, people will need to have more saved for retirement and hopefully they can even retire sooner as well; instead of having to work well into their golden years. To make this happen there are options available when it comes to the homes that a soon-to-be retiree owns. There is the option of the interest only lifetime mortgage out there.

This is the mortgage that is similar to the lifetime mortgage, with equity releasing out, while at the same time there is only the interest that is paid on the mortgage instead of any principle being made. With the interest rate being fixed for life, this means that the payment never changes for the life of the retirement mortgage. This can be a great option for people that are close to retirement age, but still working, but would like to lower their monthly mortgage payment as well.

 

The lifetime mortgage is not repaid until the home is sold, however, beneficiaries will still receive an inheritance, less the amount of the loan.

 

Looking Closer at the Concept

It is time to take out a spreadsheet and contemplate your choice of interest only lifetime mortgages. You have traditional interest only mortgages that allow you to make a payment of interest each month for ten or more years. At the end of this mortgage you have a balloon payment of the principle balance which needs to come from either an investment that has been running concurrently, or from the sale of the property.

 

The lifetime mortgage with interest only as the distinguishing factor, you do not have a time limit on the mortgage term. Instead, the actual limit is how long you live or can live in the home until you need further care. In other words, if you die or you move to a new place that is your main residence the loan must be repaid in full. Often this is done by using the house as security.

 

Your beneficiary sells the home within 12 months of your demise or move. The funds then pay off the principle balance and any remaining interest that may have accrued during the last few months of the plan. Whatever funds are left over from the sale are the beneficiaries to keep. This is essentially their inheritance instead of property.

 

Look closely because you have basically taken a cash poor, property rich situation and turned it into a cash rich situation for you and your beneficiary. The amount leftover from the sale depends on the appreciation of your house and the initial lump sum of money you took.

 

Not the Only Cow in the Herd

A farmer raising milk cows is not going to have just one cow. He is going to have numerous cows in order to ensure he has milk on a daily basis. If he sells the milk in stores then he will certainly have dozens of cows that produce milk. You need to look at lifetime mortgages like this.

 

The Stonehaven Interest Select Plan & the more2life interest choice plans are just two of the interest only equity releases on the market. There are other companies like Aviva and Hodge Lifetime with similar products. They also have products that are called retirement mortgages, but they have different terms. These can be considered drawdown, lump sum and enhanced. These three products have one thing in common- they all accrue or compound interest onto the back of the loan so the interest and principle sum is paid at the end of your life or your move out of the house.

 

Otherwise they have distinguishing factors that make them different from each other. Lump sum is a full sum of money based on the value of the house in which you cannot get any more money out. Enhanced equity release is the same except you obtain more in a lump sum due to a shorter life expectancy. In this instance it pays to be ill. A drawdown lifetime mortgage offers a facility which you can withdraw from at any time. The money used is accumulating interest, and the money left in the facility is not charged an APR.

 

Now you are armed with interest only lifetime mortgage and other lifetime mortgage retirement products to help you make an educated decision on which of these schemes can assist you in retirement. However, ensure that before you do, you receive independent equity release advice as to the full range of options available.

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