Are you looking to help you nephew open a restaurant but don’t have the adequate resources? Are your pension pot and other investments not enough to foot the bill? If so, you can try taking out the equity release plan. The financial product is a mortgage scheme that allows homeowners to unlock the equity1 tied up in their home by turning it into a cash lump sum or monthly income. It’s targeted towards homeowners within the remits of the UK, those aged 55 and above, and those whose residences are worth more than €70,000. With technological advancements today, you can quickly check how much equity you can take by using the interest-only equity release calculator.
Understanding the Interest-Only Lifetime Mortgage
Equity release plans offer you two options: the lifetime mortgages and home reversion plans. The lifetime mortgage allows you to unlock capital from your estate and you repay the loan when you either die or move into permanent care. It also offers you various options, including the voluntary repayment plan, income lifetime mortgage and interest-only mortgage scheme. The interest-only mortgage allows you to pay up the interest due monthly – meaning that the size of your mortgage repayments doesn’t shoot up. So, if you’re concerned about interest rolling up2 on your mortgage plan, It’s your best bet.
It also allows you to keep as much equity in your estate as possible, thus enabling you to maximize the inheritance you’ll pass on to your family. It’s mostly popular with homeowners who can’t get a conventional mortgage upon retirement since the scheme works similarly to the residential interest-only mortgage. The loan-to-valuation formula of the mortgage plan is centred on the youngest proprietor’s age and the market value of your estate. Thus, the older you are, the more capital you can unlock since your life expectancy is low.
The interest-only mortgage plan also features a few essential elements that differentiate it from other equity release schemes. It enables you only to clear off the interest so that the amount you owe is the initial amount borrowed, thus it doesn’t go up or down. It doesn’t have an upper age limit, and it lets you build your retirement finances with the fixed-rate option. The scheme also allows you to continue residing in your estate. Still, the on-going interest will be added to your debt from then, thus efficiently becoming a roll-up lifetime mortgage.
Another impressive feature about this scheme is that when you continually repay the interest off your loan, it’ll help you maintain a level mortgage balance. You’ll only refund the initial amount you borrowed once the life of the mortgage ends. If you plan on moving to another estate, you can move the interest-plan across, subject to the estate meeting your plan provider’s conditions.
Since their establishment, interest-only lifetime mortgage plan providers were only required to ensure they’re affordable and so homeowners were needed to provide proof of income. Nonetheless, with market variations and noteworthy alterations in the set laws, the Financial Conduct Authority3 turned this rule around, and now you don’t have to go through any rigorous income or affordability checks.
Many people rave about this financial plan because it also allows you to pick your level of contribution. With proper guidance from your financial advisor, you can get to make a smart decision since this can have a significant impact on the inheritance you leave for your family. So, you don’t have to worry about financing your nephew’s sea fish restaurant since equity release has your back. If you haven’t taken a scheme out yet, hurry and get to your financial advisor today!