Many years ago, it was quite common to take out an interest only mortgage. After all it was in some cases the only way to get on the property ladder wasn’t it?
It meant you could have a home of your choice without having a hefty monthly payment, especially as interest rates on some occasions were very high. Many people said at the time that you felt in control, you felt safe, and no doubt created safety for your family.
An interest only mortgage is a loan against your home where you pay the interest every month (safety), but the loan never goes aways (fear). In 2014 the regulator changed how these mortgages where managed, putting the responsibility on the lender to remind you that they want their money back. So, your annual statements which explained your account now came with a little reminder saying:
“It’s your responsibility to have a suitable repayment vehicle in place”
Would you be surprised to learn that many didn’t have a repayment vehicle nor did they take notice. Why you may ask….Well because the narrative circulating led many to believe a lender would not exercise the right to ask for the loan to be repaid on retirement or age 70.
But they do. So safety created complacency….The home that you thought was yours for life suddenly becomes a focus and the safety you created now turns in to fear.
Fortunately, there is a solution. Lifetime Mortgages are now very flexible and popular.
It’s a mortgage without the need to be affordability assessed due to the flexibility in whether you make any payments or not, allowing you to stay in your home for many years to come.
Caroline, age 69 was still working to meet her monthly mortgage payment but really wanted to retire. Her home was worth £290,000 and her mortgage was £72,000. The lender was sending her reminders that the mortgage must be repaid in full on her 70th birthday. Caroline had already been making plans to downsize but in the area she lived she could not find a home she liked where her family was. She also had to factor in selling and buying fees and so it wasn’t adding up.
Caroline sought advice and decided on a Lifetime Mortgage to pay off her existing mortgage of £72,000 and in addition, borrowed more for a new kitchen and improvements to her lifestyle. She is now happily retired in the home she loves and has a new kitchen and a holiday booked for the summer.
This was all completed at a very competitive interest rate which was fixed for life and where she could still afford to make interest only payments if she wished. She can even stop making payments in the future if things get tight in retirement – the choice is hers!
Her son was fully aware of the complete process and was delighted to see his mum happy and retired.
Caroline turned her fear and anxiety back to safety and you can too. Don’t put off making plans now to safeguard your home for the future.
Life is short, don’t compromise. Caroline and her son didn’t. Together they brought safety back.
Call us today on 0800 046 9776 to have a chat to see if we are able to help you pay off an existing interest only mortgage.