| Just Retirement recently quoted“Interest Only Mortgages” may be a ticking time bomb but are you ready for the equity release explosion?
40% of interest only mortgages (equivalent to 60,000) will not be repaid every year until 2020. Of these, how many will find that they cannot extend their mortgage term with their current provider, or be able to fund the cost of increased monthly payments should their provider insist on them switching to a repayment mortgage?
Do any of your clients fall into the category above?
During the course of last year I was able to help a number of clients who had been approached by their existing lender to advise that the term of the mortgage was coming to an end. The lenders are then asking how the mortgage is going to be repaid. Many customers are either faced with a shortfall or indeed have no repayment vehicle at all.
Imagine your clients being faced with having to repay their mortgage and possibly the only solution is to sell their home and downsize! The time may not be right, they may be very happy in their current home; it is likely they were expecting the lender to just extend the loan!
Certainly, the customers I have met in these circumstances became very concerned at being landed with a ticking time bomb on the countdown to the mortgage ending.
The lenders are working with customers to get a result however in many cases the only practical solution for them has been in their own mind to move.
THERE IS HOWEVER POTENTIALLY ANOTHER SOLUTION
Inevitably the vast majority of people affected will be moving towards retirement if not already retired. Equity Release can provide a solution to allow the customer to stay in their current home. A Lifetime mortgage may be the answer to their problems as the loan is only repaid on death or moving into long term care (repaid on second death or care for couples).
Some lenders will even consider an interest only Lifetime Mortgage which would return the customers back to the Status Quo and take away the need to downsize putting the decision back in the hands of the customer as to when they might wish to downsize. There is even a lender who will allow repayments of capital and interest. I am also able to potentially arrange a conventional mortgage to aged 80 as a further alternative.
Inevitably, Equity Release will not be right for everybody particularly where the loan to value is high and of course if the customers are happy to downsize that will remove the debt forever. This solution will only appropriate for a small number of people who meet the age criteria and clients must of course obtain personalised advice. A cash lump sum or income from an equity release scheme may reduce the borrower’s eligibility to state benefits. An equity release scheme will reduce the value of the borrower’s estate and may leave nothing to pass on as an inheritance if no interest payments are made.
If you have any of your clients in this position and are concerned, I would be only too pleased to speak either with your good-self or your clients to enable them to consider all the alternatives before deciding what to do. Remember, the initial meeting is free of charge and could provide them with a real solution.
RING ME ON 01704 512120 OR 07714 414545 IF YOU THINK I CAN HELP
Equity Release includes home reversion plans and lifetime mortgages. To understand the features and risks, ask for a personalised illustration.
Your home may be repossessed if you do not keep up repayments on your mortgage
For equity release we can be paid by commission, or a fee of usually £895 or a combination of both.
Steve Harrison CeMAP, CeRER
Equity Release Consultant