A big reason for the increase in the number of people paying the interest on an equity release mortgage is partly because there are more products available. By paying the interest on your equity release mortgage you are helping to reduce the impact of interest roll-up and potentially the overall amount borrowed.
Making Payments towards your Mortgage
The graph below shows the impact of making payments on the overall equity release mortgage balance for an initial amount of £50,000.
- The red line illustrates an equity
release mortgage where no interest payments have been made. The balance after 15 years is £105,441.
- The blue line illustrates an equity release mortgage where all of the interest is paid off each month. The balance after 15 years is £50,000.
- The green line illustrates where all of the interest and some of the capital is paid off. However, most lenders do require a loan balance of £10,000 to remain.
A monthly interest rate of 5.10% has been applied to each product.
A Solution To the interest only Timebomb
A lifetime mortgage could be the solution and prevent you from having to downsize or move to a different area. A Retirement Interest Only mortgage should also be considered if you can afford the interest only payments. An equity release mortgage could avoid the risk of repossession if monthly payments are not made.
The option to pay the interest could mean that you can continue on a similar basis to a current interest only mortgage.
Equity release could be a lifetime mortgage or home reversion plan. To understand the features and risks, ask for a personalized illustration.