We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
remortgaging - interest only
i am hunting more info. Not for my own circumstance. More " did i hear that correctly". apologies if it's in the wrong box.
once i have paid off my mortgage, am i allowed in retirement, say to borrow £20,000 on "interest only" basis. with that refunded (plus costs) when i die. I would then have extra money in my pocket, but have to pay the interest each month. Or is it not true?
Comments
-
yes, it's called equity release - of course it depends on your individual circumstances and value of property etc
1 -
is there any pitfalls of equity release?
0 -
of course - if you fail to make payments your house can be re-possessed.
also it impacts any inheritance once you die
1 -
Equity release can go further and you pay nothing at all during your life but your estate will have to settle the debt on your passing (or when you permanently move into care). Obviously in this scenario you have compound interest to deal with as year 1 you are paying say 8% on £20k, year two you are paying 8% on £21.6k, year 3 its 8% on £23.7k
It tends to have a higher interest rate than a normal mortgage.
The main "issue" is that you have a £100k house, you borrow £20k, the interest is all compounding because you arent repaying anything and when you pass the debt could be more than the value of the property. Decent providers cap the debt at the property value but certainly older ones didnt so kids etc were hoping to get a free house and the contents of your savings when in reality they end up handing over the house and using most your savings to pay the excess debt.
3 -
thats good. if my situation arose i would pay the interest back, so its a case of repaying the 20,000 on death
0 -
Do be aware that not all property is suitable for equity release as the lenders can be a bit picky about things like commercial adjacencies, electricity pylons, non-traditional building methods etc.
0 -
surely if you are paying the due interest the original capital is only to be repaid. in this example i would still owe £20,000, only
0 -
Why not just borrow the £20k from your existing lender on an interest only mortgage. You can have interest only and repayment mortgage.
A thankyou is payment enough .0 -
As normal lenders have maximum ages and that leaves the OP needing to repay the £20k in the future assuming they live into the 80s+
The "benefit" of equity release is you dont ever have to pay it back in your lifetime unless you go into care permanently. You therefore dont have to show a bank how you're going to be able to repay the principal in potentially a few years time depending on how old the OP is.
0 -
The OP doesn’t state their age, there are lenders who allow people into their 70’s.
A thankyou is payment enough .0
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 354.3K Banking & Borrowing
- 254.4K Reduce Debt & Boost Income
- 455.4K Spending & Discounts
- 247.3K Work, Benefits & Business
- 604K Mortgages, Homes & Bills
- 178.4K Life & Family
- 261.5K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.7K Read-Only Boards