How an interest-only mortgage is repaid at term through equity release
Sarah's interest-only mortgage has expired, and she has to repay the capital. In this scenario we see how she's able to use the equity in her home to manage the repayment.*
Sarah Jones is a 65-year-old retired widow. Her residential interest-only mortgage has reached the end of its term, and she is now required to repay the capital sum of £80,000.
Based on her age and income, she could not qualify for a Retirement Interest Only (ROI) or residential mortgage, and her mortgage company is unwilling to extend the term any further. Also, she does not want to downsize.
By choosing a lifetime mortgage, Sarah is able to release the £80,000 from her home's equity to pay off her mortgage. Payments are optional, but in the months when she has surplus cash, she may choose to make a payment to help reduce the interest roll-up.
Sarah's lifetime mortgage allows her to retain home ownership while guaranteeing no negative equity.
Things to consider
Before applying for equity release, weighing alternative options and looking at the possible effects on your finances is important. These include:
- Downsizing and other forms of finance
- Compound interest roll-up if chosen
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Early repayment charges
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Long-term care and state benefits considerations
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A lifetime mortgage may impact the inheritance you leave
Get in touch
Speak to our Wealth Specialist, Toni Chalmers-Smith or Senior Associate Solicitor Catherine Banks at Tees today.
*Examples of customer scenarios only. Every case will be different.
This material is intended for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice. Some information quoted was obtained from external sources we consider to be reliable.
Tees is a trading name of Tees Financial Limited, authorised and regulated by the Financial Conduct Authority. Its registered number is 211314.
Tees Financial Limited is registered in England and Wales, registered number 4342506.
Chat to the Author, Toni Chalmers-Smith
Wealth Specialist, Wealth Management, Bishop's Stortford office
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Jim Hook
Bishop's Stortford
'Tees supported me in my role as attorney for my elderly mother-in-law in obtaining release of capital from her house to fund her care, enabling her to continue to live in her own home. This was a protracted process requiring an application to the Court of Protection as well as advice on the equity release market and the conveyancing aspects of the transaction. Tees’ multi-disciplinary expertise meant I could find all the help I needed from the one company: Toni Chalmers-Smith as wealth specialist, Francis Gill with the Court of Protection and Catherine Banks on the conveyancing. A great team'
Mr Lawrance Lucas
Hunsdon, Herts
I'm very grateful for the professional service that everyone at Tees has shown me: Cathy Izzard who drew up my late mother’s Will and obtained probate; Toni Chalmers-Smith for care fees planning and Allan Wright for the conveyancing. They're knowledgeable, approachable and have empathy.
Mrs Mary Pope
Herts
Toni Chalmers-Smith and her colleagues define "where there's a will there's a way". Toni demonstrated tenacity, drive and an ability to think round problems and find solutions to deliver a result. Toni and the team at Tees are a must for anyone considering financial advice.