Equity Release offers solution to older interest only borrowers
Many borrowers in their 50s with interest only mortgages are facing a financial shock when their mortgage reaches the end of its term as they have no repayment vehicle in place. Some borrowers took up endowment policies or other investments planning to use the payout to repay their loan and have found that the return on these isn’t sufficient to repay the mortgage whilst others never put any plan in place to repay their mortgage at the end of the term.
Advisers have reported that more than 40% of over 55s have not paid off their mortgage and half of their over 55 clients are on interest only deals. Indeed over the next 30 years the Financial Conduct Authority (FCA) estimate that there are 2.6 million interest-only mortgages due to be repaid and 48% of these borrowers have underestimated their shortfall.
Richard Espley Head of Equity Release comments:
“Equity Release lenders offer a range of plans that are suitable for older interest only borrowers who reach the end of their mortgage term with no means to repay their capital. For some, rolling over an interest-only mortgage into a lifetime mortgage can be the best solution, particularly if they have no wish to move home. In this way they can release property equity to meet their capital shortfall and still remain in a familiar and much loved home during their later life.”
Content correct at time of publication