What are my interest only lifetime mortgage options should I enter retirement and still have a mortgage?

What are my interest only lifetime mortgage options should I enter retirement and still have a mortgage?

As someone approaching retirement, the chances are good that you are keen to supplement the income that will be afforded to you monthly once you pension scheme begins to pay out.  For many people, a lifetime mortgage is an elegant means by which to achieve this goal; however, for some, the business of acquiring this kind of policy can be fairly complex.

To begin with, it is important that you understand the fundamental principles on which a lifetime mortgage is founded. Essentially, this kind of policy is a variation on the basic equity release scheme. While the conventional plan requires that you make no payments at all, the interest-only lifetime mortgage involves paying off the interest accumulated on your loan in monthly instalments.

In this way, you will reduce the risk of saddling your estate with a significant debt in the future; conventional equity release can result in the value of the loan outweighing the value of the property against which it was originally taken out. For this reason, a financial ombudsman will invariably advise you to opt for interest-only options if you can.

If you are keen to sign up for a lifetime mortgage equity release product, but you already have an existing mortgage, you may find that some institutions will not allow you borrow the money. Others, however, will allow you to unlock only a percentage of the capital tied up in the property: you will be able to take out a loan equal to the value of the house minus the outstanding mortgage payments.

Because sourcing and acquiring equity release can be a tricky business it is always a good idea to go into the process well-informed. Find yourself a good financial advisor; with guidance, you will be able to keep your finances in good order and to avoid reckless borrowing.

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