One of the most common questions my clients ask me about equity release is “can I make payments towards the interest?”
Equity release mortgages can be a valuable financial tool for borrowers over 55 looking to access the equity in their homes. By taking out a loan secured against the value of their property, homeowners can access a lump sum or receive regular payments to supplement their retirement income. However, one of the key concerns with equity release mortgages is how they can affect the value of the estate that homeowners leave behind for their loved ones.
One way to preserve the estate while still benefiting from an equity release mortgage is to make regular payments towards the interest on the loan. By doing so, homeowners can prevent the interest from accumulating and eating away at the value of their property over time.
For example, let’s consider a homeowner who takes out a £100,000 equity release mortgage with an interest rate of 6% MER. If they choose not to make any payments towards the interest, after 10 years, the outstanding balance on the loan would be £181,940. However, if the homeowner were to make monthly payments of £200 towards the interest, the outstanding balance after 10 years would be reduced to £149,164. This means that by making regular payments, the homeowner could potentially save their estate over £32,700 in interest.
Making payments on an equity release mortgage not only helps to preserve the value of the estate, but it also provides peace of mind for homeowners knowing that they are actively managing the debt and preventing it from escalating out of control. It’s important for homeowners to carefully consider their financial situation and consult with a later life lending specialist before taking out an equity release mortgage to ensure that they are making the best decision for their individual circumstances.
In conclusion, making regular payments on an equity release mortgage can be a smart strategy for preserving the estate and reducing the impact of interest on the loan. By taking proactive steps to manage the debt, homeowners can enjoy the benefits of accessing their property’s equity while still leaving a valuable inheritance for their loved ones.
Ready to find out more? Visit our dedicated later life lending page to arrange your free 10 minute discovery call!
Mike Jones
Later Life Lending Specialist
Mike Jones is a later life lending specialist who is responsible for the “Mewstone Later Life Lending” service. Mike has years of experience in retail banking as well as extensive knowledge of the later life lending sector.
Choosing to release money from your home is a big decision and it’s important for you to understand all the options available to you. This means that he will always offer you unbiased advice. It doesn’t matter to us which solution or lender is recommend, as long as it is the right one for you.