Equity Release Option 3 Retirement Interest Only Mortgage

We suggest there are five core options when considering equity release of capital from property.

In order of priority, after downsizing (option 1) to a smaller property and family capital (option 2) have been discounted:

See Option 1 Downsize Option 2 Family Capital

We suggest the next consideration should be a retirement mortgage for releasing equity from your home.  This is a retirement interest only mortgage and works in the same way as a normal interest only mortgage in that you borrow the original capital and make interest payments each month.  The debt therefore does not increase but the main difference is that a retirement mortgage is open ended/for life i.e., it does not have a maturity/redemption date.  There are several pros and cons to retirement mortgages that you should consider before deciding to proceed or indeed moving on to consider equity release companies and products.

Pros

• Release equity quickly.
• Pay interest each month to keep the debt at the same level and not increasing.
• A lower debt means more equity in the property for you if you later decide to downsize or want more equity release.
• A lower debt means more lower redemption penalties if you inherit money/win the lottery and have enough funds to pay the debt off.
• A lower debt means more equity in the property for your family on your death or for later life care fees means tests if you need some form or social care.
• You keep the future equity growth/property price increases.

Cons

• You will need a secure retirement/pension income to prove you can afford to meet monthly interest payments
• You will also need to prove that you have a secure income for life to meet interest payments for life if needed).
• It is a mortgage so there will be financial advice fees, equity release application fees, property survey fees and equity release legal fees.

There may be many other factors that influence a decision to get a retirement mortgage  If you considered all the options and retirement mortgages are not for you, it is time to think about Options 4 and 5 for equity release products:

Option 4 Lifetime Option 5 Reversion

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