A common question that the over 55’s are asking these days is whether equity release schemes are flexible enough to accept repayments of interest and/or capital. With an increasing financially savvy population, particularly those approaching their retirement, this poses an interesting debate.
Typically, equity release plans have been associated with the roll-up lifetime mortgage principle, whereby NO monthly payments are necessary. For many retirees this is a daunting prospect given the fact that with the compounding of interest, the inheritance they would leave behind could be severely reduced, if not eliminated.
Equity release innovation needed
Equity release providers have therefore been posed themselves the question about how to develop this sector that has historically been devoured of innovation. This lends us back to the original scenario regarding the switched nature of the over 55’s, and how they are now demanding more equity release plans to meet their changing needs.
The baby boomer age group has historically grown up on a life of credit lines such as their residential mortgage, personal loans, hire purchase and credit/store cards. For them, the continuation of a mortgage in retirement is not a serious concern providing adequate pension income is received to fulfil their monthly commitments.
Some of these people will have ended up with a mortgage leading into retirement potentially affected by endowment shortfalls or pension fund under performance. Whichever way they have an outstanding mortgage at retirement, there needs to an option available that can address this common problem.
Halifax tried and failed
Certain equity release companies have researched this and taken note, particularly given the popularity that the now defunct Halifax Retirement Home Plan. Until August 2011, this Halifax equity release plan offered the over 60’s a mortgage based interest only scheme that would run for the rest of their lives. The void this product has left since being pulled from the market has been enormous and left an opportunity for another interest only provider to fill.
Equity release mortgages have now come into their own. Where once they were categorised as a vehicle to enhance lifestyle, they have now become an instrument of necessity, for many who wish to address their retirement shortcomings. These lifetime mortgages can, with product development, provide the ideal solution to an interest only mortgage situation that will only become an even greater issue in years to come.
Changes have started
Today the equity release market has opened up and a variety of new plans are now available. 2012 has seen new products come to market that are pushing the boundaries of how the equity release concept can be expanded and accommodate more people into the fold.
Therefore, to answer to the question – 'Do Equity Release Providers Accept Repayments of Interest and/or Capital', the answer is categorically ‘YES’.
The next article - 'Which Equity Release Companies Accept Payments of Interest &/or Capital' will discuss the three current equity release providers that will accept repayment of interest and/or capital. Here we can look in greater depth at them: -
Hodge Lifetime - Lump Sum Lifetime Mortgage & the Flexible Lifetime Mortgage
Stonehaven - Interest Select Plans - Including Interest Select Lite, Plus, Select & Max
more2life - Interest Choice Plan
To discuss these products further call the team on 0800 678 5159 or click here to read the next article on this subject.