Are you at risk from the mortgage time bomb?

The 1990’s and 2000’s have a lot to answer for

Interest-only time bomb##

No, not shoulder pads, Maradona's 'Hand of God' or Gazza's tears; but the thousands of interest-only mortgages which were sold at the time.

2017 is the first year in which a large number of these mortgages will reach maturity, and it has been predicted that almost half of those with an interest-only mortgage will not be able to repay their loan in full¹.

And, of those, 50% would have a shortfall of more than £50,000¹.

Homeowners in this position often don't have a repayment vehicle in place to repay their mortgage, so they need to find an alternative. In some cases they will be able to remortgage to a repayment deal – although it will depend on their financial position and whether the mortgage company deems them a good risk.

Alternatively, they can consider downsizing, and paying the mortgage off with the equity freed up in the move.

If they are unable to get a mortgage, and don't want to move, they can also consider equity release, which allows homeowners who are aged 55 and over to release some of the equity tied up in their home, and turn it into tax-free cash. They are essentially borrowing against the value of their house, but instead of paying the interest, it is rolled up and needs to be repaid when the property is sold or when the owner passes away.

Click here to find out how much cash you could unlock

Current equity release market conditions, such as low lifetime mortgage interest rates and favourable house prices has meant there has been an uplift in the number of interest only borrowers turning to equity release.

House price rises work in favour of equity release plans for two reasons. First, UK average house prices have risen by 26% since 2012², which means homeowners could have more equity than they thought. And second, many equity release plans allow homeowners to maintain 100% homeownership³, so they could benefit from any future increase in its value.

Click here to find out how much cash you could unlock

Other features of equity release can include the option to move home in the future, or to protect part of the property's value, so they can be sure to have some value left in the property to leave to their loved ones.

Click here to find out how much cash you could unlock

Those who are considering releasing the cash locked up in their home should seek independent, impartial advice to ensure that it is the best option for them.

Age Partnership has qualified advisors who will compare the whole of the market and only recommend a plan if it's in your best interests. They will discuss all the options, including what impact it could have on the size of your estate over time and if your entitlement to current and future means-tested benefits may be affected. They provide initial advice for free, and only if you choose to proceed and your case completes would a typical fee of 2% of the amount released by payable.

To find out more about equity release including how much money you could release from your home, Click here.

Equity release may involve a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration.

Sources. ¹FT Adviser Jan 2017 (quoting from the FCA) ²Nationwide rise from Q4 2012 to Q4 2016 ᶾYou only continue to own your own home with a lifetime mortgage, secured against your property.


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