How an interest-only mortgage is repaid at term through equity release

Sarah's interest-only mortgage has expired, and she has to repay the capital. In this scenario we see how she's able to use the equity in her home to manage the repayment.*

Sarah Jones is a 65-year-old retired widow. Her residential interest-only mortgage has reached the end of its term, and she is now required to repay the capital sum of £80,000.

 Based on her age and income, she could not qualify for a Retirement Interest Only (ROI) or residential mortgage, and her mortgage company is unwilling to extend the term any further. Also, she does not want to downsize.

 By choosing a lifetime mortgage, Sarah is able to release the £80,000 from her home's equity to pay off her mortgage. Payments are optional, but in the months when she has surplus cash, she may choose to make a payment to help reduce the interest roll-up.

Sarah's lifetime mortgage allows her to retain home ownership while guaranteeing no negative equity.

Things to consider

Before applying for equity release, weighing alternative options and looking at the possible effects on your finances is important. These include:

  • Downsizing and other forms of finance
  • Compound interest roll-up if chosen
  • Early repayment charges

  • Long-term care and state benefits considerations

  • A lifetime mortgage may impact the inheritance you leave

Get in touch

Speak to our Wealth Specialist, Toni Chalmers-Smith or Senior Associate Solicitor Catherine Banks at Tees today.

  *Examples of customer scenarios only. Every case will be different.

This material is intended for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice. Some information quoted was obtained from external sources we consider to be reliable.

Tees is a trading name of Tees Financial Limited, authorised and regulated by the Financial Conduct Authority. Its registered number is 211314.

Tees Financial Limited is registered in England and Wales, registered number 4342506.

Chat to the Author, Toni Chalmers-Smith

Wealth Specialist, Wealth Management, Bishop's Stortford office

Meet Toni
Toni Chalmers-Smith, wealth specialist, Equity Release, later life planning
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