FAQs – Equity Release To Pay Off Interest Only Mortgage

Can you use equity release to pay off your interest-only mortgage?

Yes, you can definitely use equity release to pay off your interest-only mortgage. This is because there is no limit on the amount you can borrow from the equity release scheme. You just need to make sure that you do not exceed the maximum loan amount allowed by the lender. The maximum loan amount varies depending on the type of property you own. For example, if you own a detached home with a value of £250,000, then the maximum loan amount would be £250,000. However, if you own a semi-detached or terraced house worth £200,000, then the loan amount would be limited to £150,000. If you are interested you can contact a specialist mortgage broker before starting your mortgage application.

How do I get rid of my interest only mortgage?

You may want to consider selling your property before paying back the loan. This would give you access to the cash you need to make the repayment. However, if you sell your home, you’ll lose out on any potential capital gains tax (CGT) benefits.

If you decide not to sell, there are other options available to you. The first option is to refinance or remortgage with another lender. Another option is to borrow against the equity in your home by taking out a secured personal loan.

If you choose to remortgage, it is important to ensure that you find a lender willing to lend you enough money to cover the outstanding amount plus the cost of repaying your existing mortgage.

The second option is to take out a secured personal loan from a bank or building society. You could also ask your current lender about refinancing their mortgage into a fixed rate deal.

What happens when I pay off my interest-only mortgage?

When you pay off your interest-free mortgage, you will no longer be required to make regular payments toward the principal. Instead, you will receive a lump sum payment which will include the remaining balance of the original loan plus any accrued interest.

This means that you won’t have to worry about making regular payments again.

However, you should note that once you have paid off your interest-only loan, you will still be responsible for paying the full amount of the original loan.

What is the age limit for repaying interest only mortgages with equity release?

Every mortgage lender is different age limits for mortgages for equity release. Some lenders allow borrowers to repay an interest-only mortgage until they reach the age of 75 years old. Others require borrowers to wait until they turn 65 years old.

It is important to check what the age limit is for your particular circumstances.

If you are planning to apply for a new mortgage with a lender who has an older age limit, you might want to think carefully about whether this is something you really want to do. It is possible that you could end up having to pay more towards your mortgage than you originally expected. So, it is always better to contact a qualified mortgage advisor before starting the application.

Can I use equity release to pay down my credit card debt?

Yes, you can use equity release to pay your credit cards and other unsecured debts. In fact, many people use equity release schemes to help them manage their finances better.

What is a lifetime mortgage?

A lifetime mortgage is a form of long-term borrowing where the borrower agrees to pay a set amount each month over a specified period of time.

In return, the lender agrees to provide the borrower with a lump sum at the end of the mortgage

Why should I choose interest-only equity release?

There are several reasons why you may wish to opt for an interest-only equity release scheme.

Firstly, you may be able to save yourself thousands of pounds in interest charges. If you were to pay back the whole amount of your mortgage, you would be charged interest every single month. This would mean that you would need to pay back your entire mortgage within just a few short years. However, if you chose to go for an interest-only mortgage, then you will not be charged interest on the capital borrowed.

Secondly, you may be able to avoid the hassle of having to make monthly payments. When you pay back your mortgage, you will receive a one-off lump sum instead of regular payments. You will also be free from worrying about making regular monthly payments.

Finally, you may be able to find a cheaper rate of interest if you choose to take out an interest-only mortgage. The reason for this is that most lenders charge higher rates of interest on loans taken out for shorter periods of time.

Can I use the equity release for home improvements?

Yes, you can use the equity release for home improvements. Many people use equity release to improve their homes or even build extensions.

However, there are some things which you should keep in mind when using equity release to fund home improvements. Firstly, you must ensure that any work carried out does not increase the value of your property by more than 10% above its current market value. Secondly, you should ensure that you obtain written permission from your lender before carrying out any work. Finally, you should only carry out work which is necessary and affordable.