Repaying an interest only mortgage with equity release

The 1990s and 2000s saw a boom in the popularity of interest only mortgages. Many of these mortgages are now coming to the end of their term with the full or a large amount of the capital still needing to be paid off.

This can be a stressful time for homeowners, who risk losing their home if they are unable to repay the mortgage, and with many of these homeowners in or approaching retirement this can compound the issue. In fact, FCA figures* show that there are approximately 40,000 residential interest only mortgages due to mature each year until 2032 where the homeowner will be past the age of 65 when the mortgage reaches its term.

The monthly juggleUnlocking your property wealth

For anyone looking to repay an interest only mortgage – either during the term or when the term is ending – they can look towards equity release as a way of funding this.

If you are considering this option, you must ensure that your home has enough equity to repay the mortgage in full. Fortunately, for many homeowners who took out an interest only mortgage some 20+ years ago, the previous two decades have seen a significant rise in house prices. This may mean that you have built enough equity up to repay the mortgage.

Modern day equity release

Over the past three decades, the equity release market has undergone a massive transformation – both practically and reputationally – resulting in strictly regulated advice and a wide range of customer-friendly products. This increased flexibility has established equity release as a valuable means for over-55s to meet a range of financial goals, from funding one-off expenses such as home improvements, to providing help to younger generations and gaining financial freedom by paying off an interest only mortgage.

As equity release becomes more trusted and socially accepted its popularity is increasing with nearly half (47%) of homeowners in their 60s – and 57% across all ages** – saying they would be interested in accessing money from the value of their property in later life.

In addition to this, as equity release does not require that the loan is paid back until the borrower moves into a permanent care home or passes away, you do not have to worry about monthly repayments.

You’re not alone

Later life should be a pleasurable time of your life, when you finally think less about work and have the time to do the things that you love and relax. But if you have an interest only mortgage and no means to repay it this can actually become a very stressful time, as the change to your financial situation in leaving work can make things difficult.

If you find yourself in this situation then you’re certainly not alone, in fact a recent survey** found that while most homeowners think it is important to be mortgage free by the time you retire, one in three (32%) of those with a mortgage are not sure they will achieve this.

With that in mind, it’s important to get the right advice to help you deal with your situation and put your mind at ease. That’s where we can help you to explore your current options and to decide if equity release is right for you, without obligation and without it costing you a penny.

It’s important you know

If you are considering equity release, we recommend that you read through ‘Things to think about‘. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits now or in the future. Should you decide to go ahead we offer UK whole of market advice which we charge a fee of £995 for, payable only on completion.

Equity release may involve a home reversion or a lifetime mortgage, which is secured against your property. To understand the features and risks, ask for a personalised illustration.