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Lifetime Equity Release Mortgages Options for Pensioners

Pensioners may need some extra money for either maintaining their house, financing medical treatment, or for simply enjoying their retirement. No matter what the reason, there are different options available for pensioners. Due to demographic changes of the British population, more pensioners tend to seek financial solutions for their diverse needs. Therefore, home equity release schemes have been around for some time already, to satisfy this demand of the elder part of the population. Nevertheless, many pensioners are still unaware of the available options, and thus some enlightenment is needed.

Lifetime Equity Release Mortgages explained

Generally, there are two main types of equity release lifetime mortgages available in the UK: The most popular ‘lifetime mortgage’ and the ‘interest only equity release mortgage’. An establishment such as Stonehaven offers both options and you can click here for more information on such choices.
Both versions make use of the value of the home, securing the mortgages on it, which makes a property value specification necessary. No matter which mortgage is chosen, the debtor stays the owner of its home until his/her death or move into long-term care, and thus is in charge for the property’s maintenance. However, in none of the long term contracts the due amount cannot become higher than the property’s worth, even though the property may lose value over time.
Lifetime Equity Release Mortgages Options for Pensioners
A lifetime mortgage means that the borrower gets a tax-free lump sum or payments by instalments at an in most times fixed interest rate. The amount plus its compound interests will be paid back with the proceeds of the sold house after the owners’ death or their move into long time care. As the amount is ‘rolled-up’ and the interest is calculated on an increasing amount, the debt is growing over time.
Having agreed on the second mortgage option, the payment of the interest instalments happen during lifetime whilst the lenders are still living in their house. Only the debt repayment of the original loan happens at the end of lending period. Therefore, this version allows reducing the debts and costs, and is a great way to keep hold of an inheritance for the family.
However, there may be other options to equity release mortgages, which may be worth considering. Sometimes, selling the house and moving into a smaller accommodation is more cost-effective. If only a small amount or small install payments are needed, one can consider to borrow money from relatives or to accommodate a lodger. Often the council can provide further help if money is needed for a house’s maintenance, and so forth. To find the best option, one should discuss this with the family, benefits centres and independent financial advisers. Pensioners who decided already on a mortgage can seek advice from Retirement Mortgages.

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