Most people with a mortgage will have always had it in mind that they wanted it paid off by the time they retire. There is, however, a type of mortgage that you can have for the rest of your life and not pay one penny back for as long as you live.
Some types of equity release mortgages allow you to receive a lump sum, to which you make no monthly repayments. Instead the interest on the mortgage rolls up, and the entire amount is repaid when you die or go into long term care, from the proceeds of the sale of your property. There are provisions in place with most equity release schemes called a ‘no negative equity guarantee’ which mean that the amount which you owe can never exceed the value of your home. Therefore, even if the mortgage balance is more than what your home is worth, you would not need to pay back the amount above the value of your home.
In an era of low interest rates, elderly savers that have relied on the interest from their bank accounts to live on for many years may be finding it hard to cope with the drop in income. Why not use some of the equity they have in their homes to live more comfortably and enjoy themselves? Many people do not want to reduce the value of their estate so that they can pass something on to their family, but I think most families would rather see their parents and grandparents living comfortably than receive a bigger inheritance.
If helping the younger generations is the most important thing to you, you could find that you are able to gift money via an equity release scheme, to provide them a deposit for a home or other financial assistance.
Then there are those who own a home and do not have anybody that they wish to leave money to. I would say that a lot of these people should at some point release the equity they have in their home and enjoy their wealth. There’s no point in letting all the money you’ve worked for go to waste, when you could use it to enjoy your life.
Jenny Ennis Cert CII(MP)
16th March 2020