A Complete Guide to Voluntary Repayment Lifetime Mortgages in 2022
Would you like to discover the world of voluntary repayment lifetime mortgages?
Look no further!
After careful consideration, unbiased professional advice, and by checking out this lifetime mortgage manual, you will finally understand what are the pros and cons of choosing this plan in 2022.
Let’s take a look.
What Is a Voluntary Repayment Lifetime Mortgage?
A voluntary repayment lifetime mortgage is a type of equity release scheme that allows you to reduce what’s owed at the end of the loan by paying back some of the interest and loan, when you have the means to do so.
How Does an Optional Partial Repayment Plan Work?
With a voluntary repayment lifetime mortgage, you have the option to reduce the final loan amount, and stop the interest from compounding, by paying some of it off when you have the means to do so.
It’s available for homeowners over 55, with a property value that’s at least £70,000.
As with all types of lifetime mortgages, the loan and interest balance is repaid when you pass away or enter long-term care.
What Are the Benefits of a Voluntary Repayment Lifetime Mortgage?
The main benefit of a voluntary repayment lifetime mortgage is that you reduce the amount of equity that’s owed from the sale of your home when you pass away or enter long-term care.
By paying interest, you also prevent the amount from compounding.
Here are some further benefits:
- You don’t have to provide proof of income to qualify.
- The optional partial payment plan is made at the discretion of the homeowner, and you achieve this without any administrative fees or penalties.
- You can decide to make payments following consultations with your lender to ensure that the maximum limit is not breached .
- You can transfer the funds by cheque, debit card, online bank transfers, or even a standing order depending on your plans broker.
Repayment Strategies: All the Options
With regular changes occurring in the equity release market and alterations made in how you can manage your future equity release balance, most brokers4 are initiating several repayment strategies. They include:
#1. Making Interest-Only Repayments
With an interest-only plan, you can effectively maintain a level balance of your loan, thus safeguarding the equity value in your estate and any inheritance you wish to pass on to your beneficiaries.
#2. Utilising the Maximum Repayment Allowance
This allows you to repay not only the interest but also a portion of the equity too. If your lender allows, you can choose a 15% voluntary repayment strategy, and get to repay the whole balance within 8-9 years!
#3. Making Irregular Repayments
The fantastic thing about these optional partial repayment schemes is that you aren’t obliged to make any monthly repayments,
and they can be efficiently switched ‘on or off’ as you wish.
If you think this plan is for you and you want to see how much you can release, be sure to use our voluntary repayment estimator to get an idea of how ad hoc repayments could work for you.
How Much Can You Borrow?
The amount you can borrow with a voluntary repayment lifetime mortgage will depend on your age, your property value, and sometimes the condition of the home.
Further criteria may include the annual interest rate and the yearly repayment plan you choose.
As of 31 March 2022, the Equity Release Council announced that all new lifetime mortgage plans will come with the option of guaranteed repayments.
The voluntary repayment plan can come in handy when you are looking for financial freedom, while continuing to own 100% of your asset.
It’s time to enjoy your retirement.
If you need more information on lifetime mortgage plans, be sure to click here and see how much equity you can release and chat with an expert.