Mrs Rogers was faced with having to repay her interest-only mortgage but couldn’t get further access to finance from her lender because of her age.
I first heard about Mrs Rogers’ situation through an estate agent who had been to value her house, where she had lived for over 38 years. Her interest-only mortgage was coming to an end and she had no means to repay the capital. She thought her only option was to sell up and downsize. Mrs Rogers had booked the valuation with a view to putting her house on the market. However, after chatting with the sales negotiator and explaining that she did not really want to move house, the negotiator thought I may be able to offer an alternative financial option.
I booked an appointment to see Mrs Rogers myself; we discussed the different options available to her such as downsizing as well as equity release. She said she had already considered using equity release beforehand but did not like that interest was added to the loan – she wanted to leave as much of her property as possible to her three children for an inheritance.
I suggested the Interest Choice Plan which is offered by More 2 Life, as I felt it was ideal for someone in her position. The plan gives clients the option of a lifetime mortgage with the flexibility of making monthly interest payments. By being able to service some or all of the interest on the loan, clients can reduce the total amount that will be owed when the house is sold at the end of the loan. Customers are also able to convert their loan to a roll-up lifetime mortgage anytime they wish, free of charge.
Mrs Rogers was delighted with the plan as she could release enough money to ensure a secure financial future and leave an inheritance for her family, which was really important to her.
There should be more innovative products in the equity release market which allow customers to pay down their debt.
Age limits for borrowing are outdated and should be scrapped, lenders should assess on the ability to repay, and age should not be a factor. What shocks me most is that most lenders don’t consider the state pension as an income, however it is one of the steadiest sources of income for older people and it should be taken into consideration when deciding whether they can meet the repayment criteria.
As clients get older and move through retirement, equity release could provide the kind of financial outcome only a lucky few will secure through pension savings alone. There are still hurdles to overcome to convince more clients to consider this option, but the financial benefits for those that do are second to none.