Other ways to reduce the cost of your lifetime mortgage However, if you are unable to make repayments towards your lifetime mortgage, there are other options that could help to manage the size of your loan. Consider a drawdown plan
How can I reduce the cost of my lifetime mortgage?
All the plans we recommend come with options to help reduce the total cost of the borrowing if that’s important to you; for instance, if you wish to leave a larger inheritance. Making repayments Even though there are typically no monthly
to secure a lower rate. By paying a lower interest rate, you can reduce your total cost of borrowing. However, a reduction in interest rates in the future isn’t guaranteed. It’s also important to remember that an early repayment charge (ERC) may be payable if you choose to remortgage your equity release plan. However, all plans that we recommend come with fixed ERCs, meaning they expire after a certain amount of time. Your equity release adviser can explain this in more detail to you.
With a drawdown lifetime mortgage, you only take out the money you need when you need it. This can help reduce your total cost of borrowing, as interest is only charged on the money you release, rather than the full amount available. You can read more about this on page 16. Remortgage to another equity release plan in the future If interest rates reduce in the future, you may have the option to remortgage your current plan
your total cost of borrowing would be £223,915*. However, by making a monthly £250 repayment, after 15 years, you’d owe £146,440 – with a total cost of borrowing, including repayments, of £191,440. This means, by repaying £250 a month, you, and your beneficiaries, could benefit from a £32,475 net interest saving.
repayments to make with a lifetime mortgage, all plans that we recommend come with the option to make ad-hoc or regular repayments to help reduce your total cost of borrowing. Even if you’re only able to make small repayments, it will help reduce the amount of interest you pay over the lifetime of your loan. In this example, if you were to borrow £81,703 and make no repayments at all, after 15 years,
How making repayments can help you manage your total cost of borrowing Total cost of borrowing making no repayments would be £223,915
Flexible features for personalised plans Here’s an overview of the flexible features available with the lifetime mortgages we recommend, specifically designed to help put you back in control of your later life finances. Lump sum or drawdown
Total cost of borrowing repaying £250/month would be £191,440 Net interest saving of £32,475
Downsizing protection If, for any reason, you need to move home, you can pay the loan back early without incurring an early repayment charge if the new property doesn’t meet your plan’s criteria. Early repayment charges All plans that we recommend have fixed early repayment charges, so you’ll always know what the charge will be should you wish to repay your loan early.
Choose to release a lump sum of tax-free cash or take out an initial amount and draw down money in stages. With a drawdown, you only ever pay interest on the portion of your facility
— £142,212
Interest accrued
— £81,703 Initial loan — £64,737 — £45,000
Repayments made
that you have withdrawn. Optional repayments
Interest accrued
With a lifetime mortgage, there are typically no monthly repayments to make, as the loan, plus roll-up interest, is repaid when the plan comes to an end. However, there are benefits to making repayments if you can afford to do so. Partial capital repayments Make voluntary, ad-hoc repayments up to 10% of the initial amount you’ve borrowed each year (without incurring an early repayment charge) and reduce the size of the loan on which interest is charged.
— £81,703 Initial loan
Initial release amount of £81,703**. Plan subject to a fixed interest rate of 6.74%** MER. Interest and repayments shown over a 15-year period. *Based on a fixed 6.74% MER (Monthly Equivalent Rate) interest rate. **Key Market Monitor Q1, 2023
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