Equity release lender More 2 Life is cutting application fees by as much as 48 per cent in response to strong demand for its Interest Choice Plan.
Launched three months ago the Interest Choice Plan is an equity release mortgage that was designed for older people who are still working or need to clear interest-only mortgages.
Application fees have been cut to £155 from £300 for customers with homes valued between £100,000 and £150,000. Fees range from £120 on homes worth less than £100,000 to £820 on homes worth between £800,000 and £900,000 compared with £200 and £900 previously.
More 2 Life’s research shows up to 103,000 over-65s are still paying mortgages spending around £1.36 billion a year.
That breaks down to around 81,000 households in the 65-74 age group and 22,000 in over-75 age groups
The lender forecasts the issue is likely to become a bigger problem as more homeowners with interest-only mortgages come to the end of their term. The Council of Mortgage Lenders estimates 150,000 interest-only loans will mature each year until 2020.
Jon King, managing director of More 2 Life, said: “The cuts in application fees are in direct response to the strong early demand. The Interest Choice Plan is expanding the market by improving on previous plans which offered interest-paying options and offering increased flexibility on access to further funds.”
Interest Choice Plan details
The Plan allows customers to choose the level of interest they pay on loans, and the term, while fixing their interest rate and having access to a lifetime drawdown facility.
Customers can choose to pay all or part of the monthly interest on their loan and choose how much to withdraw. Those who do not take the whole loan-to-value can make further withdrawals.
Loan-to-values start from 20 per cent at age 60, meaning you can borrow 20 per cent of the value of your property. This rises to 36 per cent at age 75 and the maximum is 45 per cent at age 85-plus. The property must be worth at least £70,000.
The interest rate of 6.08 per cent monthly is fixed for life and interest payments are subject to a £25 minimum. Clients do not have to choose a term to pay the interest and can stop free of charge at any time. On further withdrawals rates are fixed on the rate applicable then.
The minimum initial lump sum is £10,000 and the minimum facility including drawdown is £15,000 with the minimum drawdown facility set at £5,000. The arrangement fee is £695.
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