How do the interest payments work for equity release? Mark Gregory of Equity Release Supermarket helps a reader who wants to know the repayment options
The Question
I wondered if you could explain more about equity release for me. I heard about it through an advert and can’t get my head around the interest payments. Is it a bit like a mortgage where I lock into a rate for a specified time or are there variable options?
Mark’s Answer
Thank you for your question and I am very happy to confirm that all current Lifetime mortgages have fixed interest rates from the time the loan completes until it is repaid, which is usually when a customer passes away or enters long-term care, and for joint cases, on second death, or the second applicant enters long-term care.
To clarify, a Lifetime mortgage is different from a conventional mortgage because you can decide whether you want to make payments or not.
For example, a fixed interest rate will be calculated daily and added to the mortgage monthly, or annually depending on the provider.
If you decide not to make payments, the loan will increase with interest and compound each month or year. However, if you prefer you can make partial flexible payments and pay some or all of the interest and part of the capital each year.
In fact, you can stop and start payments based on your personal circumstances without penalty. The Equity Release Council is the trade body which sets the standards for the equity release industry, and they confirm for lifetime mortgages the rate must be fixed for each release. If variable, the rate must be capped for the life of the loan and as noted above, no current plans have variable, capped interest rates. To view current rates in the market please visit our equity release comparison table.
If you would like to know more about equity release and check your eligibility, please contact one of our friendly equity release advisers who can provide you with information without obligation. They would only charge a fee if you decided to proceed with a plan they have recommended. and this charge would only be payable on completion.
Meet our expert…
Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.
He launched Equity Release Supermarket 10 years ago and it has grown to become one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask Mark a question
