March 25th, 2014

The current news of the world is sounding the death knell for the interest only mortgage. It is therefore more essential than ever before that should you still be holding an interest only mortgage you manage your risk accordingly.

In today’s world, saving up for your old age is the best way of rewarding yourself for the future. This is the reason why many people originally considered an interest only mortgage. They felt the investment vehicle selected, whether it was an ISA, low cost endowment or personal pension would create a fund surplus at the end of the term. This would have enabled them to not only repay their mortgage, but provide an additional cash sum for their pension provision.

As the decades have gone by, we have seen how the economic world has turned on its head and those now reaching their retirement have hit a financial brick wall with their investments. Whichever way they turn, for one reason or another they have been stung where it hurts – in the wallets. This means they now need to look out for alternatives sources of funding to bridge the shortfalls they are now experiencing. One option that is proving increasingly popular is an interest only mortgage plan that can now run for the rest of your life – commonly known as an interest only lifetime mortgage.

Providing your existing interest only mortgage has not been financed to the hilt & you have a loan-to-value below 50%, there are interest only lifetime mortgage schemes available that could possibly help. The advantage of having this type of a plan is that, you only get to pay for the interest alone for the rest of your life with the knowledge that no repayment will ever be requested until you die or move into long term care. Additionally, should your property value escalate over this period then you may even have further funding capabilities at a later date.

Another benefit of using an interest only lifetime mortgage plan is that you have a chance to buy a more expensive house while paying minimal monthly instalments to the mortgaging company. Like any conventional mortgage, this can be a sure way of obtaining your dream house especially if you are still enjoying a good retirement income from the state and alternative income sources. Paying smaller interest only payments, rather than some of the capital in retirement gives you freedom to handle other more demanding issues, which makes is easier for you to manage your life.

In addition to all these, you also need to make sure you get the best advice and company for the interest only lifetime mortgage. This means you will need the help of an independent lifetime mortgage adviser to help you out, and also help you choose the right interest only mortgage plan.

A word of note though would be this course of action is a last resort. By careful financial planning in your earlier years leading upto retirement can avoid such pitfalls. Prevention is better than cure and if it can be seen that investments set up to pay of an interest only mortgage are falling short, or even not in place, then preventative steps are taken immediately before any damage can be done to your long term future.