Q Should I explore equity release when my two-year fixed-rate deal (on my 15-year repayment mortgage) comes to an end? I am 60 next year and intend to work until I am 67. I have a number of decent local authority and private pensions, and also £40,000 in additional voluntary contributions, which should cover any mortgage payment after retirement.
My property on the market would fetch about £300,000, and my outstanding mortgage is £150,000 (but probably £130,000 when the fixed rate expires). I bought last year at the peak of the market.
I have no children and nobody that I want to leave the property to after my death. So I have little ambition to pay off the mortgage (although I would use the AVCs towards it).
What is important to me is low monthly payments. Should I look at equity release, or am I too young?
A No, you are not too young to consider equity release, as the minimum age is typically 55, but you are too young to be able to raise the £130,000 you will need to clear your current mortgage. At 60, the maximum equity you can release is 39.2% of the value of your property, according to Andy Vickery, a qualified equity release and mortgage adviser at Money Release who specialises in over-55s finance – which means that the most you can raise is £117,600. If you wait until you are 62, the most you could release would be a slightly higher £123,900.
The main advantage of equity release for you is that, rather than low monthly payments you would have zero monthly payments. This is because the interest charged on the loan is added to the amount you originally borrowed, so the amount you owe rises each year, as does the interest charged. As you don’t want to leave your property to anybody, this isn’t really the problem it might be to someone who wants their heirs to inherit as much of a property’s value as possible.
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