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Case Study: Interest-Only Mortgage with No Repayment Vehicle

Posted: 19/04/2017

The Problem

A retired couple with an interest-only mortgage nearing the end of its term had received a letter from their current lender requesting for all of the outstanding loan to be repaid.

With no repayment vehicle in place, the couple approached a Mortgage Adviser to find out what remortgage options were available to them. If a lender couldn’t be found in the next month, then the couple’s only option would be to sell the property and downsize.

Due to the client’s low income and age (69 and 64 years), it was difficult for the Mortgage Adviser to find a mainstream lender who would consider offering them finance to remortgage the property. The Mortgage Adviser contacted Ingard’s Specialist Team to find out if there were any specialist residential lenders who would consider the case.

Unfortunately, even specialist lenders with a flexible stance surrounding age and income were unable to consider the case as the affordability would be too low.

The Solution

Ingard’s internal Equity Release Adviser, Neil Mulhearn, discussed the option of repaying the existing mortgage with a lifetime mortgage. The clients were interested in gaining a better understanding of this type of mortgage and the deals available to them, so Neil booked an appointment to meet the client’s face to face at their home.

A lifetime mortgage would pay off the couple’s current mortgage, but unlike remortgaging, it wouldn’t need to be repaid until the homeowners die or go into long-term care. This would enable the couple to keep their home, whilst allowing them to make payments towards the interest each month or on an ad hoc basis, reducing the impact of interest roll-up when the loan is repaid on the sale of the property.

The couple were happy to proceed with a lifetime mortgage through Legal & General at a fixed interest rate of 4.07%. Due to the loan requiring minimal underwriting, the clients were issued an offer within just five days.

On completion, Ingard paid the introducing Mortgage Adviser, 50% of the broker fee (1%) and proc fee (2.25%).

For more information on lifetime mortgages (equity release), call our Specialist Team on 01702 538 800 or arrange a callback.

This case study is for illustrative purposes only.