An endowment mortgage is a special type of interest only mortgage that is accompanied by an endowment policy which uses stock market investments as a means of repaying a mortgage. In recent years many consumers have found that their endowment policies are simply unable to repay the mortgage. These endowment shortfalls have lead to mortgages into retirement.
Retirement Mortgages Covering Shortfalls
It is possible to get mortgages which are specifically for retired individuals and these are often suitable where an endowment policy has failed to repay a mortgage. One such scheme is the Halifax retirement mortgage which is essentially the same as an interest only mortgage in that monthly contributions are made to cover any interest. The difference is the mortgage remains unpaid until death. You could also move to a new main residence and be required to repay it.
This is beneficial in that the balance owed does not grow unlike other equity release schemes in which interest is essentially rolled into the outstanding amount owed and continues to grow.
Research Mortgage Products
As with all mortgages and equity release schemes it is important to fully research all options and ensure that you make the right decision for your needs. Do not allow the stress of an endowment policy shortfall to pressurise you into making a poor decision about the way in which you release equity in your home to pay back the mortgage.
Home reversion is a type of equity release provided to retirees aged 65 and older. It is designed to sell part of your property, where a buyer invests in the potential appreciation of the home value. In exchange for their investment they provide you with funds at lower than current market share. In this way there is potential room for growth in their investment. You live rent free in the house until you decide to leave or until death occurs. Since it is not a mortgage and there is no repayment it can be a more comfortable situation.
If selling your home is not comfortable to you, lifetime mortgages are your other option. Already the Halifax product was mentioned. It is only one of your lifetime equity release products on the market. Others available are not based on interest only set ups.
If you feel you will not have the funds to pay a monthly interest payment, you can select a roll up or drawdown lifetime mortgage.
No-Interest Required Loans
If you do not wish to make an interest payment, you can allow the interest to accrue over your lifetime. Like the capital sum remains unpaid until the end, the interest will compound onto the loan amount. At death or your decision to make a different location your main residence, you are required to pay all interest and capital sum back. This is normally done by selling the home. Should there be any equity left in the home at time of sale it is given to your beneficiaries or you.
The difference in roll up versus drawdown is access to equity. With a roll up option you obtain a lump sum. It is given only once and based on value and accrued interest for your life expectancy.
Drawdown sets up a facility. You take a small lump sum in the beginning. When this money runs out or you have an emergency to cover, you can withdraw more funds at any time from the equity account. Interest compounds onto the sum of money you use, not what is available and unused in the account. This can save you a little in interest accrual over your lifetime. It is also second only to the interest only lifetime mortgage in leaving behind inheritance for your beneficiaries.
Gain Advice from Various Locations
You can start your advice research by reading articles such as this one. Take a few different articles from a couple of different sites if you want. You should look at FAQs, issues from other borrowers, and thoroughly go through articles to develop questions. In this way you can seek advice from banks, financial experts, and unbiased individuals who know about equity release to gain a firm understanding of the different products on the market.
It is also advisable to take independent financial advice about your options. With the Retirement Mortgage you can also request a personalised financial illustration of how the mortgage will change over time. Remember that your twilight years should be the least stressful possible and therefore it is of the essence to make the best choice at this stage.