Case Study: Using Equity Release to Address an Interest-Only Mortgage
The Background
Steven and Sarah (names changed for confidentiality), aged 65 and 63 respectively, were nearing the end of their interest-only mortgage term, with a remaining balance of £180,000. Determined to remain in their £850,000 family home, they faced uncertainty about how to obtain the finance, with income from overseas, pension pots being drawn down on ad-hoc not regularly, and the income bias heavily weighted to one applicant not equally. Seeking an effective and sustainable solution, they turned to J Finance for professional advice.
The Challenge
The couple’s financial priorities included:
Fully repaying their existing mortgage balance.
Retaining ownership of their home.
Ensuring monthly payments were affordable on their retirement income.
Preserving a portion of their home’s equity for their beneficiaries.
The Solution: Interest-Serviced Lifetime Mortgage
After a comprehensive analysis of their needs, J Finance recommended a Lifetime Mortgage. This equity release product provided:
Full repayment of their interest-only mortgage, enabling them to stay in their home.
Monthly interest payments of approximately £930, ensuring that the loan balance remained stable over time. This also meant they were offered a discounted interest rate for agreeing to service the interest.
A fixed interest rate providing long-term predictability.
A cashback incentive of £1,800 (1%), which could be applied towards fees.
A no-negative-equity guarantee, ensuring their estate would never owe more than the property’s eventual sale value, unlikely to be a problem with interest serviced plans and a good amount of equity however.
The Process
Initial Consultation: Steven and Sarah worked with J Finance to discuss their objectives and concerns. This was done via a video call.
Customised Recommendations: An interest serviced product was the most suitable solution.
Application and Approval: J Finance guided them through the application process, recommended a solicitor to assist, ensuring the adviser, legal representative and lender were all Equity Release Council Members.
Completion: Within six weeks, the funds were released, their existing mortgage was cleared, and they began making interest payments.
The Outcome
John and Sarah successfully achieved financial security in retirement while maintaining their cherished home. Key benefits included:
Home Retention: They avoided selling their home and could remain there indefinitely.
Stable Financial Management: By servicing the interest, they prevented debt escalation.
Preserved Equity: Significant equity remained for their children’s inheritance.
At J Finance, we’re committed to offering personalised financial solutions. If you’re exploring equity release or other ways to address an interest-only mortgage, contact us for expert advice and guidance.
A lifetime mortgage is a loan secured against your home. Equity release will reduce the value of your estate and may affect your entitlement to means tested benefits.