There are many different ways to raise some money in retirement from releasing equity in your home. An interest only equity release mortgage is becoming a popular option for those people who have a good retirement income but need a lump sum of money.
In this scheme you will be able to borrow a lump sum of money in the same way that you would with a mortgage. You will then be charged interest each month. You will pay back the interest owed. Then when you no longer need the house and you decide to sell it, the lump sum will be paid back before the rest of the equity is paid to those inheriting money.
This option is really good if you want to get a lump sum of money. You may need this to pay for a holiday, repairs on your house or perhaps to give away to children or grand children that are in need of help. It can be frustrating knowing that you have capital tied up that you cannot get hold of and so this is a great way to release it.
The advantage of doing it this way is that there will be no costs to be paid after you die. You will have paid the interest on the mortgage and so when the house sells, there will be no additional fees, just the lump sum to pay back.
Another advantage is that you can use any type of mortgage rather than just looking at equity release ones. You do not need to be so limited in your choice and that means that you are more likely to get a better deal, something that is more competitive. You will also have the option of being able to borrow more in the future or even going for a reversion scheme.
This can be a more satisfactory and flexible approach for those with a decent retirement income. However, it is important to make sure that the interest will always be affordable. At the moment interest rates are low and so it can seem that it is a great thing to do. However, imagine how you might cope when they start to rise. They have been as high as 15% in the past and are only 0.5% at the moment and so the interest only payment could significantly increase in the future. Make sure that you will still be able to afford the payments if this does happen.