Equity release becomes an option for homeowners starting at the age of 55. However, it's important to note that at this age, the borrowing amount is relatively lower compared to older homeowners. Lenders typically employ a sliding scale, where the amount you can borrow increases as you get older.
Initiating an equity release scheme at a younger age is closely regulated by lenders, who limit borrowing amounts accordingly. Because of this, if it's feasible to postpone equity release, we strongly recommend doing so. This delay can help prevent a substantial accumulation of interest over time.
Modern lifetime mortgage plans now offer various flexible features to address the accrual of interest, including options for voluntary payments to minimize the impact of compound interest.
Nevertheless, many borrowers opt not to make monthly interest payments on their equity release plans. Instead, they repay the borrowed amount along with the accumulated interest when the plan concludes, typically upon the final borrower's passing or transition into permanent care.
It's crucial to understand that forgoing interest payments will result in a significant increase in the amount of interest to be repaid over time. As an example, a plan with a 5% interest rate will cause the overall debt to double approximately every 14-15 years.
Because the age at which you choose to initiate an equity release plan has a substantial impact on both the borrowing amount and the eventual repayment, this decision is highly personal. A specialist adviser from Paxton Equity Release will be happy to assist you in navigating this process and tailoring a plan to your unique circumstances.
