Equity Release and Voluntary Repayments Plans

Equity Release Voluntary Repayments-min


If you’re interested in releasing some equity from your property but would like to stay in completely in control of your finances, a voluntary lifetime mortgage plan might be perfect for you.

Here, we’ll go into some detail about what a voluntary plan involves, answer some common questions and explain how to get a little more info if it sounds like it might be right for you.

What is a Voluntary Repayment Plan?

A voluntary repayment lifetime mortgage plan is a variation on existing lump sum and drawdown plans and actually allows you to repay up to 10% of the amount borrowed every year without incurring any penalty.

By making payments toward the balance, homeowners can minimise the amount of interest that builds up on the plan – and by doing so, control the balance in line with your own financial wishes, whether that’s for you, or for possible beneficiaries.

Benefits of a Voluntary Repayment Plan

Voluntary repayment lifetime mortgage plans open a different source of lending for people approaching or already in retirement age – and the key is in the name – ‘voluntary’.

Because payments can be made, rather than have to be made, lenders do not require any proof of income as they would with traditional mortgage payments. As such, if you’ve looked at traditional mortgage payments but been hindered by your age or a reduced income after retirement, a voluntary plan could be perfect.

What’s more, there are generally no admin fees or early repayment charges, so you’re free to pay back as much or as little as you like, as frequently as you like too. There’s ordinarily a 10% cap on the amount you can repay annually – but a quick call to your lender will make sure you don’t breach this limit.

As with the rest of the lifetime mortgages we recommend, all our voluntary repayment plans are Equity Release Council approved, keeping you and your property fully protected – with your right to live in your home always safeguarded. In addition to this, lifetime mortgages do not impact your wider estate – so should there be a shortfall when the property is used to repay the loan, that impacts the lender – not your beneficiaries.

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What do Voluntary Repayment Plan look like practically?

How you choose to manage any repayment is entirely up to you – but it’s sometimes useful to look at some typical repayment strategies in action – they include:

  • Making ad hoc payments

If you find yourself with some unexpected income, an underspend elsewhere or some savings that become accessible you can make random ad hoc payments toward the balance. By doing so you will slow the accruing interest.

  • Maximising repayments

If you maximise the amount you can repay (usually 10% of the overall balance each year) then you will fully cover any accruing interest and pay a small percentage of the capital off too. This will usually see the full amount of the mortgage repaid in somewhere around 15-17 years, depending on specifics of the plan.

  • Make interest only payments

With some help from your lender you can calculate exactly how much income you’re accruing each month and make a consistent payment that covers just this amount. By doing so you safeguard any increase in equity that becomes available over time and also safeguard any additional equity that could be passed on to beneficiaries further down the line.

Am I eligible for a Voluntary Repayment Plan?

As with other plans, you should be at least 55 years of age with a property that’s worth in excess of £75,000 to become eligible.

Beyond this, the amount that you can borrow will depend on your age and the property value – and is calculated on a sliding scale. We’re always more than happy to provide a detailed illustration based on your circumstances – feel free to request a call back if you’d like us to get in touch with some specific figures.

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How Much Can I Borrow?

The size of the lump sum payment that you can access when releasing equity from a second home might change slightly versus a main residence. The exact figures depend on your age and the property value – as well as the perceived risk lending against a second property by a lifetime mortgage company.

The calculations can be complex – but we’re happy to do them for you so you get an idea of what you could release. You can call us at a time that’s convenient to you and we’ll be able to talk you through figures that are specific to you and your property. Get in touch by calling 0131 644 3664 or 0333 360 1958.

Current LTVs (Loan-to-Values) – Source: Canada Life June 2019

AgeOver 55s Buy-to-Let Lifestyle
5514%

56

15%

57

16%

58

17%

59

18%

60

19%

61

20%

62

21%

63

22%

64

23%

65

24%

66

25%

67

26%
AgeOver 55s Buy-to-Let Lifestyle
6827%

69

28%

70

29%

71

30%

72

31%

73

32%

74

33%

75

34%

76

35%

77

36%

78

37%

79

38%

80-90

39%

Would you like to hear a little more?

Does a voluntary repayment plan sound like it would be ideal for you?

If the answer is yes, why not give us a call and discuss your plans in a little more detail – we promise to listen carefully, answer all your questions and provide you with all the information you’ll need to take away, think over and discuss with people most important to you.

We’re extremely proud of the fact that we always provide a service that’s free from any pressure or obligation – we understand that an equity release is likely to be one of the biggest financial decisions you’ll make in your life.

You can call us on 0131 644 3664 or 0333 360 1958 – and when you speak with one of the Equity Release Scotland team, you’ll understand why we’re highly recommended by all of our customers.

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Equity Release - Benefits

Tax

There may be some tax implications that you need to take into consideration, but these will vary on an individual basis.

Advice

If and when you decide to move forward with your application, our team of advisors will assist you and answer any further questions you might have.

Assistance

Take you time and don’t ever be rushed into making a decision, whatever your requirements Equity Release Scotland will be there to assist you every step of the way.

Frequently Ask Questions

Once the money has been released to you, the choice on what to spend it on is entirely up to you. There are no restrictions whatsoever (provided it is legal!). So whether you want to go on a round the world trip, buy a new car, or simply pay off other debts, the choice is entirely yours.

Absolutely, that is one of the major benefits of this type of scheme, and it in our opinion is one of the more important foundations upon with the agreement is built. There is little point in removing the financial stress, if a few years down the road you are concerned about losing your home. In fact, not only are you entitled to remain in the home for the rest of your life, but so is anyone else mentioned in the agreement.

If everything goes according to plan, then it is entirely feasible for the money to be released to you between three and four weeks. However, always err on the side of caution and plan on the entire process taking up to eight weeks. The length of time is not entirely under our control, and can take even longer if your solicitor is unfamiliar with equity release schemes for instance.

When you sign the contract, you are simply agreeing to another style of mortgage, so the ownership of the property remains with you.

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To get more advice and information, please fill out the form and we will be call you back.

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Why you should always choose a product from a lender approved by the Equity Release Council

Guarantee 1

equity release council logo approvedYou have the Right to Remain in your Home for as long as you choose

Guarantee 2

equity release council logo approvedYou will NEVER owe more than the value of your home due to the "no negative equity" guarantee.

Guarantee 3

equity release council logo approvedYou have the freedom to move to another property without financial penalty (subject to provider criteria)

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