Home-owners turn to equity release to defuse ‘interest only’ timebomb

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In the wake of official figures highlighting the scale of the ‘interest only’ mortgage headache facing householders up and down the country, specialist equity release firm Stonehaven says nearly a third of its customers are raising funds on the value of their homes to pay off mortgage debt on the properties.

Latest figures show that a worrying 1.3 million families face losing their homes after taking out interest-only loans in the 1980s with no strategy in place to pay the money back.

The figures also revealed that many of those with interest-only mortgages face an average shortfall of £72,000, while 260,000 homeowners owe nearly double this amount.

For older homeowners with substantial equity in their property but no other repayment vehicle, equity release can be a viable remedy to the interest only problem.

Cash can be unlocked from equity in the property to pay off the mortgage and also allow the homeowner to retain ownership of the property.

Stonehaven managing director Georgina Smith said: “Many people are sitting on a interest only mortgage timebomb, which will ultimately result in them losing their home.

“For those people who do not want to downsize to a smaller property, there is a simple solution which can prevent them from needlessly losing their home – equity release.

“Our figures demonstrate that increasingly older customers, who are excluded from traditional mortgage lending, are turning to equity release as a suitable option to solve their problems, particularly at a time when interest only mortgages bought in the 1980s ‘boom years’ are starting to reach maturity”.

“Equity release has moved on from being an expensive last resort and become a genuinely viable option that can be utilised to solve financial problems. Switching to a lifetime mortgage allows the borrower to continue to service the interest, as they always have done.”