Challenge

• One option for the repayment of their interest-only mortgage was to downsize. But at this stage in their lives, it wasn’t something they wanted to do as their family and friends loved to visit them.
• We also explored selling their investments or taking a lump sum from their pension, however, both had their downsides. The sale of investments and/or property would reduce their regular income and present a Capital Gains Tax burden. And, if they took the amount required as a lump sum from their pension, there would be tax liabilities.
• One thing they were keen on was keeping their tax under control and planned to use this in a later stage of their lives. They still needed to find an alternative way to repay their mortgage due for repayment…

Solution

• After careful consideration, together, we decided that a lifetime mortgage was the best way to repay their interest-only mortgage.
• This provided a competitive fixed interest rate for the duration of the lifetime mortgage and all the interest payments would be made from their current income.
• Although downsizing wasn’t on the cards for them at this stage in their life, it was part of their long-term plan after the early redemption charge period of the lifetime mortgage. This meant that the mortgage could be repaid without incurring early repayment charges and the equity in their home would be sufficient to buy another property in the area.