A Voluntary Repayment Mortgage is a unique equity release product that provides a level of flexibility to homeowners who want to release equity from their homes during retirement while also controlling at least a portion of their loan balance. The flexibility of this product is primarily in the feature that allows the homeowner to make repayments of interest and/or capital on the amount borrowed. This gives the homeowner some level of control over their outstanding loan balance. This feature is a unique one in the equity release marketplace, which has expanded to include a number of features that were previously unavailable.
To be eligible for this product, the home must have a minimum valuation of £70,000 and the homeowner must be at least 55 years old. With a Voluntary Repayment Mortgage, the homeowner can choose the method by which they receive their cash and which plan will work the best for their individual needs. There is the drawdown lifetime mortgage available as well as the lump sum mortgage. Interest on both options is then applied to the loan balance according to the loan’s terms.
The primary difference between the voluntary repayment mortgage and other equity release products is that it allows the homeowner to make repayments against their loan balance. The homeowner can pay up to 10% of the original amount borrowed. This allows the homeowner to control their overall loan balance. This feature is very unique to the equity release marketplace and gives heightened control to the homeowner while also giving the homeowner more options for the retirement needs.
There is no proof of income necessary to qualify for a voluntary repayment mortgage. This feature can make this product more attractive to those homeowners who may have been denied for a different mortgage product because of income issues.
There are different payment options available with a voluntary repayment mortgage. Some products allow the homeowner to make repayments against only the interest that accrues on the loan balance. Other lenders allow the homeowner to pay both the interest and part of the capital as well, meaning that over time the homeowner may be able to pay the entire loan balance back. Other lenders allow the homeowner to make random repayments on their loan. This is perhaps the most flexible option, allowing homeowners to choose when they are most able to make payments. Voluntary repayment mortgages do not mandate payments. The homeowner can decide if they want their voluntary payments turned on or off depending on their financial situation.
The Voluntary Repayment Mortgage is most suitable for the homeowner who wants flexibility in their repayment but also wants to be able to control their loan balance over time while also taking advantage of a fixed interest rate. The versions of this product currently available in the marketplace provide a level of flexibility for homeowners. The borrower is able to control their loan balance to at least some degree and can choose a plan that allows them to make payments based on a frequency and amount that works for their individual situation.