About Barbara
Barbara is a 60-year-old, part-time teacher, who plans to retire at 65. She owns a property valued at £500,000, and wishes to release £105,000 from her home to fund essential home improvements, support her family and enjoy her retirement with greater financial freedom.
Barbara is keen to minimise the long-term cost of borrowing and preserve as much equity as possible for her beneficiaries. She gets in touch with her financial adviser to discuss her options.
Unlocking money from her home
After consulting with her adviser, Barbara chose the Advantage Gold product. She committed to paying 100% of the monthly interest for the full 20-year term, qualifying for the maximum interest rate discount of 0.25%, resulting in an interest rate of 6.99% MER
Every month, Barbara will pay £593, a manageable amount for her given she is currently still working. When she does retire, her pension income and careful budgeting will allow her to continue the repayments.
Paying the interest each month, and accessing a lower rate, meant I could unlock the money I needed for my home improvements, without worrying about my loan balance growing over time.
Protecting her children’s inheritance
By covering all the interest for the entire term, no interest will be added to her balance. Her loan will stay at its original amount of £105,000 throughout the 20 years, offering her the highest long-term savings available.
If Barbara had chosen a standard roll-up mortgage at 7.24% with no interest payments, her balance after 20 years would have grown to £424,938. By servicing all the interest, she saves £177,651 over the lifetime of her mortgage, protecting a future inheritance for their children.
Key benefits
- Barbara benefits from the lowest available interest rate by servicing 100% of the interest each month
- No interest is added to her loan balance, so the amount owed remains unchanged over the lifetime of the mortgage
- She achieves some of the highest long-term savings, preserving the maximum possible equity for her estate
- The product offers flexibility, security, and peace of mind, allowing Barbara to enjoy her newly improved home without worrying about escalating debt.
Important information
This case study is a worked example and is for illustrative purposes only. We have taken care to ensure the information is accurate, but we accept no liability for any of the information we provide that you decide to use or for the suitability of any of the statements made. Individual financial advice and tax advice should be sought prior to taking out a lifetime mortgage, as releasing equity can change the inheritance tax position of the borrower and their estate, as well as potentially altering their eligibility for welfare benefits.
