/ Author: Hamilton Brooke
SPF are always keen to support new lending products, so see the prospect of equity release with ability to roll up interest as broadly positive.

Anything that provides Guernsey people with another way to stay in their homes and be better off in their later years, should certainly be considered. However, this type of product is highly regulated in the UK, and a key factor is ensuring that borrowers fully understand the impact of ‘roll up‘ interest. It is good to see the regulation aspect being referred to in the budget.

Roll-up of interest means that borrowers defer paying interest on the mortgage but, as a result, interest accumulates until the mortgage is paid off. Because the lender will have to wait an unknown time until they get paid, rates tend to be higher than standard mortgages and with interest building this can mean a substantial amount from the property sale price going to the lender as settlement. Whilst that may still be an attractive option for anyone for whom legacy is not a prime consideration, for others it may not be the best solution.

However, there is an alternative already in existence in Guernsey, through Marsden Building Society. Their Lifetime Mortgage enables anyone with a loan to value of 65% or less to switch to an interest only mortgage. Borrowers are therefore paying the interest on a monthly basis. This can significantly reduce monthly payments and, at the end of term, only the capital needs to be paid off with no additional interest accrued, so more money is ‘left in the pot’.

It remains to be seen if any existing lenders on island would enter this market but at SPF we are always looking to bring our clients the widest range of mortgage products available so will be ready to act when legislation changes.
For advice on finding the mortgage that’s right for you contact us on 715234, or email info@spf.gg
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