There are currently 2.6 million households whose mortgage is on an interest only basis. Of these, 1 in 10 currently have nothing in place to repay the capital when the term comes to an end. This means these people will either have to sell up and downsize or face taking out a lifetime mortgage in order to remain in their family home. In other words, the property would be sold and the debt repaid upon death, so they never actually fully own their home.

Lenders offering lifetime mortgages charge the homeowner interest on the loan whilst they are alive. Upon death, when the property is sold, a specified chunk of equity becomes repayable.

London and Country mortgage brokers have undertaken some calculations that show a homeowner aged 65+ would actually pay 3 times more interest than the initial amount borrowed to complete the purchase.

As a mortgage professional, you are best placed to advise people dependent on their individual circumstances. Having attended the relevant CeMAP course and obtained the required exam standards, you will need to ensure you have a detailed discussion with your future customers to establish their mortgage needs and the future they have in mind.

It is important to ensure that your customer fully understands the implications of the mortgage product they choose. Perhaps more importantly, they also need to understand how much interest it will cost them overall, as well as their thoughts towards having to sell their property at the end of the term if they have nothing in place to support the capital repayment.

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