A large proportion of older people who have an interest only mortgage may be facing the prospect of having to sell their home, as they don’t fulfil the criteria for equity release.

This will be the first year where interest only mortgages are beginning to mature, forcing around 40,000 people to decide how to pay off their mortgage, or to sell their home. This is according to experts, who also state that around 50% of those people don’t have any plans for the repayment of their mortgage.

Previously, equity release has been a solution for those with interest only mortgages, so that equity is released from the property and used to pay the outstanding amount. However, many people don’t own enough of their property to be able to qualify for equity release, and have loan to value ratios which are too high.

According to Key Retirement’s Dean Mirfin, just 16,000 people will qualify for equity release. Last year, the number of people benefiting from equity release lending rose by 24%, with an average of £72,000 being released from the property.

To qualify for equity release, a person should own around two thirds of a property, with a loan to value between 33% and 35%. The number of people relying on equity release has increased. In 2010, the figure was 20%, while the figure increased to 25% last year.

A mortgage adviser who has taken CeMAP training will be able to provide advice for people in this situation, although the situation may still result in the sale of the property.

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