Voluntary Repayment Plans

For homeowners over the age of 55 thinking about the future, there are many types of equity release available that might help free up some funds come retirement.

Recently, the market has seen more and more incredible mortgaging opportunities opening up designed specifically for those nearing retirement age.

Various types of equity release loans entail unique terms for the homeowner, with voluntary repayment equity release loans perhaps being the most lenient when it comes to repayment.

If you are curious about voluntary repayment equity release and whether or not it’s the right type of mortgage for you, read on to find out what sets voluntary repayment equity release apart from other types of mortgage loans.

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What Is Voluntary Repayment Equity Release?

Simply, voluntary repayment equity release allows you to repay the loan when you want to. With a traditional equity release, the loan is usually not paid back until the property is sold.

This will typically occur when the homeowner either dies or is moved into long-term care unless the homeowner should decide to sell their home for some other reason.

The amount that the home is sold for is what is used to pay off the amount owed on the loan, oftentimes resulting in a reduced amount made from the sale of the home. This reduced amount may affect either you or those you leave behind.

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1. Pay Off the Loan When You Want To

The point of a voluntary repayment equity release, then, is that you have the chance to pay off the loan when you want to.

Whereas early payments on a loan might entail exuberant penalties with other types of mortgage loans, a voluntary repayment mortgage loan will traditionally allow you to pay off at least a significant chunk of your loan well in advance.

This, in turn, allows the homeowner the opportunity to greatly reduce the amount of interest that the loan will accrue, leading to more money in the long run, whether it be for them to enjoy or for their family to rightfully inherit.

2. Greater Freedom and Financial Flexibility

This revolutionary type of equity release allows great freedom and flexibility to the homeowner, giving them the opportunity to release equity from their home with minimal financial risk.

While it won’t benefit those who don’t end up having the funds to make exuberant payments, those who do end up paying off their loans early will likely end up paying a greatly reduced amount of interest, especially when compared to homeowners who choose another type of equity release.

3. Tax-Free Funds

As with any other type of equity release, the cash that you release from the value of your home will not be subject to taxes, meaning that your money gets to stay in your pocket.

Compounded with the already incredible benefits of a voluntary repayment plan, it’s no wonder that the market for this unique type of mortgage loan is booming.

With the amount of freedom that voluntary repayment allows and the amount of cash a mortgage loan can put into your hands almost immediately, it may seem like there’s no reason not to take out a voluntary repayment loan.

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Voluntary Repayment Can Give You the Freedom to Have Fun

For those in the position to do so, a voluntary repayment equity release loan may allow you to go on the vacation of your dreams, pay for a family member’s college tuition in full without the need for them to fall in debt, or buy a retirement home that is fit for a king.

You could buy a sports car, or even invest in a post-retirement passion project, like a self-operating business, that will allow you to pay your loan off early and then some.

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How Does Voluntary Repayment Work?

Despite the name, there is not typically absolute freedom when it comes to paying off a voluntary repayment equity release loan.

There is generally going to be a limit when it comes to how much of your loan you can pay off per year, and sometimes there is an additional cap that will prevent you from paying off your loan in full until a designated time.

Although these restrictions may limit your overall freedom, voluntary repayment equity releases will still generally allow a significantly greater amount of freedom as far as repayment is concerned than any other type of equity release.

On top of limits in terms of how much of your loan you can pay off in a designated amount of time, there may also be an initial period where you can’t make any payment at all. This period will typically only extend for about a year, and will not often accrue a very large amount of interest.

Depending on how soon you think you will be able to start making large payments on your loan, you may wish to negotiate terms that will allow you the best opportunity to do so as early as possible.

Lenders are typically willing to work with those in many different financial positions, and the competitive market often encourages them to be fairly lenient with those in a position to negotiate.

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1. Voluntary Repayment Puts You In Charge

The greatest benefit of the flexibility allowed by voluntary repayment is that it puts control of the balance of the loan into the hands of the homeowner. Whereas other mortgages are much more stringent and suffocating in their demands, voluntary repayment allows for a greater deal of leeway.

Given the oftentimes unpredictable nature of the future, homeowners typically find these types of loans are much more accommodating.

If you happen to have more money than you expected when the next year rolls around, you can pay off a greater deal into your loan. If money is a little bit tighter than you had planned than you can put off making a larger payment until your finances are more in order.

2. Pay If You Can, Wait If You Can’t

With voluntary repayment, you can make a payment, but you typically don’t have to. Because of this, the freedoms that are allowed by this unique type of equity release go both ways.

While these liberties won’t be afforded to all homeowners, those who qualify for voluntary payment plans will certainly be able to see the many advantages this type of mortgage has to pose over its competition.

The true beauty of a voluntary repayment equity release is that it can be many different things for many different people. It can be more akin to a traditional equity release, where it is paid off in full after an allotted amount of time. It can be like an interest-only lifetime mortgage, where you make small payments to simply keep up with any accrued interest.

However, unique to the voluntary repayment equity release is the ability to possibly pay off your loan before interest is even accrued, without a penalty and with only minor limitations.

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What Lenders Allow Voluntary Repayment Equity Release?

Although the option for voluntary repayment equity release has only been around for a handful of years, it has spread in popularity fairly quickly due to the attraction of its unique freedoms for the homeowner.

Today, many major lenders offer an option for voluntary repayment, and it is quickly becoming the new normal.

In a competitive market where the customer has so many options for equity release, it’s little freedoms like the option for voluntary repayment that can put one lender at a competitive edge.

A Growing Market for Voluntary Repayment Mortgage Loans

While many new types of equity release are aimed at a demographic that may not be able to qualify for a traditional mortgage, voluntary repayment equity release was created for those with more financial stability. This is the reason that voluntary repayment loans often have such great terms.

For those who require a loan at the moment yet have the stability to ensure quick and easy payment of the loan well before payment would typically be due, releasing equity from your home with voluntary repayment provides the perfect opportunity.

The option for voluntary repayment has opened up a market for people who might not traditionally even be interested in taking out a mortgage.

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Control the Balance of Your Loan

Oftentimes, those taking out a mortgage are in a dire situation and are not poised to question the exuberant terms of the loan being proposed to them. With voluntary repayment equity release, the homeowner is given much more stability from the beginning and can feel much freer in the process.

Having the ability to control the balance of your loan means that you can have a much greater deal of control over your future, as well as the future of your loved ones.

While other types of equity release may damage the amount that your loved ones stand to inherit after you pass, voluntary repayment allows you the ability to give more of what you own to those you love.

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The Maximum Amount of Financial Freedom

With voluntary repayment equity release, you can receive the benefits of a mortgage loan while retaining the maximum amount of financial freedom over your own assets.

With maximum benefits and minimal risks, a voluntary repayment equity release certainly stands out as one of the best loans for homeowners that can qualify.

Of all the various types of equity release, it provides the homeowner with the most financial security for the future.