If you’re interested in releasing some equity from your property but would like to stay in completely in control of your finances, a voluntary lifetime mortgage plan might be perfect for you.

Here, we’ll go into some detail about what a voluntary plan involves, answer some common questions and explain how to get a little more info if it sounds like it might be right for you.

What is a Voluntary Repayment Plan?

A voluntary repayment lifetime mortgage plan is a variation on existing lump sum and drawdown plans and actually allows you to repay up to 10% of the amount borrowed every year without incurring any penalty.

By making payments toward the balance, homeowners can minimise the amount of interest that builds up on the plan – and by doing so, control the balance in line with your own financial wishes, whether that’s for you, or for possible beneficiaries.

Benefits of a Voluntary Repayment Plan

Voluntary repayment lifetime mortgage plans open a different source of lending for people approaching or already in retirement age – and the key is in the name – ‘voluntary’.

Because payments can be made, rather than have to be made, lenders do not require any proof of income as they would with traditional mortgage payments. As such, if you’ve looked at traditional mortgage payments but been hindered by your age or a reduced income after retirement, a voluntary plan could be perfect.

What’s more, there are generally no admin fees or early repayment charges, so you’re free to pay back as much or as little as you like, as frequently as you like too. There’s ordinarily a 10% cap on the amount you can repay annually – but a quick call to your lender will make sure you don’t breach this limit.

As with the rest of the lifetime mortgages we recommend, all our voluntary repayment plans are Equity Release Council approved, keeping you and your property fully protected – with your right to live in your home always safeguarded. In addition to this, lifetime mortgages do not impact your wider estate – so should there be a shortfall when the property is used to repay the loan, that impacts the lender – not your beneficiaries.

What do Voluntary Repayment Plan look like practically?

How you choose to manage any repayment is entirely up to you – but it’s sometimes useful to look at some typical repayment strategies in action – they include:

• Making ad hoc payments

If you find yourself with some unexpected income, an underspend elsewhere or some savings that become accessible you can make random ad hoc payments toward the balance. By doing so you will slow the accruing interest.

• Maximising repayments

If you maximise the amount you can repay (usually 10% of the overall balance each year) then you will fully cover any accruing interest and pay a small percentage of the capital off too. This will usually see the full amount of the mortgage repaid in somewhere around 15-17 years, depending on specifics of the plan.

• Make interest only payments

With some help from your lender you can calculate exactly how much income you’re accruing each month and make a consistent payment that covers just this amount. By doing so you safeguard any increase in equity that becomes available over time and also safeguard any additional equity that could be passed on to beneficiaries further down the line.

Am I eligible for a Voluntary Repayment Plan?

As with other plans, you should be at least 55 years of age with a property that’s worth in excess of £75,000 to become eligible.

Beyond this, the amount that you can borrow will depend on your age and the property value – and is calculated on a sliding scale. We’re always more than happy to provide a detailed illustration based on your circumstances – feel free to request a call back if you’d like us to get in touch with some specific figures.