Sometimes a little financial assistance is needed in retirement. For whatever reason your pension and investment accounts are not enough, there are equity releases to help you. Voluntary repayment scheme is a part of certain equity release products on the market. You can either obtain a lump sum lifetime mortgage or interest only lifetime mortgage that has a voluntary repayment scheme attached to it. There are three options currently on the market from Aviva, Hodge, and Stonehaven. Each one has a different style to their scheme, which is often under the title flexible or flexi to indicate they offer a flexible and voluntary repayment option should you prefer it.

The Basics of a Voluntary Repayment Scheme
This form of lifetime mortgage works in the same manner as any other lifetime mortgage scheme on the market. If it is a lump sum option then the initial tax free lump sum provided to the homeowner is not repaid until the person moves to long term care or dies. At that time the home is sold to repay the principle balance. Since it is a roll up mortgage there is also compounding interest. This interest also gets repaid at the same time as the principle.

If a homeowner chooses an interest only loan then they repay the interest each month while the principle remains the same until death or move to an assisted living facility.

A voluntary repayment scheme allows for more flexibility without penalty charges. These three loans explained above also allow for repayment of the interest, but go one step further than just this. Voluntary repayment plans permit upto 10% of the initial amount borrowed to be repaid each year without penalty. Therefore, not only can the interest be repaid, but also some of the capital each time.

It means you can repay up to a certain percentage of the loan, either from day one with Stonehaven or after the first year with Aviva & Hodge Lifetime, without being charged additional fees. Therefore, the capital & interest equity release scheme has been created! With the voluntary repayment plan you now have complete control over the lifetime mortgage balance which can then be used as an advantage in gauging the balance to be passed onto any beneficiaries.

Voluntary Repayment Calculator

Advantages
Two options exist for repayment:
• Making a minimum £250 per annum payment, instead of the interest accruing
• Paying 10% of the principle balance back each year without penalty

This flexible lifetime mortgage payment scheme makes it possible to pay a low minimum repayment of capital &/or interest instead of what might be accrued in that month. For both interest only and lump sum lifetime mortgages it is also possible to pay up to 10% of the principle amount in a 12 month period without being charged penalties, thus flexibility is an advantage.

It also helps homeowners leave behind more in inheritance than other lifetime mortgages on the market.

Disadvantages
There are only three companies offering these loans. The product is the latest innovation for the equity release market. For people looking to redeem any mortgage they have in retirement, the voluntary repayment plan could be a solution to switching when the time is right.

As always there are some points that you will need to clarify with an independent equity release adviser and expert in their field. If you feel you have the option of repayment then this might be a scheme to attach to your lifetime mortgage. It is definitely a way to guarantee inheritance by controlling the balance using voluntary repayments.