Lifetime Mortgages
Lifetime Mortgages
A lifetime mortgage is similar to a standard mortgage in that it is a loan which is secured against your property.
Lifetime Mortgages
A lifetime mortgage can provide a tax free lump sum and enable you to retain 100% ownership of your property or the drawdown option allows you to access the money as and when you need it.
You are using the value of your home as security for borrowing money. The loan is repaid from the future sale of the property, generally when you die or go into long term care and your property is sold. If you are a couple, this is when the surviving partner dies or goes into long term care.
You can choose to make no monthly repayments however, some providers give the option of paying all of the interest and some of the capital on an ad hoc basis, thus avoiding the effect of ‘rolled up’ interest.
Interest Roll-Up
Accrued interest is added to the loan and paid back on death or admission to long term care when your property is sold.
The debt will increase over the years and reduce your beneficiary’s inheritance but you will have a no negative equity guarantee
so you can’t leave your beneficiaries a debt.
Over time, the loan will increase in value but this can be offset if the value of your property increases. A Specialist Equity Release adviser can explain the impact if your property increases or decreases in value over time.
Interest Only
The interest only option allows you to make repayments to cover the interest. This means the debt doesn’t increase.
You hope that the property increases in value over the years which will increase your beneficiary’s inheritance.
Sometimes couples will start on interest only when they have two incomes and switch to Interest Roll Up after first death.
Repayment
Lifetime mortgages are designed to last until death so that you can enjoy the peace of mind that comes from knowing that you can stay in your family home for the rest of your life or for as long as you choose.
This means lifetime mortgages can have significant early repayment penalties so if you only need the capital for a short period and wish to repay the debt you need to ensure you take a suitable product that allows you to repay the capital and interest over a time period that suits your objectives.
Term
Lifetime mortgages are for life, as the name suggests, so there is no set term.
Purchasing A Property
Lifetime mortgages aren’t only used to release equity from your existing property they can also be used to purchase a new property.
With lending criteria for residential mortgages stopping many over 55’s from being offered a suitable mortgage, Lifetime Mortgages can be the answer.
Second Homes
To be eligible for a Second Home Lifetime Mortgage the property must be available for you to use and there are several requirements relating to the property, for example:
The property must be used by you for a minimum of 4 weeks every year.
If the property is ever let out it cannot exceed 4 weeks at a time.
Buy to Let Properties
To be eligible for a Landlord Lifetime Mortgage the property must not be lived in by you or your family and there are several requirements relating to the property, for example:
The property must be let under an Assured Shorthold Tenancy.
