Frequently Asked Questions
If you've got questions, we've got answers!
A lifetime mortgage is basically a loan you take out secured against your property. You do not have to repay the loan until the home is eventually sold, which typically takes place after the last homeowner has either passed away or moved into long term care. When the home is sold, the money is used first to pay off the loan and then the remaining balance goes back to your estate where it can be gifted to your beneficiaries. There is now an option to take advantage of an interest-paying mortgage which means that you can make either monthly or ad-hoc payments against the loan balance. This can combat the effect of interest roll-up. There are still standard interest roll-up mortgages available as well.
Lifetime mortgages can be categorized as either interest roll-up or interest-paying. With interest roll-up, you receive a lump sum payment and are charged interest on that amount. That interest amount is then added to the total loan balance. You don’t need to make any payments and when your loan becomes due it will be a total of what you borrowed and the rolled-up interest. With interest-paying lifetime mortgages, you can make monthly or ad-hoc payments against the loan balance. There are plans available that also allow you to pay some capital as well. In addition, there are drawdown and enhanced plans available. Drawdown plans allow you to draw down money from a reserve facility. Enhanced plans offer higher releases to those homeowners who are in poor health or lead a particularly unhealthy lifestyle.
There are many advantages to lifetime mortgages. You receive a guaranteed income or lump sum while also being able to stay in your home. You do not have to repay the loan until the sale of the property so you are also able to take advantage of any increases in property value. You get a fixed interest rate and many plans prevent the debt from exceeding the property value. You can benefit from decreases in Inheritance Tax Liability and you may be able to provide some inheritance to beneficiaries following the sale. Disadvantages include potentially having to pay arrangement, valuation and legal fees. The inheritance you leave behind will be less and you may incur an impact on other benefits. You do have to maintain the property which means it must remain in good condition and you are required to have buildings insurance.
There are currently 8 lenders who offer Lifetime Mortgage Schemes and between them all, there are over 100 products available. The lenders that offer Lifetime Mortgage Schemes include Legal & General, More2Life, Pure Retirement, Aviva, Retirement Advantage, Hodge Lifetime, Just Retirement, and LV=. The plans available include drawdown plans, lump sum releases, and interest repaying plans. Many of the plans available to can be tailored to suit your individual needs. You can find an option if you do not want to make any repayments and you can also find options if you do want to be making repayments to control your loan balance.
No, there are no banks that currently provide their own lifetime mortgage schemes. However, some will offer the product through a third party. It is important to get your own independent advice when trying to find the best deal. Finding the right product for you will depend on your own individual situation and circumstance.
Determining the best Lifetime Mortgage product will depend on your individual circumstances, as the best for one customer may not be the best for another. Choosing the best product will also depend on your objective for the lifetime mortgage. Lenders will take into account your overall health, age, property value and location and any outstanding mortgage or loan balance when determining if they will lend to you, and if so, in what amount.
There are different effects on your inheritance depending on the type of lifetime mortgage you select. If you go with the standard interest roll-up lifetime mortgage, your inheritance will be smaller. If you go with a lifetime mortgage that allows for payments, the overall balance of your loan will be smaller which means that you will be able to leave behind a more substantial inheritance. In essence, you have control over your inheritance by deciding which product you’d like to use.
There are many factors driving the equity release market. To start, people have longer life expectancies than ever before. This essentially means that more money is needed in order to fully enjoy retirement. Pensions are no longer guaranteed and savings built up during the working years aren’t always sufficient to provide enough funds for an extended retirement. There has also been a shift in how the idea of inheritance is approached. Many now help their children and family members earlier in life. That means not only are homeowners a little less concerned with inheritance but they are also looking for extra funds earlier to help their loved ones. This money can come from a lifetime mortgage product.
Equity release is an excellent choice for many homeowners but it is not right for everyone. In order to determine if it is a suitable choice for you, you should absolutely make sure to speak with an adviser who can detail the advantages and disadvantages of using equity release. A knowledgeable adviser can also discuss other options with you if an equity release product is not the best option for you.
You can start by using a free only equity release calculator to give you an idea of the release available to you. This calculator does not take the place of a knowledgeable adviser that can guide you through each product and the advantages and disadvantages of each. You don’t want to ever raise more money than you actually need since this will have an impact on your ability to leave behind an inheritance to your loved ones.
To qualify, you should be between the ages of 55 and 90. The age applies to the youngest homeowner if you are borrowing jointly. Your property must have a valuation of at least £70,000. The maximum property valuation is £6 million. The property must be located in England, Wales or Scotland. The amount that you will be eligible to borrow will be based on the lenders LTV criteria, which typically starts from 19% at age 55 and goes up to 50% for ages 90-95.
You do not lose ownership of your property by using a lifetime mortgage. It is a loan secured against your property that is repaid when the home is eventually sold. You are required to maintain the property throughout the loan period and you can take advantage of any increases in property value.
Overall, the process takes about 4-6 weeks and depends on the solicitor used. To begin, you get a personlised illustration. You then complete an application form. This is the point at which you pay to have a valuation of your property. A surveyor will then come out to your home and value it. The lender then finalises the proposed terms of the plan in an offer. You then move to the conveyancing step in the process to the legal charge to be taken on your property and when that is ready, the completion of the loan is arranged.