Extra Funds during Retirement
People who are above fifty-five may have difficulties meeting their daily needs especially with insufficient pension provision. These people may be in need of some extra funds during retirement. Retirees who own a property are realizing that they have funds tied up in their property. This is termed ‘equity’. Therefore, imagine if these funds were then made available & were at their disposal, they would not have to struggle to make ends meet.
Companies such as Aviva, Just Retirement, Stonehaven, Hodge Lifetime and New Life Mortgages offer a solution for these people – the lifetime mortgage. So what is a lifetime mortgage scheme?
A lifetime mortgage is a loan obtained from an equity release provider and secured against a property. This loan or mortgage does not have any fixed duration. Instead it lasts for the lifetime of the borrower, hence the name lifetime mortgage.
The funds received from a lifetime mortgage are tax free and can be used to enrich the quality of life of a retiree. These funds can be used to purchase a new vehicle, to pay for holiday, home improvements or to support family members who are in need of financial support. Particularly in today’s first time buyer market, more & more parents are gifting funds to their children as a deposit for their first house.
At some point in the future, the homeowner will either die or will no longer be able to remain in his property due to the fact that he will no longer be able to take care of themself. The property will then be sold by the executors and the sales proceeds will be used to repay the lifetime mortgage lender.
If you are a pensioner and are considering obtaining a lifetime mortgage, you should consult an equity release adviser as well as your family members, since a lifetime mortgages can have a huge impact on the inheritance that you will be leaving behind. In all SHIP regulated equity release plans, the sales proceeds are guaranteed NOT to be greater than the value of the property. This is due to the inclusion of a free no-negative equity guarantee.
This will ensure the beneficiaries cannot be left with any debt to themselves. However, if the lifetime mortgage roll-up to such as degree that it matches the value of the property upon sale, then no inheritance will be left. The reason for this is due to the fact that no repayments of the principal loan amount and no interest payments are required to be made during the lifetime of the borrower. The sales proceeds of the property will therefore be used to repay the principal loan amount as well as the accumulated interest amounts.