Lifetime Mortgages

Getting independent mortgage advice when considering lifetime mortgages is invaluable. A lifetime mortgage isn’t for everyone and there may be a cheaper, more suitable lending solution available such as a traditional mortgage or a retirement interest only (RIO) mortgage.

A lifetime mortgage could affect any current and future means tested benefits that you receive. Also, there may be grants and funding options available to you which are free to access.

Interest can accumulate quickly with a lifetime mortgage, eroding the value of your inheritance in a short time. An experienced advisor will talk through any features and benefits of a lifetime mortgage that are available to keep the interest that builds up to a minimum based on your personal situation.

Please speak to one of our independent mortgage advisors for a personalised quotation and recommendation for your individual circumstances.

Mistakes with later life lending can be costly and can result in a swift decline of your assets and the amount of inheritance that you leave to your family.

Releasing equity from your home can provide an element of control back to your personal and financial life, though there may be alternatives better suited to your needs. A qualified later life mortgage advisor will review your circumstances and see if this is the best option for you to take.

There are a wide variety of reasons as to why a later life homeowner may look to take out a lifetime mortgage. They could be looking to repay a current mortgage balance, cope with an increased cost of living, pay off any debts they have against their name, fund their retirement, or something else entirely.

It’s also possible to purchase a new home with a lifetime mortgage, your lender will use the property that you are buying as security for the loan.

All the lifetime mortgages that we recommend adhere to the standards set out by the Equity Release Council. This brings some important protections for borrowers, that your advisor will discuss in more depth with you during your appointment.

Here at UK Moneyman, we offer our later life customers lifetime mortgage advice, as they begin to look at their options regarding the equity in their home and/or buying a new home.

The way that a lump sum lifetime mortgage works, is that it gives you the option to release an amount of equity from within your home in one large lump sum, free from tax. There is also an option to release your equity via a drawdown lifetime mortgage which is smaller chunks of money designed to supplement your pension income in retirement.

The positives of this type of lifetime mortgage, are that they can apply to both leasehold and freehold properties, you will still own your own home and you may have the option of porting your plan, if you ever need to. The downsides are that compound interest will build up and they may affect means tested benefits, as well as inheritance.

A drawdown lifetime mortgage is the alternative to this, wherein it will allow you to instead release a portion of your equity periodically, when you decide to do so. Unlike the lump sum lifetime mortgage, these may not affect any means tested benefits or inheritance, and they will only charge interest on the amount you draw out.

This type of lifetime mortgage could be a good way to dip into a financial reserve over the rest of your life as and when you need it. There are still downsides to a drawdown lifetime mortgage as well, such as a mortgage lender potentially limiting your reserve, or withdrawing your access to it.

Lifetime mortgages are a common way for homeowners and home buyers who are aged 55+, to purchase a home, repay a mortgage or release tax-free cash. With a lifetime mortgage you can release money as a loan secured against the value of your home. Lifetime mortgages can also be used as a loan to buy a new property to live in, the loan would be secured on your new home.

With lifetime mortgages, you keep ownership of your home in the same way you would with a conventional mortgage. The mortgage lender will need to be repaid, generally from the sale of your home, after you either die or move into long-term care.

You can choose to make monthly payments towards the interest or not. If you select not to pay, the interest will roll up on your property, do you’ll pay interest on your interest etc lowering the value of your estate.

If you have the income available to service the interest and to pay a monthly amount towards it, the overall cost of borrowing is reduced significantly in the long term. Overpayments of the capital can be ok with some lifetime mortgage lenders also if this fits with your objectives and personal situation.

A lifetime mortgage may potentially be the best option for you. The role of a qualified later life mortgage advisor is to spend time getting to know you, any plans you have and your hopes for later life.

We will look at the alternatives that may be available to you, looking to provide the best value solution for your needs in the long term.

Alternatives products to a lifetime mortgage are:

• Traditional interest only mortgages.
• Repayment mortgages.
• Downsizing/grants etc.
• Retirement interest only (RIO) mortgages.

We always encourage family to be part of these discussions, but that is entirely up to you.

If a lifetime mortgage is not the right option for you, your trusted late life mortgage advisor will suggest a better more cost-effective solution for you.

Yes, as with all mortgages, interest is payable on the loan. With a lifetime mortgage, monthly interest payments are optional, paying all or some of the interest if you can, will significantly reduce the amount of interest you pay overall.

If no monthly payments or made, you’ll be paying interest on your interest, and then, interest on your interest on your interest etc, this will roll up and erode your capital and inheritance.

You’ll never end up owing more than the value of your property with a lifetime mortgage.

The interest rate of your lifetime mortgage will generally be determined by current market conditions, the amount you are borrowing as a percentage of the value of your house, and the age of the younger borrower. Interest rates are typically fixed for the life of the loan.

A lifetime mortgage product can be used to help fund moving home.  If you are considering moving into a new home, whether it is to downsize or so you can increase your borrowing, there will be mortgage options for you to consider.

Often, our older clients are looking at their options for moving home, to be closer to family in retirement so they can provide help and support with grandchildren and later in life be closer for any possible health reasons. These days, mortgages are much more flexible for older clients and options such as making repayments and overpayment are possible with most products.

If you have seen a property that you would like to buy and have yet to sell your current property, we can help. We can explore your bridging loan options alongside any mortgage advice, so you can act quickly to buy the new home, whilst your current property sells in the background.

Many customers who contact us and who want to secure a property quickly, are looking to downsize, but will only move for the “right” home. If you have some cash available, bridging finance can provide a fast and effective solution for this, as completion can happen very quickly and gives you typically 12 months to sell your current property.

The costs of your lifetime mortgage will vary, depending on how much equity you are looking to release, your age, the interest rates of the plan and the ways you would like to personalise your product.

Additionally, the amount you owe overall can differ, depending on the type of lifetime mortgage you have. With a drawdown lifetime mortgage, you will only pay interest on the amounts you withdraw. Conversely, with a lump sum lifetime mortgage, you will likely owe more overall on compound interest.

Similar to when you take out a standard residential mortgage, you will still have to factor in additional costs such as a surveyor’s fee, a valuation fee, and a mortgage broker fee.

With a lifetime mortgage, it’s a condition that you seek independent legal advice during the process to ensure that you understand the features. This will be in the region of £700 to £1,000.

Lifetime mortgages will garner some form of interest. The way in which you choose to approach this interest could affect your inheritance.

Some homeowners opt to completely pay back their interest, leaving only the capital balance to be paid back upon death or moving into long term care. Other homeowners will let the interest roll up, meaning that there will be a higher mortgage balance to be paid back upon the sale of the property.

The more equity that a homeowner opts to take out of their property, even if they manage to pay back all of the interest, the less that they will have left for inheritance.

Alternatively, if you choose to allow your compound interest roll up, this will generally reduce your inheritance further. In some instances, a homeowner may find that they have nothing left for inheritance, once the home is sold and the lifetime mortgage balance has been paid back.

We would always suggest that you get in touch with a qualified later life mortgage advisor, to further look at the most appropriate way for you to approach your lifetime mortgage options. If you would like a specific amount of equity to be left over for inheritance, this should form part of your initial discussion with your mortgage advisor.

Many homeowners will take out a lifetime mortgage to release equity, with a view to gift an early inheritance to a valued member of their family. This could be for reasons such as a deposit for them to put down as they begin their own home buying journey.

We would also recommend speaking with a qualified tax advisor to further understand inheritance taxation.

From our experience, it’s always a good idea to involve your family members in the process as early as you feel comfortable so that they understand why you are considering a lifetime mortgage and how it impacts your estate and inheritance value.   These days with video calling technology getting everyone on a call is quick and efficient.

If you know from the start that you may potentially need to draw out more money in the future, it is important that you bring this up with your later life mortgage advisor, as it may be possible to arrange a cash reserve facility which gives you easy access to more money in the future.

If needing extra money in the future is foreseeable for you, it’s much better for your advisor to know this from the start so that they can factor this into their recommendation to you.

There is a drawdown lifetime mortgage product which is designed for customers that may require additional funds in the future for one reason or another. This product is slightly more expensive at the outset; however, it’ll save you thousands of pounds in fees in the long-term preventing you from going through a full application process.

If you have a lifetime mortgage with no cash reserve, you may still have the option of taking out a further advance from your mortgage lender.

This must be arranged with a qualified later life mortgage advisor, who will also work with you to compare the available plans on the market to see if a further advance is indeed right for you, or if you would be better off with a different lifetime mortgage plan.

Yes, lifetime mortgages are usually portable meaning that you can move home. All lenders have different criteria surrounding porting a lifetime mortgage, however, subject to meeting these, it is usually possible.

If for any reason you are perhaps looking to move homes into a much smaller property, you may have the option of moving your lifetime mortgage to a new property, subject to the lender’s terms and conditions.

If this is an option you may consider making further down the line, then you should talk to your later life mortgage advisor in depth about your plans to make sure you’ve got the flexibility you would like to have.

Lifetime mortgages can also be used to buy a house. Many people want to move to be nearer family but can’t be due to the prices of properties in the area. Speaking with a mortgage broker to take out a lifetime mortgage could help you raise the extra funds necessary to achieve your goals.

The benefits with a lifetime mortgage are:

• Monthly payments are not required, they’re optional.
• For purchases, you can buy a bigger home with a lifetime mortgage.
• Joint and sole names available.
• Repay an existing mortgage and/or debts into retirement.
• Afford to pay for care or home renovations.
• Bad credit options are usually accepted.
• Overpayments are allowed depending on the lender/criteria.

You can release tax free cash either as a lump or smaller chunks as and when they’re required to supplement your income.

The lifetime mortgage balance will be paid off from the sale of your property, once you have either died or have moved into long-term care.

Because we are members of the Equity Release Council, we can offer our customers the No Negative Equity Guarantee, meaning that when the property is sold (at a fair market value), your family or estate won’t be liable for any payments if your interest exceeds the sale price of your home.

Firstly, a lifetime mortgage is designed to be a long-term solution and it can be quite costly to make any changes to it once it has been put in place.

That being said, if you have had your lifetime mortgage a while, it may still be worth your while reviewing. The reason for this, is that if there are any small drops in interest rates, you could drastically alter the cost of the loan overall. A later life mortgage advisor will be able to give you an analysis of potential savings, including all costs.

If you want to repay your lifetime mortgage, (for example, because you have received an inheritance) you are able to do so at any point in time, though please bear in mind that there may be penalties.

Nowadays, there is much more flexibility with the lifetime mortgage products so monthly or annual overpayments may be allowed depending on your lender.

It is important to consider all likely future events whilst talking with your later life mortgage advisor, as it will help them to recommend a product which remains as flexible as it possibly can be, to take your foreseeable future plans into account.

As well as speaking with your later life mortgage advisor about whether equity release, and subsequently a lifetime mortgage, is right for you, it is also worth your time considering any other arrangements you could make for the future.

There are several over 50’s life insurance policies available from our team that, if suitable for you, will help offset against the cost of a lifetime mortgage for the duration of the life policy term.

We would highly recommend that you speak with your family about your lifetime mortgage, bring your will up to date and make arrangements for any lasting powers of attorney.

These are all important as, often, it is your family as beneficiaries (after your death) or attorneys (if your mental capacity is impaired) who will have to sell the property to repay the lifetime mortgage.

Much like it would be for everything else, proper planning in the present will make life easier, and generally cheaper, in the future.