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Lifetime Mortgages

A lifetime mortgage is an option for homeowners (who are aged 55+ and have a property valued at least £70,000) looking to take out an equity release plan.

To understand the features and risks, ask a qualified later life mortgage advisor for a personalised illustration.

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What is a lifetime mortgage & how can it help?

A lifetime mortgage is a type of mortgage given to homeowners who will be taking out an equity release plan. To meet the criteria of a lifetime mortgage, you must have a property worth at least £70,000 and be over the age of 55.

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.

The majority of lifetime mortgages (and all of the ones 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.

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What are the different types of lifetime mortgages?

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. This type of lifetime mortgage could be a useful option for homeowners who have perhaps taken out a equity release plan with a view to repay any debts accrued or to cover the costs of any home improvements.

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. That being said, 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.

To understand the features and risks, ask for a personalised illustration.

A lifetime mortgage may impact the value of your estate and it could affect your entitlement to current and future means tested benefits. The loan plus accrued interest will repayable upon death or moving into long term care.

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Lifetime Mortgages FAQs

What is a lifetime mortgage?

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A lifetime mortgage is a common way for homeowners who have a property worth at least £70,000 and who are aged 55+, to take out an equity release plan. With a lifetime mortgage you can release money as a loan secured against the value of your home.

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.

Is a lifetime mortgage right for me?

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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 take a look at all of the alternatives that may be available to you, looking to provide the best value solution for your needs in the long term. 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 more applicable option or refer you onwards to someone who can help.

Will I end up paying more interest than I borrowed on my lifetime mortgage?

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Thanks to our membership with the Equity Release Council, we can offer customers something called a No Negative Equity Guarantee.

This means that, if the property is sold for a fair market value and the amount you owe including any interest accrued exceeds the sale price after estate agents and solicitors’ fees, neither you, nor your estate or family will be liable to pay any more.

The interest rate of your lifetime mortgage will generally be determined by 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. That being said, there may be other factors involved.

These other factors can include the type of lifetime mortgage you are taking out. A lump sum lifetime mortgage pay see you paying more on compound interest overall, whereas with a drawdown lifetime mortgage, you’ll only be charged interest on what you draw out.

Repayments of just the interest or larger sums are optional with the majority of lifetime mortgages, meaning that you can pay what you can afford, in order for you to reduce the amount of interest adding onto your loan.

If you don’t make any repayments to your loan, the interest will add to the loan and compound, meaning the amount of interest will grow as each year passes, as you would be paying interest on the interest already added the previous year.

This will increase the debt against your home, which means there will be less funds left behind, for your beneficiaries or for you to use for later life costs, such as if you need to pay for care.

How much does a lifetime mortgage cost?

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

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, solicitor’s fee and a mortgage broker fee, set at the discretion of your mortgage advisor.

Can a lifetime mortgage stop me leaving an inheritance?

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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 take a 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 as a way 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.

What if I need more money later?

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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 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.

Can I move home if I have a lifetime mortgage?

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Lifetime mortgages can be portable! 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 due to the prices of properties in the area. Taking out a lifetime mortgage could help you raise the extra funds necessary to achieve your goals.

What are the benefits of lifetime mortgages?

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There are lots of benefits to a homeowner choosing to take out a lifetime mortgage. One of the main benefits to doing so is that, whilst you are able to keep up your monthly mortgage payments if you would like to, there is also the option of letting the interest roll up, leaving you without any monthly payments to worry about.

The 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.

Once I have a lifetime mortgage, am I stuck with it?

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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, it may still be worth your while reviewing your lifetime mortgage every so often. 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.

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, in order to take your plans into account.

Is there anything else I need to do for a lifetime mortgage?

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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.

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.

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We will compare different lifetime mortgage deals across the market. We have a large panel of mortgage lenders to choose from.

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We have been in the mortgage industry now for over two decades. If you need help with lifetime mortgages, get in touch!

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We will be there for you throughout your whole mortgage process, recommending the best lifetime mortgage deal for your situation.

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