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Lifetime mortgages are equity release plans that enable homeowners to borrow a portion of the value of their home as equity release money for any purpose they deem fit – including paying off existing mortgages and any debt secured against it.
No monthly repayments are necessary and the loan will only be repaid through the sale of your property when you die or enter permanent care. Reputable providers include an equity guarantee as standard clause in their contracts to protect you against potential negative equity scenarios.
It’s tax-free
Lifetime mortgages are a form of equity release that allow homeowners to access tax-free cash from the value of their property in one lump sum payment. They’re ideal for older homeowners looking to make upgrades, help family members purchase property or supplement retirement income; or clear an existing interest-only mortgage that has come to its end term. They can be more costly than traditional residential loans however; their use could impact inheritance plans in your family.
Lifetime mortgages are regulated by the Financial Conduct Authority (FCA), offering no negative equity guarantee – meaning your total debt won’t surpass the value of your property when selling in future. It is important to understand how taking out a lifetime mortgage may impact eligibility for means-tested benefits such as Child Tax Credit.
Lifetime mortgages differ from conventional residential loans in that the loan and interest aren’t due until death or long term care services become necessary. Your loan amount depends on factors like age and the percentage of property available to be borrowed against. Early repayment can reduce total owed amounts.
Many lifetime mortgages offer a rolled up interest rate, meaning that interest payments don’t need to be made every month – which can build up over time into significant debt accumulation. You could choose plans which enable you to pay back any accrued debt monthly, thus decreasing how quickly it accumulates.
Some lifetime mortgages feature fixed or variable interest rates; both options can have an effect on how much debt accumulates over time, so it is wise to consult an independent adviser who holds CF8 qualifications when selecting your plan.
Many people turn to lifetime mortgages as a way of paying off existing loans or debts, financing home improvements or helping family members purchase their first property. Lifetime mortgages have also proven popular for supplementing retirement income but make sure not to overstretch yourself as this could prevent accessing valuable government benefits like pension credits, savings credits or council tax reductions.
It’s portable
Lifetime mortgages are an equity release solution designed to allow homeowners aged 55 or over to release tax-free cash from their property without moving. Payment can either come all at once, or in installments known as drawdown payments; as and when desired by the homeowner. With their complex nature and duty of care requirements associated with equity release plans, specialist brokers should usually handle arrangements.
As a rule, lifetime mortgages can only be transferred when the borrower passes away or moves into long-term care, and in that case their new property must have enough value to repay any outstanding mortgage debt – any surplus remaining with them and their estate; although any effects this might have for means-tested benefits could arise.
However, providers who offer lifetime mortgages that can be paid back with monthly interest repayments are becoming increasingly common. This allows a borrower to reduce the amount owing when they die or go into long-term care and removes the risk of negative equity.
Some individuals who take out lifetime mortgages opt to sell and move to another property; others wish to stay put and remain in their current one for life. Either option is possible as most lifetime mortgages are portable – the lender just needs to be convinced that your new property meets their lending criteria.
Once a borrower dies or moves into long-term residential care, their new property will be sold off to repay both their outstanding loan balance and any accumulated interest – any surplus will then go back into their estate or will. Regular interest repayments on lifetime mortgages typically aren’t possible as interest simply accumulates and then is paid off when eventually selling the home.
It’s flexible
Are you seeking a way to unlock the equity in your property without moving? A lifetime mortgage might be the solution. These plans are available to homeowners aged 55 and above and work slightly differently to traditional mortgages in that interest compounds and is added onto your loan, which will then be paid back when either death or long term care occurs. You have options regarding regular interest payments or more flexible arrangements such as one-off voluntary payments (or even no payments at all), with some plans even permitting family members to make payments on your behalf.
There are various lifetime mortgage options, with amounts that depend on both your age and home value. To find a plan that suits you best, consider seeking professional equity release advice to discuss your individual situation with an advisor who will assist in helping determine how best to utilize your equity as well as explain it all to you and your family members.
Lifetime mortgages offer considerable flexibility, as they may be transferred to another property if it fulfills your lender’s criteria. However, early repayment charges may apply depending on the plan type and amount owed.
Most providers of lifetime mortgages will offer a no negative equity guarantee, meaning your estate won’t owe more than the sum of the loan plus interest accrued during its term. This protection can provide peace of mind when using plans regulated by Equity Release Council.
If you decide to sell your home with an outstanding lifetime mortgage in place, your lender will need to clear away both your current mortgage and any other borrowing secured against it before using your proceeds from this new lifetime mortgage to purchase another home. Most lenders allow porting of mortgages from one property to the next provided it meets certain criteria and often waive early repayment fees as well.
It’s a business like approach
Lifetime mortgages are an equity release option that allow you to borrow against the value of your property without selling it, without selling. They can be used to fund home improvements, pay off existing debt or give money away as gifts – with borrowing limits determined by age and value of home; however it should be remembered that borrowing more money reduces what your estate receives when your home is sold in future.
Typically, loans do not need to be repaid until either you die or move into care; however, you can choose to re-pay part or all of your debt at any time; early repayment fees may apply however.
Before entering into a lifetime mortgage plan, it is advisable to seek professional advice. This will enable you to understand both its risks and benefits as well as select an option most suited to your unique circumstances. It is also crucial that your family are informed as releasing equity from your home can affect them too.
Setting up a lifetime mortgage entails various costs, such as equity release advice services, solicitor fees and administration charges in addition to interest charges on your borrowing. But the biggest cost may be compound interest; its buildup causes your debt to balloon over time. Some providers allow small monthly payments which reduce overall loan amounts and help avoid the’snowball effect’ caused by compound interest.
Not only should you consider the costs, but you should also assess what impact a lifetime mortgage might have on your entitlement to means-tested benefits and estate valuation. Some plans provide protection from having to repay more than its value over time – this feature could save money.
Lifetime mortgages offer many advantages, but they may not be right for everyone. To avoid making poor choices and make informed decisions about equity release plans, it is crucial that professional equity release advice be sought first before purchasing one. A reliable provider should have an impressive track record as an Equity Release Council member as well as having in place a product governance framework to identify and mitigate against risks of poor consumer outcomes.
