A lifetime mortgage plan is one of the main types of equity release scheme. You can obtain a tax-free cash lump sum or a regular income in later life by securing a loan against your property. You do not have to move from the property and can continue to live there and own your home.
How does it work?
A lifetime mortgage plan is a types of equity release product. Essentially provides a tax-free cash lump sum or a regular income by securing a loan against your property. You do not have to move from the property and can continue to live in your own home.
How much you can expect to release will depend on your age and health, you may be able to release between 18-50% from the value held in your home.
On some lifetime mortgages borrowers pay the interest and capital repayment element as it accrues. The most common way to pay interest is on a roll-up basis which means borrows are not required to make regular payments at all during the term of the loan. A roll- up of interest feature can either be fixed or variable which the lender will then add to the original loan amount. It is important to be aware the original loan amount can increase substantially and quickly under a roll-up feature.
The roll-up of interest that has accrued is eventually paid back when you sell your home to move into a long-term care facility or when you and your partner die.
1. A regular income or cash lump sum with potentially no monthly repayments.
2. You do not lose the right own your home and if there is any growth in value this still belongs to you.
3. For peace of mind products can be considered with ‘No negative equity guarantees’ available.
4. If leaving inheritance for your family is important there are plans that can guarantee this.
5. Some plans can accommodate borrowers from the young age of 55.
1. The inheritance amount you may have wanted to leave will have reduced.
2. The long-term nature of the loan will result in higher interest rates than a normal mortgage.
3. If interest is being compounded the original loan amount can increase quickly.
4. Early repayment charges could apply.
5. Your tax position and benefits entitlement could be affected.
6. You may need a larger loan amount in which case a reversion plan may be more appropriate.
Please note: Interest only lifetime products are available, where you can make monthly payments to avoid increasing the loan amount. Rolled up products are however more commonly offered as explained above with no monthly payments and is paid on the sale of the property.