Lifetime mortgages are a method for releasing the equity in your home, built up over many years with your mortgage payments. What makes lifetime mortgages different from conventional mortgages loans is the fact that the money you borrow, does not have to be paid back until your death or entry into long-term care.
You can choose to receive your lifetime mortgage as a cash lump sum. Alternatively, you can opt to have the money released to you as a monthly income allowance, or in smaller lump sum payments.
Those looking into lifetime mortgages can apply for a proportion of your home’s current value from a reputable lifetime mortgage provider. You will then be charged interest on that loan amount. You can then choose to pay off the interest on the loan every month, or you can choose to ‘roll-up’ the interest. This is where you add the interest to the capital portion of the loan and you pay nothing, month-by-month.
You do not have to pay back the interest until you and your partner dies, or goes into long-term care. The lender gets their money back from the sale of your property, at the end of the mortgage term.
To find out more about other equity release schemes, take a look at this guide.
Fred and Geraldine are close to 60 years old and have paid off the mortgage on their £185,000 home. They would like to take out a lifetime mortgage to secure their retirement. Currently, they can borrow 25% of their home’s value within a lifetime mortgage.
The couple decides they would like to borrow £45,000 and have been offered a mortgage that charges 7.5% interest per annum. 10 years later both Fred and Geraldine have passed away and the home is sold off. The interest of the loan was rolled-up, and so the lender received £95,042 from the sale proceeds.
It is highly advised that you seek independent financial advice before you consider taking out a lifetime mortgage. Lifetime mortgages for pensioners can have an irreversible effect on your finances, in terms of what you can leave behind for your loved ones when you die.
To find out more about lifetime mortgages and how they might benefit your individual circumstances, get in touch with an independent financial advisor. They can offer you a free, no-obligation quote to get you started.
You can also take a look at some frequently asked questions about equity release and how it may affect your finances.
I need a little help to understand the process. The adviser guided me through everything and was happy to have my family present during the meetings.
Bill Westwood, London
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATION EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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