A Lifetime Mortgage is a way to release money that is tied up in your home. It works as a loan that is secured on your home, which is only repaid after you pass away or go into long-term care. It can be a helpful option for many homeowners who wish to receive a sum of money for various lifestyle improvements, without having to move out of their home.
In this piece, we’ll answer some of the most common questions about Lifetime Mortgages to give you some insight into whether it might be the right choice for you.
It is worth discussing this with an adviser as you may be able to pay/service the interest every month, or on an irregular basis, which will avoid or reduce the build-up of interest which is a standard feature of most Equity Release plans. These payments are on an ad-hoc basis with no obligation to pay.
You can use a Lifetime Mortgage to buy a new property that you intend to move into, typically to cover the shortfall between the costs of the old and new property. The Lifetime Mortgage is secured on the new property.
Alternatively, you can raise a Lifetime Mortgage on your existing property to enable you to buy, say, a holiday home or gift money to family to help them on the property ladder.
The main disadvantage of a Lifetime Mortgage is that the interest accrued increases the longer the mortgage runs, so people might not realise just how much they could potentially owe once the loan is expected to be paid. Therefore, this might significantly affect the amount of inheritance you could leave to your family. Also, if you use any of the released equity as a cash gift to your family, they might then have to pay inheritance tax after you pass, however there are possible exceptions to this, such as a Potentially Exempt Transfer.
It’s very hard to give a typical rate for a Lifetime Mortgage as they change frequently due to a number of factors, and the rate you are offered will be dependent on things like your age, the value of your property, how much you release, and other personal circumstances. However, once the mortgage is issued, the interest rate will remain fixed throughout the life of the mortgage.
This is also very much dependent on your personal circumstances, but it can be a useful tool for releasing money when you’d like to enjoy your retirement or prepare for long-term care. It is vital, however, that you get insight from an Equity Release adviser who will be able to talk you through the pros and cons, discuss other options such as downsizing or a regular mortgage or loan, and ultimately help you decide whether it’s right for you.
Lifetime Mortgages are the most popular type of Equity Release plan and are a popular choice for many homeowners looking to enjoy a lump sum, or series of lump sums, later in life. However, it is vital to consider all of your plans and circumstances before you commit, so speak to one of Bower’s Equity Release advisers today to find out more.
