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Lifetime Mortgages

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Equity Release

Lifetime Mortgages

Lifetime Mortgages are currently the most popular type of equity release scheme. The information below is an overview including the advantages and disadvantages.

Summary

These plans enable you to raise a lump sum at generally a fixed interest rate, which is then added to the loan. They are also known as ‘roll-up’ schemes and you have no monthly payments to make. There are also available options where you can pay some or all of the interest.

You retain 100% ownership of your home and have the right to remain in the property for the rest of your lives and the plan is repaid when the property is sold, which usually occurs when you die or enter long term care.

Advantages

  • Plans are generally available from age 55 to age 95
  • You will benefit fully from any future increase in property value
  • Option of fixed interest rates for the lifetime of the plan
  • Flexibility of borrowing additional funds in the future
  • Optional guarantees to protect a portion of your estate for your family

Disadvantages

  • The Lifetime Mortgage balance will compound over time
  • Your tax position and eligibility for means-tested benefits may be affected
  • A lifetime mortgage usually cannot raise as much as a reversion plan
  • Early repayment charges may apply
  • Your beneficiaries may receive a reduced inheritance
A LIFETIME MORTGAGE WILL REDUCE THE VALUE OF YOUR ESTATE AND MAY AFFECT YOUR ENTITLEMENT TO MEANS-TESTED BENEFITS AND TAX STATUS.
THE IMPACT OF NOT SERVICING MONTHLY INTEREST PAYMENTS ON A LIFETIME MORTGAGE IS THAT THE OUTSTANDING DEBT CAN GROW RAPIDLY, THUS REDUCING THE VALUE OF YOUR ESTATE. FOR EXAMPLE, IF THE INTEREST RATE WAS 7% A YEAR, A £50,000 LOAN WOULD DOUBLE TO £100,000 AFTER 10 YEARS ASSUMING NO REPAYMENTS ARE MADE. THIS IS AN EXAMPLE FOR ILLUSTRATIVE PURPOSES ONLY AND PERSONALISED ADVICE AND RECOMMENDATIONS SHOULD BE SOUGHT FROM A QUALIFIED PROFESSIONAL.
YOU ARE STRONGLY ADVISED TO REGISTER A LASTING POWER OF ATTORNEY. THIS WILL ALLOW YOUR AFFAIRS TO BE MANAGED BY SOMEBODY ELSE IF YOUR MENTAL ABILITIES SIGNIFICANTLY DECLINE.

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