Lifetime Mortgages – Unlock Your Nest Egg

Releasing The Money In Your Home To Make Life A Little Sweeter

So, you’re at that time in your life where your kids have flown the nest and you’re ready to make some changes for the better. Like buying a motorhome and zooming off round the countryside, or getting that new kitchen you’ve always talked about.

But how can you when the only money you have is locked up in the value of your home, and the only way to set that free is to sell up and move out … isn’t it?

Not if you have a Lifetime Mortgage.

Fifty Five is the magic number – did you know if you’re 55 and over, you can unlock the equity in your property without having to sell your home, give up ownership, or make monthly repayments?

Here’s our guide to Lifetime Mortgages and how they can help you access the money in your home and use it for pretty much anything you like.

What Are Lifetime Mortgages?

Lifetime Mortgages enable you to access the money locked up in your home.  Unlike a traditional mortgage, you can release your equity without having to make monthly repayments because the loan only needs to be paid off when you die or move into long term care.

To apply for a Lifetime Mortgage you need to be 55 years old or over, own and live in your own property.  Provided it’s worth more than £70,000, used for domestic purposes only, and is located in a residential area – you could be home and dry.

Depending on your age and the state of your health, you can borrow between 28% and 56% of your home’s worth and take it as a tax free cash lump sum, or in smaller monthly payments.  In fact the older you are and the more health conditions you have, the more money you can borrow.

You can use the money for pretty much anything you like, but not for investment purposes, like buying stocks and shares, or a Buy-To-Let property.  However, you can use it to pay off debts or to clear the existing mortgage on your home.

There are many benefits of a Lifetime Mortgage. Probably the most important one is that you can continue to own your home and have the right to live in it until you die or move out.  Lifetime Mortgages are not to be confused with Home Reversion Plans which expect you to give up ownership of all or part of your home.

Choosing a lender that is a member of the Equity Release Council, means the value of your home is secure under their ‘No Negative Equity Guarantee.  This means you will never be asked to pay back more than your home is worth, even if your property drops in value in the meantime, the shortfall will be written off.

If you want to move home during the lifetime of your mortgage, you can. The loan will be transferred to the new property, provided it meets the lender’s standards.

So How Do They Work? 

Lifetime Mortgages are like having an invisible loan, because you don’t have to make any monthly repayments.  Although you can make interest and capital payments if you want to.

Interest payments are set at a fixed rate, and added to the loan.  The entire loan amount, capital and interest is cleared when your property is sold after you die or move into care. The interest does compound year on year, so it’s important to find out how much this would amount to in the long run.

Any money left over from the sale of your property will be paid to your beneficiaries. However, if the sale price only just covers the loan, there will not be any money left for your children or other family members to inherit.

Types of Lifetime Mortgages – Which One Suits You?
Lump Sum – interest is charged and added throughout the lifetime of the mortgage. There are no payments to make for the rest of your life and all of the loan is paid off after the sale of your home.

Drawdown – you take a small lump sum at the beginning, then take smaller amounts as you need them.  This may be a cheaper option as you only pay interest on the money when you draw it.

Interest only – you pay off the interest monthly so only the capital is payable after your home is sold.

Flexible – you make regular payments to reduce the loan, so some equity from your home is left for your partner or children to inherit.

Enhanced – if your life expectancy is low, you may be able to borrow a larger portion of your equity so you can do the things you need to do now, rather than wait.

There may be certain restrictions, such as early repayment charges, talk to us first so we can make you aware of the terms and conditions.

Why Choose A Lifetime Mortgage?
A Lifetime Mortgage could be just the life-line you need to:

• pay for the holiday of a lifetime
• buy a motorhome and tour the UK
• make home improvements
• help your kids buy their first home
  
• pay off the capital on your interest only mortgage
• keep your head above water if you’ve lost your job
• buy your ex out of your home if you’re splitting up
• pay your bills because you’re ill and have no income protection

How Much Does A Lifetime Mortgage Cost? 

This depends on how much money you are able to borrow and the interest rate you’re charged.  While you don’t have to pay monthly repayments, there will be other expenses to factor in such as legal and valuation fees.

A Lifetime Mortgage is not suitable for everyone and may affect your entitlement to means tested benefits, so it is important to seek financial advice before taking any action. If you are considering releasing equity from your home, you should consider all options available before equity release.

The interest that may be accrued over the long term with a Lifetime Mortgage, may mean it is not the cheapest solution. As interest is charged on both the original loan and the interest that has been added, the amount you owe will increase over time, reducing the equity left in your home and the value of any inheritance, potentially to nothing.

Although the final decision is yours, you are encouraged to discuss your plans with your family and beneficiaries, as a Lifetime Mortgage could have an impact on any potential inheritance. We would also encourage you to invite them to join any meetings with your Financial Adviser so they can ask questions and join in the decision, as we believe it is better to discuss your decision with them before you go ahead. This is a referral service.