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Lifetime Mortgage

These mortgages are used by many individuals as a successful way to attain extra income during the later years of their life. When a person acquires one, they are agreeing to what is known as an equity release mortgage. This equity release mortgage allows for individuals to gain access to cash that is tax-free.

A loan amount is given which is based on the value of the individual’s home. Unlike many mortgages that are for fixed terms, these are extended until the individual either passes away or enters into full-time care in a facility. This is why a lifetime mortgage is often attached as a descriptor of this unique mortgage option.

Taking out one of these equity release mortgages is a way for homeowners to gain access to money that they need while still keeping their homes. This is money that can be used in whatever manner is deemed necessary and there are no monthly payments to worry about if the homeowners choose that option.

Other benefits include being able to receive this money as one lump sum payment, or in instalments. Many homeowners choose this mortgage option as a way to avoid having to downsize their home to get access to the cash that they need.

What You Need to Know About How These Mortgages Work

There are some important things to know about these unique mortgages. The most important thing to remember is that you can continue to live in your home until your passing or until you enter into long-term care. Once this happens, your home will be sold. This is how the loan is paid off. Interest does accumulate on the amount borrowed.

It can either be repaid, or it can be added to the loan total. Taking out one of these unique mortgages allows a homeowner to release an amount of money that can range anywhere from £ 10 thousand to £100. Your options for receiving this sum include either taking the whole amount at once or receiving smaller payments that come in as you require them.

If there are proceeds left over after the mortgage has been repaid, they are distributed to your beneficiaries as a part of your estate. It is important to once again emphasize that this money that is accessed is all tax-free.

The Different Types of Lifetime Mortgages

There are five primary types within this mortgage category. These equity release mortgage types include:

  • Drawdown Mortgage: When you take out this variety of equity release mortgage, you gain the ability to access your cash over a period of time rather than taking it all as an individual lump sum. The benefit of this option is that you can gain access to cash as you find that you need it. You will only be charged interest on the cash amount that you do end up taking out. Many individuals prefer this option as a way to avoid building up a large amount of interest that is owed
  • Roll-Up Mortgage: When you take out a roll-up mortgage, you are given the entire lump sum at once. When you do this, you have no monthly payments to make, and the interest that you owe is paid when your home is sold
  • Enhanced Mortgage: If you have certain types of medical conditions, you might be able to unlock an even larger sum from the value of your home. Individuals who qualify for an enhanced mortgage are often able to avail of better rates
  • Flexible Mortgage: With the flexible mortgage option, you get the option to make payments voluntarily. These payments bring down the amount of your equity release mortgage. When you take this option, you are still able to get your money in a lump sum. You also continue to keep ownership of your home until you pass on or go into a long-term care situation
  • Interest-Only Mortgage: When you take out an interest-only equity release mortgage, you gain access to your cash in a lump sum but you make monthly payments on the interest that accrues. When you take this option, you reduce the amount that must be paid back when the mortgage concludes

What Amounts Can Be Borrowed?

The amount that you can take out in your mortgage is going to be based on your individual provider. The amount is generally based on three main factors. These include the age of the youngest homeowner involved in the transaction. It is also based on the valuation of your home. It is required that your home has a minimum value of £70 thousand to be able to get one of these equity release mortgage options.

A third factor that is considered is your health and your lifestyle. Medical conditions are also assessed and can often lead to you being able to access a larger amount.

How Do You Decide If This Mortage Option Is the Right Choice for You?

Taking out one of these mortgages is a big decision and one that should be made only after careful consideration. It is important to decide whether or not it is the right option for you and your needs.

Some of the key factors that you should consider include:

  • Taking out this mortgage option can affect the amount of money that you can leave as an inheritance to your beneficiaries
  • If the mortgage has variable interest rates, it is important to remember that they could rise substantially. The Equity Release Council that governs these transactions has ruled that the upper limit is capped for mortgages with variable interest rates
  • The amount of money that you owe can rapidly increase when you choose an interest roll-up variety of mortgage. This could eventually lead to the amount owned being more than the home’s value
  • Taking out one of these mortgages can possibly affect your ability to gain benefits that are means-tested. It can also affect your tax position
  • Your lender will expect that your home will be maintained to a certain standard during the course of the loan

Information Regarding the Interest Rates

It is important to have a good understanding of some information related to the topic of equity release and interest rates. The interest rates for this special mortgage type will depend on several key factors. The type of plan that you decide on is a major factor in the determination of interest rates.

The length of time the plan will run for is also a factor that plays into interest rates. It is important to speak to your service provider about how your interest rates will be calculated when you are investigating whether or not this is an option that is the right choice for you and your financial needs.

Are There Other Costs That Are Associated With This Process?

Another thing that is important to know regarding these unique mortgages is that there can be some other costs that are involved in the process. Some of the costs and fees that you might be responsible for could include lender fees related to your acquisition of the product, valuation fees, legal fees, application fees, a fee at completion, and building insurance.

You want to make sure that you are completely aware of all of the types of fees that you will be responsible for as a part of your application to acquire and equity release. This is another area where you need to be clear about everything because it can help you in deciding if this is the right option for you. Your lender can go into more extensive details about this important topic related to equity release mortgages.

How Can This Mortgage Option Help Me?

Countless homeowners have found this unique mortgage option to be a program that works for them. There are a lot of ways that the funds can be used that will help you out significantly.

Some of the ways the funds are typically spent by homeowners include:

  • A Much-Needed Income Boost – It is an all too common thing for those entering their later years to find that they could do with a boost in income. This is one of the most common uses of an equity release mortgage
  • Many Homeowners Have Used the Funds to Pay an Existing Mortgage – It is also a common thing for homeowners that still own money on their existing standard mortgage will turn to an equity release mortgage. Using an equity release mortgage as a way to get one’s self free and clear of all other debts is a common reason why homeowners will choose this great option
  • Funds to Help Out Family in Need – It is a common occurrence as people get older to want to be able to help out younger members of the family to ensure that they are in a good financial position in their own lives. It is not uncommon for homeowners to get an equity release mortgage as a way to help out family members in need
  • Funding for Home Renovations – An equity release mortgage is commonly sought by homeowners that want to finally be able to put their home renovation plans in motion. The funds can be used to make long-overdue home improvements and renovations that can make life more enjoyable
  • The Funds Can Be Used for Enjoyment – The older one gets, the more they realize the importance of being able to have time to just enjoy one’s self. Using equity release funds to simply be able to enjoy life more is another common reason why homeowners will choose this option

A Breakdown of the Benefits

It is worth taking a moment to clearly break down the benefits associated with equity release mortgages.

The primary benefits include:

  • You Are Guaranteed to Have Zero Negative Equity – The guarantee of no negative equity is a major benefit associated with equity release. This means that you do not have to worry about leaving your loved ones with debt because you can’t owe any more than what your home is valued at. This is the case even when your property experiences a drop in value. Your lender will write off any debt that is leftover in the case of a loss of property value
  • You Are Still the Owner of your Home – The fact that you still own your home when you get an equity release mortgage is another major benefit. Your home will continue to belong to you and your partner until you either pass on or go to a permanent care facility. When you have an equity release mortgage, you never had to stress about being forced out of your home
  • You Still Maintain the Ability to Move House in the Future – One never knows when circumstances will require you to need to move house. This is not a problem with an equity release mortgage. To do so, you have to find an alternative property that will meet the criteria that have been set forward by your lender
  • It Will Still Be Possible for You to Leave an Inheritance to Your Beneficiaries – Many individuals worry that taking out an equity release mortgage will prevent them from being able to leave an inheritance to loved ones, but this does not have to be the case. Any funds that are left over after your house has been sold and your interest has been paid will be able to go back into your estate and distributed to beneficiaries

Contact Us for More Information

Contact us today at Equity Release Warehouse for more information about your mortgage options. We can provide you with an extensive range of information that will help you to decide whether or not an equity release mortgage is the best solution for your financial needs. You can give us a call or fill out our online form.

We look forward to speaking to you today about how we can help. Countless homeowners have found that an equity release mortgage was the right decision to help them meet their financial needs in their later years.

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