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Income Lifetime Mortgage Plans

There are many different types of equity release plans available for homeowners, and each one features unique advantages and disadvantages that may serve certain homeowners more than others.

In this article, we’ll be taking a look at the type of equity release known as an income lifetime mortgage, as well as the types of homeowners who may stand to benefit from taking one out.

What Is an Income Lifetime Mortgage?

An income lifetime mortgage is what it sounds like… a lifetime mortgage whose funds go on to serve as supplemental income to the homeowner.

As compared to other types of equity release that might allow the homeowner to take out more exorbitant funds at a time, or simply will present that homeowner with a large lump sum upon the initial agreement, the funds from income lifetime mortgages are made available to the homeowner in incremental installations.

Supplemental Income for Retirees

There are many reasons that a homeowner may opt for an income lifetime mortgage over some other form of equity release that allows them to borrow greater amounts of money at a time. Firstly, it’s perfect for those homeowners who aren’t interested in spending huge sums of money at once.

If you are going to be using the funds from your loan for day-to-day expenses associated with retirement living, you likely won’t be needing huge amounts of money at a time.

When we have more money than we need, that money can oftentimes start to burn a hole in our pockets. With income lifetime mortgages, the loan funds are staggered so that you never have more money than you need at any given time.

How Does an Income Lifetime Mortgage Work?

In terms of the basics, income lifetime mortgages function fairly similarly to other popular types of equity release, with the main difference being the specific way in which funds are offered to the homeowner by the lender. As with most other forms of equity release, you must be a homeowner and over the age of 55 before taking out an income lifetime mortgage.

Once you’ve decided to see if you qualify, it is only a few simple steps before you stand to benefit from the incidental value of your home, withdrawn in cash.

1. Fixed Amounts and Interest Rates

With income lifetime mortgages, the overall amount you will borrow, as well as any interest this amount might accrue, is agreed to at the initial stages of the loan. Both the amount and the interest will be fixed, facts that have their own pros and cons in relation to other forms of equity release.

The overall amount a homeowner stands to borrow is determined by both the value of their home and how long they plan on remaining in the home. The more valuable the home, and the shorter the homeowner plans on staying there, whether due to death or other life events, the more money they stand to borrow off of the value of their home.

2. Your Property Will Be Evaluated

In order for the value of your home to be properly determined, the lender will arrange for an inspector to come and check on its condition. This inspector will use all necessary and pertinent data to value your home, and this will then determine the sum that you are able to borrow.

Typically, the overall amount agreed upon may range from 30-60% of the determined value of the home. This amount, then, will be paid in cash to the homeowner in incremental monthly instalments, functioning as a supplemental “income”. Hence the name “income lifetime mortgage”.

3. Tax-Free Funds

As with most other types of equity release, the amount that you receive in funds each month will not be taxed. However, the funds will accrue the established amount of interest that you agreed to, and that interest will detract from you and your family’s potential ability to profit off the sale of the home in the future.

As compared to other types of equity release that may offer more leniency in terms of “buying the house back” from the lender, income lifetime mortgages are a bit more finite, with those taking them out oftentimes not being overly concerned with the future of their property.

Who Are Income Lifetime Mortgages For?

As you can imagine, there are many different reasons that a homeowner might wish to take out an income lifetime mortgage. However, the predominant reason is always due to decreased amounts of income after retirement.

For many, income dries up immensely as soon as you reach retirement, which makes the need for some supplement income all the more pertinent. Of course, there are always pensions, savings, and investments, but not everyone has these, and even those who do don’t always have enough.

1. Smaller Funds for Day-to-Day Purchases

Whereas other types of equity release may be more apt for big purchases or monumental life changes, income lifetime mortgages are for those who simply need a helping hand, or just don’t want to waste their twilight years worrying about money.

For the right homeowner, an income lifetime mortgage provides a great opportunity to up your pension and make the remaining years of your life worth living.

2. Limited Control Over Your Property Going Forward

Since the terms of an income lifetime mortgage are typically stringent and fixed, those who think they might like to retain the total value of their home, and maybe even pass it on to a family member, would be better off with a more lenient form of equity release.

There are other types of equity release that are much more flexible in terms of how much money you can receive and how much value you can retain over your property.

Contact Us for More Information

Deciding which type of equity release is right for you is tricky, and the decision isn’t always so cut-and-dry. However, with the proper advisement, the decision doesn’t have to be too difficult.

If you have any questions, we are here to give you answers. We take pride in helping all of our customers find the right equity release plan for them so that they can worry about what really matters in their remaining years.

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