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Lump Sum Lifetime Mortgages

As many people are already aware, lifetime mortgages and equity releases can allow homeowners to turn the value of their home into tax-free cash to help them in their later years, and one of the options to receive your money is in the form of one large “lump sum”.

The lump-sum option may be an attractive choice for some, particularly those dealing with single large expenses or who need access to more of their money right away.

If you’re over the age of 55 and looking for a great opportunity to access the value of your home while continuing to live in it, then a lump sum equity release plan could be the right choice for you.

What is a Lump Sum Lifetime Mortgage?

With lump sum lifetime mortgages, a homeowner receives one-time cash withdrawal based on the value of their current property and continues living in the property until their term there has ended. This is tax-free income that can be used on anything the homeowner sees fit, from paying bills or taking care of living expenses and more.

People generally prefer a lump sum payment if they have money already earmarked for a specific use or major purposes. Also, lump sum lifetime mortgages are very popular and often selected for the fact that they come with some of the lowest interest rates possible for a lifetime mortgage.

Why Would Someone Want a Lump Sum Lifetime Mortgage?

Certain eligible individuals may want a lump sum lifetime mortgage due to the fact that it provides a steady and dependable interest rate so you can know exactly what is owed. No monthly payments are generally required because the loan and roll-up interest are added when the plan comes to an end.

Other seniors may like the fact that the lump sum lifetime mortgage allows the person to continue living in their own home while enjoying the tax-free value of their property to help them live the lifestyle they prefer. Also, some plans could still allow you to move homes if you please, as long as the new property meets the demands of the lender.

You can also get an available downsizing protection plan to help you pay your loan off early while keeping extra fees to a minimum.

Benefits of a Lump Sum Lifetime Mortgage

The one large lump sum format provided by some equity release plans brings a large number of choices and flexibility regarding what the homeowner can do with their money. For example, if the homeowner wishes, they can segment a specified amount or portion of their home value payments as an inheritance to leave behind for their loved ones or designated recipient.

Others may appreciate the fact they can complete any large projects such as home renovations or taking vacations with portions of their lump sum money.

There is a wide range of reasons for why people may choose to get a lump sum lifetime mortgage, but there are several interest rate arrangements and other options to decide on when selecting the right lump sum lifetime mortgage.

Possible Disadvantage of a Lump Sum Lifetime Mortgage

There may be some potential drawbacks to getting a lump sum lifetime mortgage, and the homeowner should always be aware of the details of their plan. While several varieties of lump sum lifetime mortgages exist that may carry their own unique structures or features, some may feel a lump sum lifetime mortgage doesn’t offer the flexibility of accessing your funds over time as some drawdown lifetime mortgages may do.

Also, it may be necessary to for fees if you decide to cancel your lump sum equity release early, as they are almost always designed for the long-term. These are known as early repayment charges (ERCs) which can often be significant, and as much as 25% of the money loaned in some situations.

There are also other opportunities however for these fees to taper over the course of a number of years, and many more variables involved with lump sum equity releases.

Advantages of Lump Sum Lifetime Mortgages Over Drawdown Plans

Those choosing to go for a lump sum equity release payment get to avoid the added fees associated with setting up additional accounts and other services necessary for a drawdown mortgage. This can be a benefit for those paying attention to their bottom line over the entire course of their loan, and you still own 100% of your home.

There may also be voluntary partial payment plans available that give the homeowner the opportunity to maintain their balance according to their financial goals as they go along.

Also, by getting a lump sum lifetime mortgage, you leave open the possibility for additional borrowing in the future, as a lump sum lifetime mortgage does not prevent an individual from taking on additional loans.

Possible Flexibility Features That May be Available

Many options can be built into a lump sum lifetime mortgage that leaves open the door for additional actions at a later date by the homeowner. For example, many plans have fixed early repayment charges after 8, 10, or 15 years that allow a homeowner to pay off their loan if they choose instead of selling their property.

Other options may include a designated time period early repayment charge exemption during which no additional fees are charged for early repayment of the loan or a downsizing protection plan that lets you pay back the loan without fees after a given period of time.

Things to Consider About Lump Sum Lifetime Mortgages

Compound interest plays a strong role when understanding your lump sum lifetime mortgage, so consider this factor, as well as the amount, will need to be repaid when the loan ends. Monthly payments are purely optional with a lump sum lifetime mortgage and defined by the terms of each individual agreement.

Lump-Sum Lifetime Mortgages are some of the most common lifetime mortgages available and as such, are offered by leading companies and providers.

If you’re looking for a lump sum lifetime mortgage, make sure to spend time consulting with an advisor to know you are getting the loan you truly want and deserve.

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