What is a lifetime mortgage?
A lifetime mortgage is a type of loan that lets you release equity on your property. Another option that lets you do this is a home reversion scheme, but a lifetime mortgage is generally the most popular way of doing it.
You can receive this loan in the form of a lump sum or monthly payments (like a regular income) - it all depends on your preferences and needs.
How does a lifetime mortgage work?
When you take out equity release with a lifetime mortgage, you are borrowing money that’s secured against your home, but you still own it and you’re able to carry on living there as normal.
The loan is then paid back to the lender from the sale of your home when you pass away or go into long-term care, meaning that you don’t have to make any monthly payments as you would with a traditional loan.
When the lifetime mortgage loan is paid off, what usually happens is that there will be money left over from the sale of the house for your family as a form of inheritance. Having said this, depending on how much the house is sold for and how much pays off the loan, this could mean that your loved ones won’t receive much. In this case, we recommend you having life insurance in place, just to make sure your loved ones aren’t left struggling financially when you pass away.
On top of the amount you are borrowing, you will be charged a fixed rate of interest – you can either repay this or just add it to the total amount of the loan. Some lifetime mortgages are willing to let you pay off all the interest, or just a part of it, while others may let you pay off the interest and capital. The terms and conditions of all types of lifetime mortgages can differ, so it’s always best to get expert advice from a professional. At Unite Life, we can help – simply get in touch with us today, obligation free, for more information!
Who is a lifetime mortgage for? Do I qualify for it?
People usually release equity on their home if they have a low pension pot and want to boost it so that their retirement fund is greater and more sufficient. So a lifetime mortgage is most suitable for older people – those who are retired, or close to retirement, and want extra money without having to move house and downsize.
To qualify for a lifetime mortgage, the following rules apply:
- You must be over 55 (some schemes may only be available to those aged 60 and over)
- Your house must be in good condition (as this guarantees a quicker sale)
- Your mortgage must be paid off in full
If you have a particular medical condition, or you are a smoker, some lifetime mortgage providers may offer a larger loan, due to there being a shorter life expectancy (as they know they’ll receive the loan and interest back quicker compared to other borrowers).
What if the sale of my house isn’t enough to pay off the loan?
In the event that there is insufficient funds left over from the sale of your house to pay off the loan, your beneficiaries will have to pay off the remainder of the loan from your estate.
To prevent this from happening to people, most types of lifetime mortgages will offer a ‘no-negative-equity guarantee’, set out by the Equity Release Council.
If the lifetime mortgage comes with this guarantee, the lender is promising that neither you nor your loved ones will have to pay back more than the value of your home. Even if the debt is actually more than the value of your home, the no-negative-equity policy remains in place to protect you.
How can Unite Life help?
At Unite Life, our experienced and friendly advisors are available to help provide you with more information regarding equity release and lifetime mortgages.
We have partnerships with trusted UK suppliers whose services are the best in the market. There is no charge for our initial advice – it’s free! If, however, you do want to go ahead with an equity release scheme such as a lifetime mortgage, then a fee may apply. You’ll always be informed of everything throughout the process, so there are no hidden costs or surprises. If you don’t wish to go ahead with our advice then that’s no problem at all and you won’t be charged anything.
Get in touch with us today, obligation-free, and we can help make sure you have the right plans in place for retirement and for protecting your loved ones.