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lifetime mortgages

Lifetime Mortgage in 2018

I’m sure you will agree that when it comes to better understanding how equity release works, and in particular a lifetime mortgage, it can get confusing.   This is why we are here to help you by explaining what a lifetime mortgage is.

The key topics in this guide will help explain it all to you in a very straight forward way.  In this guide,you will find:

What a lifetime mortgage is

– The pros and drawbacks of a lifetime mortgage  

– Current lifetime mortgage rates and lifetime mortgage providers

– Where you can find people to help you find the best equity release deal and info about lifetime mortgage calculators

– What happens if your home is worth less then you borrow

– Questions you should ask an advisor when you speak to them

Some background to a lifetime mortgage

Equity release schemes are rapidly growing in prevalence in the UK and overseas – and with good reason.

Here is a short video that explains what equity release is.

As more and more people are unfortunately finding they have left it too late to prepare for the cost of care, equity release is understandably becoming an increasingly popular option.  The two most popular options are lifetime mortgages or home reversion plans.

Equity release schemes provide instant access to funds that can be used to pay for care in the short or long term. But as the needs of customers continue to diversify, new products emerge on the market to meet them.

In this informative guide we explain the two broader categories most equity release schemes fall into, and share the benefits and drawbacks of each to help you to make the right decision depending on your individual situation and needs. For more information on how equity release works, please refer to our comprehensive guide here.

What is a lifetime mortgage?

Here is a useful video that explains what a lifetime mortgage is.

The most popular type of equity release scheme is known as a lifetime mortgage.

This is the most popular type of equity release scheme, as it’s the most flexible and versatile option.

It’s easiest to think of a lifetime mortgage as a kind of long-term loan, secured against the value of your property.

The difference with this compared with regular mortgages or loans is that although interest is added by the lifetime mortgage providers (usually on a yearly basis), no repayments are due until the termination of the contract – which usually occurs upon death or the sale of the property.

As with all investment options, there are benefits and drawbacks to consider if you are thinking about approaching lifetime mortgage providers. 

What are the advantages of a lifetime mortgage?

Retaining ownership of your property – in the event that you wish to keep it in the family, sell early should circumstances change, or plan on yourself or family members continuing to live there indefinitely.

Freedom to use your money – The money borrowed can be spent (or reinvested) however you choose, giving you freedom and flexibility.

Negative equity guarantee – Many lifetime mortgage providers offer a ‘negative equity guarantee’, ensuring that you won’t have to pay back more than you received when you eventually come to sell your property.

Inheritance planning – Some also allow you to portion and protect a percentage of the property’s value to gift as inheritance, or make partial repayments early should your circumstances change.

Partial repayments – some lifetime mortgages will allow you to repay some of the money that you have borrowed.  This will help increase the amount that may be available to your family when you pass on.

Here is a short video that explains what the advantages and disadvantages of Lifetime Mortgages are.

lifetime mortgage

What are the drawbacks of a lifetime mortgage?

Reduces your inheritance – Equity release schemes and lifetime mortgages in particular are likely to reduce the amount of inheritance you’re able to gift to family members and friends. However this is less of a concern if the cost of imminent care needs is likely to reduce the amount you can leave when you pass away.

Impact on benefits and tax position – A lifetime mortgage can affect your entitlement to certain state benefit payments as well as your tax position – so it’s worth obtaining a clear picture of how enrolling on a scheme could affect your income situation before making a decision.

Accruing interest – Lifetime mortgages accrue interest – both on the mortgage itself and the interest added each year.

This significantly increases the amount you’ll have to repay later down the line. (Interest only lifetime mortgages can be taken out to alleviate this – as detailed below.)

Repayment – You may need permission or be forced to make repayment early should you decide to rent out your property or sell it before the agreed period of time has lapsed.

This can become rather complicated if you do change your mind or find that your circumstances change.

How much can you borrow from a Lifetime Mortgage?

You can click the calculator below to get an instant idea as to how much money you can get tax free from the value of your home.  Give it a go as it can often be more than you think!

Try the Equity Release Calculator and see how much money you could get tax-free!

Just click on the Calculator and get an estimate of the thousands of £££'s you could get!

Alternatively, you can speak to an advisor right away. Just call 0800 4640 806 and speak to someone right away.  OR leave your contact details below and we will get in touch with you.

What are the different types of lifetime mortgages?

Primarily, there are two different types of mortgages that you choose between:

– An interest roll-up mortgage

This is where you get a lump sum at the start or you are paid a regular amount over a period of time.  You are then charged interest on the amount that is borrowed and this amount is then added to the loan. The effect of this is that you don’t have to make any regular repayments back to the mortgage provider.

The amount that you initially borrowed plus the rolled-up interest is repaid at the end of your mortgage term when your home is sold.

– An interest-paying mortgage

This is where you get a lump sum and make either monthly or ad-hoc payments to cover the cost of the interest on the amount borrowed. This reduces, or stops, the impact of interest rolling-up. In addition, some mortgages also allow you to pay off the capital.

The amount you borrowed is repaid when your home is sold at the end of your mortgage term.

The best Lifetime Mortgage rates – What are the best one’s available

The lifetime mortgage rate that you will get will typically depend on the amount of loan to value you are taking.

However, typically you would see rates starting around 3.5% going up to about 7%.  As you can see, the range of lifetime mortgage rates that you can get are very wide.  That is why we strongly recommend that you speak to a specialist to help you find the best rate.

Here are the 5 cheapest lifetime mortgage rates available in the market today.

1st cheapest lifetime mortgage deal

Provider – Hodge Lifetime

Maximum Loan to Value – 50%

Annual interest rate (AER) – 3.45%

Loan details – £20,000 to £500,000 as a cash lump sum payment.  Click here to see how much you can borrow or call 0800 4640 806 to speak to an equity release specialist.

2nd cheapest deallifetime mortgage rates

Provider – Legal & General Home Finance

Maximum Loan to Value – 39.5%

Annual interest rate (AER) – 3.75%

Loan details – £250,000 to £2,000,000 as a cash lump sum payment.  Click here to see how much you can borrow or call 0800 4640 806 to speak to an equity release specialist.

3rd cheapest deal

Provider – Legal & General Home Finance

Maximum Loan to Value – 39.5%

Annual interest rate (AER) – 3.77%

Loan details – £250,000 to £2,000,000 as a cash lump sum payment.  Click here to see how much you can borrow or call 0800 4640 806 to speak to an equity release specialist.

4th cheapest deal

Provider – LV

Maximum Loan to Value – 45%

Annual interest rate (AER) – 3.8%

Loan details – £10,000 plus as a cash lump sum payment.  Click here to see how much you can borrow or call 0800 4640 806 to speak to an equity release specialist.

5th cheapest deal

Provider – Legal & General Home Finance

Maximum Loan to Value – 42%

Annual interest rate (AER) – 3.83%

Loan details – £10,000 to £750,000 as a cash lump sum payment.  Click here to see how much you can borrow or call 0800 4640 806 to speak to an equity release specialist.

Lifetime Mortgage Providers

The market for lifetime mortgage providers is not as large as your typical mortgage market.  This is because there is much more demand for conventional mortgages which means that the number of providers for lifetime mortgages is much smaller.   However, the larger providers in the market are:

Because the market for equity release mortgages is much smaller, we can not stress enough the importance of speaking to an advisor.  You can either leave your contact details below or ring 0800 4640 806 and speak to a specialist that can help you understand the best available options for you.

lifetime mortgage providers

Alternative lifetime mortgage products

A range of different products also fall under the umbrella of lifetime mortgages – further increasing the potential for complications and confusion as you make your decision.

Each has benefits and drawbacks of its own – but many have been developed to circumvent or alleviate problems that have been run into by traditional standalone policies.

One such example is the ‘interest only lifetime mortgage’ – which prevents the need for a huge repayment inclusive of interest on termination of the contract through low monthly repayments which cover interest accrued.

An interest only lifetime mortgage also helps homeowners to protect a greater portion of their property for inheritance purposes. Another type of equity release scheme, known as a ‘home reversion plan has additional benefits for those looking to remain living in their property long-term.

What does a lifetime mortgage cost?

Like with many financial products, there are often costs involved with setting up a mortgage product.  In addition, there may also be other insurances and products that you need to purchase as part of your agreement to get the mortgage.

In our experience, these additional costs typically add up to somewhere between £1,000 to £4,000.

However, the price often depends on the amount you are looking to borrow.

Typically, the following costs may apply:

  • Buildings Insurance.  You may want to also take this alongside your contents insurance.
  • Solicitor and legal costs
  • Home valuation fees
  • An arrangement fee to the lender for the product.  These can vary greatly and an advisor can tell you what these are.  You can call 0800 4640 806 to speak to a specialist and find out what the current arrangement fees typically are.
  • A completion fee.  You normally have two options with this.  You can either pay this as a lump sum when your mortgage is set up or you can add it to the amount that you have borrowed.

You should note, however, that if you do look to pay off your mortgage earlier then the terms you originally signed up for, then you may be liable to pay an ‘early repayment charge.

Why is a lifetime mortgage a popular choice?

When the opportunity to put aside money to pay for care in the future has passed, the range of options for investments that don’t affect quality of life and inheritance begin to narrow. Therefore equity release has become one of the most viable and attractive ways to fund care – and with good reason.

Equity release schemes enable you to retain ownership of your home and in most cases continue to live there.

Some people won’t be eligible for certain types of equity release schemes – or it may not be a suitable option at all.

For example, you may prefer to sell your property and move to sheltered accommodation, using the funds raised from downsizing to pay for additional care needs.

Your property may be held in trust.

If you are still paying the original mortgage on your home it will need to be paid off in full before you can apply for an equity release scheme. To discover more about equity release schemes and decide whether this may be a viable option for you, take a look at our handy guide here.

What is a ‘no-negative equity guarantee’?no-negative equity guarantee

The Equity Release Council are the industry body for the equity release industry in the UK.  Any equity release plans that they approve have a no-negative equity guarantee’.

In essence what this means is that you will never owe more than what the house is worth when you use a lifetime mortgage.

This is really important, because in the main, people don’t repay the loan until the property is sold, which happens when you either pass on or move in to a care home.

When this happens, the provider that you took the lifetime mortgage out with will calculate how much is owed from the point you took out the loan up until the point a repayment is due.   They do this by adding on all the interest owed in the intervening years.

What happens if I owe more than my home is worth?

If the calculation from the mortgage provider shows that you owe more than your home is worth when it’s sold on the open market, the mortgage provider isn’t able to try and get any more money from your estate.  This is where the ‘no-negative equity guarantee’ kicks in.

In this circumstance, when the property is sold, the entire proceeds of the sale will be paid across to the mortgage lender.   Clearly, this also means that you will have nothing left to pass on to your family.

If you’re worried about the interest on Equity Release Mortgages, and want to guarantee that you have something to pass on to your family, you always have the option to not ‘roll up’ the interest.

This means that you can look to structure your loan like an interest-only mortgage, and opt to make interest payments throughout the life of the loan.  This allows you to keep the outstanding balance fixed rather than seeing it escalate with the interest amount rolled up.

Who can help me find the best lifetime mortgage equity release scheme?

It is essential that you use a specialist to secure an equity release scheme.   They will ensure that your interests are always protected and also ensure that you dont waste thousands of pounds on a bad deal.

There are two options for you to consider.

Option 1 – Find an advisor in our directory of equity release specialists

We have created a directory of advisors that specialise in helping people find the right equity release provider.  The directory has advisors listed from all over the country.   You can access the equity release advisor directory here.

Option 2 – Let us, the UK Care Guide, find an advisor for you

If you do not feel confident in choosing an advisor, you can leave your details below, and we will find an advisor for you.   We do not charge for this service and it is absolutely free.

Here is a video from Martin Lewis on ‘This Morning’ explaining why you should speak to a specialist before taking on an equity release plan.

The benefits of speaking to an equity release specialist

As well as the video above where Martin Lewis talks about why you should speak to an advisor before taking out an equity release scheme, we recommend you watch this really useful video from the government’s Money Advice Service where individual’s talk about the benefits of taking independent financial advice.

Questions to ask your adviser when discussing a lifetime mortgage

Many people that are looking to take out a lifetime mortgage will be doing so for the first time.  This is why we have set out some questions you should ask when you do speak to someone.

  • What happens if you decide to move home?
  • What happens to the mortgage if you pass away soon after taking out the mortgage?
  • If you do take money out of your hose, what impact could that have on any benefits that you receive?
  • If you feel that you may want to repay some of your loan early, make this clear to your advisor and ask what rates each of the shortlisted provider will charge you to repay the loan early
  • If you intend to use some of the money to modify for your home, to make life easier, ask if you can also apply for any local or national grants to fund the cost?
  • Ask that there is a ‘no-negative equity guarantee.   This is where you end up owing more than your house is worth.  You can read more about this below.

Try the equity release calculator below and see how much money you can get out of your house with a Lifetime Mortgage. I think you will be surprised at what you could get……tax-free!

Try the Equity Release Calculator and see how much money you could get tax-free!

Just click on the Calculator and get an estimate of the thousands of £££'s you could get!

Alternatively, you can speak to an advisor right away. Just call 0800 4640 806 and speak to someone right away.  OR leave your contact details below and we will get in touch with you.

Did you find this article helpful? If so, please share so you can help others.... Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Pin on PinterestEmail this to someone

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Click the button and see how much cash you could get out from your house, tax-free, using our equity release calculator. Or you can speak directly with an advisor now on 0800 4640 806.

Are you sat on a pile of cash?

Are you intrigued about how much tax-free money you can get from your house? 

 

Click the equity release calculator below to see how much £££ you could get right now.  You will definitely be surprised.

Amazing Equity Release deals!

There are some amazing equity release deals to be had at the moment and they are changing almost daily!

 

You can speak to an equity release specialist straight away and see how much cash you could get!

 

Please call 0800 4640 806 and speak to an advisor now.