Equity Release

What is a Lifetime Mortgage?

Lifetime Mortgage equity release schemes allow you to raise a tax free lump sum at an interest rate, which is later added to the loan, monthly or may be annually. It is a type of loan secured against the value of your property.

With a Lifetime Mortgage you are using the value of your home as a security for borrowing money. It is repaid out of the future sale of the property generally when you die or go into long term care. Beneficiaries receive the net proceeds from the sale price of the property and the lifetime mortgage is repaid.

Lifetime Mortgage helps you make use of some of the equity locked in your home by taking out a loan secured on it. It does not involve selling any part of the property. There are normally no repayments to be made. You retain the legal ownership of your home and can still benefit from any house price increases.

Types of Lifetime Mortgages

Lump sum - The interest payable is rolled up over the full term. There's nothing to pay for the rest of your life, but interest is compounded year on year until you die or move into a residential care home. Interest rates are usually fixed at the outset for most lump sum deals.

Drawdown – A Drawdown lifetime mortgage enables you to take smaller amounts initially and then only drawdown further amount In this case you pay interest only on the money you have taken. The overall cost can be considerably lower.

Interest Repayment – One of the ways to reduce the overall cost of the loan could be to enable the borrowers pay off all or some of the interest during the term of the loan.

Enhanced lifetime mortgage – A form of equity release that enables the maximum amount of cash to be released from your property.

How do Lifetime Mortgages work?

Mostly, lifetime mortgages have a fixed interest rate. However some providers may offer variable rates, but these offer less certainty.

Lifetime mortgages helps you to utilize some of the equity locked in your property by taking out a loan secured on it. Interest on a lifetime mortgage is charged on an increasing sum. As you are not making any repayments, and therefore the interest on the loan is added on a continual basis. It is not repayable until you die or move into long term care, which is when your home will usually be sold. When this happens, the capital and the interest are repaid in one lump sum from the money raised out of the sale of the home.

Benefits of a Lifetime Mortgage

The Equity you can release from your property with a lifetime mortgage equity release scheme is tax free and can be used for anything you wish.

• Benefit fully from any increase in the value of the property in future

• No need of selling any legal ownership in return for the money raised

• A Lifetime Mortgage equity release scheme enables you to remain living in the property for the rest of life

• Help your children by gifting them some money and take pleasure from watching them enjoy

• Indulge in home improvements and repairs which will add value to your property

• There is a fixed rate plan option available in case of a lifetime mortgage equity release scheme

• With a lifetime mortgage equity release scheme additional borrowing is usually possible

• Most lifetime mortgage providers have a no negative equity guarantee included in their plans

• Pay off credit cards and loans allowing more financial freedom

Lifetime Mortgages: Lending Criteria

• Available to people from 55 years age and over

• The older you are the more you can borrow

• There are also minimum loan amounts

• Your property will have to meet a minimum value specification