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A lifetime mortgage is where the provider lends you a percentage of your property’s value in the form of tax-free cash. You’re charged interest on the loan but unlike an ordinary mortgage, you do not need to make any monthly repayments (although you can if you want to) and there is no set term or repayment date.
In fact, you decide whether you repay all, some, or none of the interest over the life of your plan when you take out your plan.
As with all lifetime mortgages, the loan plus interest continues until the plan comes to an end, usually when you pass away or move into long-term care. At this point the property is sold to repay the original sum borrowed, plus any interest that’s accrued.
Interest-only mortgages usually give you cheaper monthly repayments than repayment mortgages, but you’re not paying any debt off (just the interest on it), and when your mortgage term ends you’ll still owe your lender the original amount you borrowed.
Here at Bower Retirement, we value an honest approach and are always transparent, so we’ve listed the pros and cons so you can make an informed decision that’s right for you.
The amount of tax free cash you can release from the value of your home depends on a number of things.
If you like the sound of a lifetime mortgage, then there are many flexible plans available we can tailor to your individual needs and circumstances. Your Bower adviser will be able to discuss all of these with you during your free, no-obligation consultation.
Simply, this is where you unlock all the money you want in one go.
Usually a lifetime mortgage has a fixed interest rate. So as soon as you receive your lump sum, interest starts to accrue on the full amount you’ve borrowed.
These plans work much in the same way as a Lump Sum Mortgage but with a cash reserve/drawdown feature.
So you can take out further funds when you want (up to a specified number of years or until the cash reserve runs out). Interest is only charged on the total amount you withdraw, so this plan can save you a significant amount compared to a Lump Sum plan.
Interest is added to the loan each month and no repayments are required during your lifetime. Also, interest is only applied to the initial cash lump sum taken and when further withdrawals are made.
Interest-payment lifetime mortgages work in the same way as a lifetime mortgage, with the added flexibility that you can make one-off or regular payments of up to 10% off the capital owing (not the interest).
With some plans you can pay a percentage of the interest and have the remainder rolled up, or only pay the interest for a chosen term.
A monthly income is required to meet the interest payments on this type of equity release plan, and eligibility is subject to credit status for interest-only mortgages.
With this plan you can release a larger percentage of your home’s value based on existing or pre-existing health or lifestyle conditions (as the lender assumes a shorter lifespan).
Over 100 conditions qualify you for a larger cash release from your home including high blood pressure, diabetes, cancer, angina, kidney disease, and dementia. Lifestyle conditions such as a history of smoking or a high/low Body Mass Index (BMI) can also qualify.
No medical is necessary, and your specialist adviser can find out if you qualify for this type of plan for you.
With some lifetime mortgages you can guarantee an inheritance for your loved ones. So this might be a sensible choice if you’re looking for certainty of leaving some of your assets to loved ones.
You can choose a fixed amount or a percentage of your home to be left to your beneficiaries when your plan comes to an end. And this amount will be guaranteed.