A lifetime mortgage is a type of equity release loan that is secured against your home. It frees up your wealth that is invested in the value of the property and allows you to continue living there. It doesn’t need to be paid back until you die or move into long-term care.
Is a lifetime mortgage the same as equity release?
A lifetime mortgage is a type of equity release product for people aged 55 and over that allows you to release the equity from your home without having to sell up and move. Your equity is the value of your home minus any loans secured against it.
How does a lifetime mortgage work?
Who qualifies for a lifetime mortgage?
Property owners aged over 55 can apply for a lifetime mortgage. For couples, both partners need to be aged over 55. If your property is leasehold with less than 75 years of the lease remaining, you might not be eligible for a lifetime mortgage.
Why choose a lifetime mortgage?
For home improvements
You might want to update the decor or renovate a bathroom/kitchen or even carry out essential work that adapts your home to be more accessible as you grow older and less able.
Once retired, travelling the world or finally taking that dream holiday is often at the top of people’s wish list. A lifetime mortgage is a way to make your travelling dreams a reality.
To boost your income
Often a pension doesn’t provide an adequate amount of money to live comfortably during retirement. Unlocking capital that is tied up in a property is a popular way to receive additional income.
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To loan money to family
Some people prefer to help their children financially during their lifetime rather than waiting until it is passed on as inheritance. Equity release lifetime mortgages provide a way to give them an early inheritance. Popular reasons for offering financial help to families are for weddings, university fees and deposits for houses.
Lifetime mortgage rates and associated costs
- Interest rates
Lifetime mortgage rates are currently at the lowest they have been for five years. The rate you are charged will depend on which type of plan you choose, its term length and who the financial provider is.
Talk to our experts to know the latest lifetime mortgage rates applicable to you.
- Other costs
It is important to be aware of all the costs associated with lifetime mortgages before making the decision to go ahead with the loan.
Possible costs include:
- Application fees
- Legal fees
- Valuation fees
- A lender’s arrangement fee
- A completion fee
- Buildings insurance
What are the pros and cons of lifetime mortgages?
When researching whether a lifetime mortgage is right for you, it is essential to weigh up the pros and cons.
Types of lifetime mortgages
Enhanced Lifetime mortgage
These loans are for those with certain specified medical conditions and are designed to allow you to release even more cash from your home.
Roll-up lifetime mortgage
You receive a cash sum with no monthly payments. The cash sum and any interest is paid off by the sale of your home when you die or go into a care home.
Drawdown lifetime mortgage
Your cash is released over time, as and when you need it. Interest is charged on the amount you have taken.
Interest-only lifetime mortgage
You can access a cash lump from your home, with interest paid off monthly rather than it rolling up over the years.
Flexible lifetime mortgage
This provides the option to make voluntary payments to reduce the equity release loan amount.
- Do I have to make monthly payments with a lifetime mortgage?
It depends on the type of lifetime mortgage you choose. Some require monthly payments whilst others are rolled up and added to the total loan amount to be repaid when you die or go into permanent care.
- What is the difference between a home reversion plan and a lifetime mortgage?
Both types of equity release allow you to release cash locked in your home whilst allowing you to stay there until you die or move into permanent care. A lifetime mortgage is a loan secured against your property, whereas a home reversion plan sells a share of your property at less than its market value.
- What is the difference between a lifetime mortgage and a residential mortgage?
With a residential mortgage, payments are made each month until the end of the loan term. With a lifetime mortgage, the loan is usually repaid in one lump sum when you either die or go into permanent care.
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Lifetime mortgage advice
Getting a lifetime mortgage is a big decision to make and requires some serious consideration. Complex calculations are required to assess if it could work for you and your specific situation. It is therefore advised that you seek expert advice.
You can talk to our friendly experts via live chat or go ahead and Request a callback from the team at Propillo to find out whether a lifetime mortgage could work for you.