Lifetime mortgage providers
Lifetime mortgages explained
A lifetime mortgage is a type of equity release mortgage. Here are the answers to some of the common questions. There are several options available to consider when choosing lifetime mortgages.
Most people have heard of equity release mortgages but might not know the details of lifetime mortgages. This form of credit scheme allows you to keep living in your home for your lifetime.
Topics you will find in this article
A pension does not always provide enough money to cover costs in retirement. Adaptations to a property can also be expensive.
These mortgages offer a way for people to use the value of their home to access the money they may need for care in later life. This might include long-term care at home.
The greatest advantage is that you can stay in your home until you die or move. So a lifetime mortgage could prevent you from having to sell your home in retirement to finance your expenses in later life.
If you are living as part of a couple, both partners have the right to live in the property. The loan will not become due until the longest living partner dies.
Borrowers are usually required to be 55 years or older in order to take out lifetime mortgages. There are some exceptions to this as there are some lifetime mortgages for pensioners available, but those products might not always have the same protections.
The amount of equity release you will be able to obtain depends on the value of your home. Since you do not pay tax on equity release, any cash that you receive has the advantage of being tax-free.
If you are eligible for means-tested benefits, they may be affected. Money which has been released from your home may be counted as savings.
The loan amount can vary and so it is important to find the best option. The amount can depend on many factors such as how many years you think you will live in your home and whether you have a retirement pension.
It also depends on whether you might want to sell your home during your lifetime. You might want to move closer to family, or might need to move into residential care.
The market has grown a great deal over the past few years. Lots of information is now available on lifetime mortgages.
Here is a video from Legal & General that shows you how a lifetime mortgage works.
What are the types of lifetime mortgage?
Lump-sum and drawdown are the two main kinds. Each of these has its own advantages.
With a lump sum lifetime mortgage, you borrow the total amount in one go. You usually will not have to pay interest during your lifetime.
With roll-up interest, the interest is simply added to the loan amount using compound interest. This does not need to be repaid until you die.
In some cases, you may also be able to find a deal which allows you to pay interest as you go, meaning that your debt will not increase as much. However, your monthly payment will be bigger.
With a drawdown lifetime mortgage, you don’t have to borrow the full amount straight away. This means that you gain flexibility.
However, there may be limits to how many times you can withdraw equity from your house in a single year. There also may be no guarantee that you can borrow a further sum later, meaning that you have to apply for the cash each time.
You will probably be charged less interest on a drawdown lifetime mortgage than you would on a lump sum, because you are borrowing less. That is one reason this choice could be a good one.
Different products may be available to you depending on your age and state of health. If you have certain conditions, you may be able to get an enhanced lifetime mortgage.
If you share your home with a spouse or other family member, it may be the age of the youngest homeowner that is relevant. This is because you will both be offered the right to remain in the home.
What are the risks associated with a lifetime mortgage?
The more equity you release from your home, the lower the inheritance that you will be able to pass on to your family. You should also plan to make sure that you will have enough money to afford any interest payments that you have agreed to pay while still living in your home.
It is always a good idea to consult a specialist adviser about your borrowing. It is essential to seek financial advice before taking out a loan of this type.
Always look for a financial product that is authorised and regulated by the financial conduct authority. The savings you have invested are an important source of financial security for you.
Check that you are protected against negative equity. This means that you owe more money to the lender than your home is worth.
Negative equity could mean that when you die and your home is sold, your heirs have to pay the additional money from your estate. Fortunately, many companies offer guarantees against this.
Can you buy a property with a lifetime mortgage?
You might need to consider whether you will need to move house during your retirement. For example, you might want to downsize or move closer to family.
Fortunately, lifetime mortgages do not prevent you from moving house. But the lifetime mortgage provider must be satisfied that the new home provides enough security for the loan.
If the value of the new property is lower, you might have to repay some money. This is something important to consider when you think about how much equity you want to borrow from your property.
Can you get a lifetime mortgage even if you already have a mortgage?
The short answer to this is yes, equity release with a mortgage is possible. This will be taken into consideration in the valuation of your property.
The value of your existing mortgage will be deducted from the value of your home. The existing mortgage is paid off first.
What is the interest rate for a lifetime mortgage?
Just like with other mortgage rates, lifetime mortgage rates can vary. The interest rate is usually fixed.
Looking at a comparison site can give you an idea as to whether you are getting a good rate. Take into consideration whether you qualify for an enhanced rate because of your age or any health conditions.
Early repayment is sometimes possible, but you may pay a fee for this. Hodge (see below) offers a very detailed set of terms and conditions on early repayment.
Companies do not encourage you to pay off the loan too soon because this results in less profit for them. It is better to plan not to need to do this.
With some lifetime mortgages, you can also sometimes pay back the capital. This type of lifetime mortgage could make sense if you need a lump sum in the short term. For example, you might need to make adaptations to your property.
By making payments monthly, you can spread the costs and still end up keeping the investment you have already made in your home. The disadvantage of this is that your regular payment could be rather high.
Main lifetime mortgage providers
If you are considering getting a lifetime mortgage, you will want to take a look at some important lifetime mortgage companies and see what they have to offer. The equity release council is the body that represents this type of lender.
This company will be familiar to many. It is probably the only lifetime mortgage lender that is truly a household name. They provide a calculator for customers on their website.
This is the oldest equity release company in the U.K. They have been offering their services since 1965.
This organisation is previously known as Stonehaven Equity Release. They offer the Interest Select mortgage which involves a fixed monthly interest payment.
They offer a wide range of products, with comparison tables and charts available on their website. This information is aimed mostly at financial advisors, so it may be difficult to understand.
How can I find out more?
You can always give the lender a call and set up a consultation about their products. They will be happy to answer your questions.
Remember always to check the legal information and get independent advice. Additional guides can also be found in The Guardian, The Telegraph, and Which.
Other articles related to lifetime mortgages you will find useful
What is a Lifetime Mortgage?
Lifetime mortgages are relatively new to the market – but their growing popularity means they’re already an industry staple. Increasingly people are looking to access cash with no strings attached in retirement.
Lifetime Mortgage Providers
If you are considering getting a lifetime mortgage, you will want to take a look at the leading lifetime mortgage companies. This article looks at who the main UK providers are and what they offer.
Drawdown Lifetime Mortgage
A drawdown mortgage allows homeowners to withdraw an initial cash lump sum, while having the flexibility to borrow more at a later date. You can then ‘draw down’ this equity when you please under terms agreed with the lender.
Lifetime Mortgage For Pensioners
Unlike with other mortgages, there is usually no maximum age for a lifetime mortgage product. The older you are, the more you can normally borrow.
Lifetime Mortgage Rates
The rate mortgage customers receive depends on the loan size and type. Normally, though, they begin at around 3% and go up to a maximum of around 7%.
What is a Home Reversion Plan?
A home reversion plan is a form of equity release scheme. Equity release schemes are a way of releasing some of the value of your property in exchange for cash.