Lifetime mortgage

There are three main types of Lifetime Mortgages available: Interest roll-up mortgage, Interest only mortgages and Fixed Repayment Mortgage.

to discuss Lifetime Mortgages

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration

We will explain all the pros and cons of each option to help you make the best decision for your family.

Our fully qualified advisers with decades of experience will search the whole of market with access to all equity release lenders.

Types of Lifetime Mortgages

1. Interest roll-up mortgage

With a roll-up mortgage, you do not make any payments. Interest is added to the loan which is repaid when your home is sold. If you take a lump sum of £45,000 and the interest rate is 5%, after 25 years the amount you owe is £152,387.

2. Interest-only mortgages

You get a lump sum, but like a normal interest-only mortgage you pay the interest monthly. Unlike a normal mortgage, there is no fixed term, you can continue to borrow the original amount until your home is sold. With some lenders, it may be possible to pay part-interest and the balance roll-up.

3. Fixed Repayment Mortgage

At the outset of this loan, the full amount to be repaid is agreed. You do not make any payments. The loan is only repaid when your home is sold. This type of Equity Release can work in your favour if you live longer than expected, but this is a much worse deal than a roll-up mortgage should you die sooner than expected.

Lending Criteria

Providers have strict lending criteria such as minimum age, percentage of your property you can borrow and minimum loan amounts.

All lifetime mortgage products offer a no-negative-equity guarantee which means that you will never repay more than the value of your property.

Benefits of Lifetime mortgages over Home Reversion Plans

Monthly income or large lump sum
You keep ownership of your home
Loan is only repaid when your property is sold
Potential benefit from any future increased in the value of your home
Fixed interest rates
No-negative-equity guarantee

Drawbacks to consider with Lifetime mortgages

If you own a leasehold property the lease is expected to be 80 years or more in most cases
The inheritance you leave is greatly reduced
Early repayment charges may apply
Loss of means-tested benefits: you may no longer be eligible for pension credit and council tax benefit
Arrangement and Valuation fees
You may not be able to transfer the debt if you choose to move home

Lifetime Mortgage Examples

The following Lifetime Mortgage example is based on borrowing £45,000 and an interest rate of 6.5%

The example shows how the debt accumulates up to 15 years, however a lifetime mortgage will continue until death or sale of your property. All lifetime mortgages have no-negative-equity guarantee, which means you will never repay more than the value of your propery when it is sold.

	Roll-up Mortgage		Interest-only Mortgage	Fixed Repayment Mortgage
You Receive	Lump Sum £45,000	Income £250 per month	Lump Sum £45,000	Lump Sum £45,000
You Pay	Nil	Nil	£243.75 / month Interest only	Nil
After 5 years	£45,000 + £16,654 TOTAL DEBT £61,654	£15,000 + £2,764 TOTAL DEBT £17,764	£45,000 + £0 TOTAL INTEREST PAID £14,625	You pay the sum agreed at the outset of the loan
After 10 years	£45,000+£39,471 TOTAL DEBT £84,471	£30,000+£12,329 TOTAL DEBT £42,329	£45,000 + £0 TOTAL INTEREST PAID £29,250
After 15 years	£45,000+£70,733 TOTAL DEBT £115,733	£45,000+£31,297 TOTAL DEBT £76,297	£45,000 + £0 TOTAL INTEREST PAID £43,875
NOTES	Interest on £45,000 is accumulated from the start of this mortgage	Interest is charge on the amount you have borrowed to date	The outstanding amount to repay will remain at £45,000 whilst interest is repaid	It’s your challenge to live as long as possible to get value for money

At Bright Money Independent, our qualified equity release advisers will explore all of your circumstances to ensure that equity release is the right decision for you. If they don’t agree it is in your best interest they will advise alternative options.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE