Lifetime 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