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Lifetime Mortgage | Bright Money Independent

Equity Release Lifetime Mortgage

There are three main types of Lifetime Mortgages available.

Interest roll-up mortgage Interest only mortgages Fixed Repayment Mortgage

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.

This website refers to home reversion plans and lifetime mortgages. To understand the features and risks, please ask for a personalised illustration.

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.

Mr & Mrs V of Ascot

… have a mortgage outstanding with a high-street lender who requires it to be repaid due to the clients age

Rather than sell the house & move, we have arranged an Equity Release Lifetime Mortgage to repay the current mortgage, thereby allowing the clients to remain in their home of 35 years.

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%

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
After 5 years £45,000 + £16,654
TOTAL DEBT £61,654
£15,000 + £2,764
TOTAL DEBT £17,764
£45,000 + £0
You pay the sum agreed at the outset of the loan
After 10 years £45,000+£39,471
TOTAL DEBT £84,471
TOTAL DEBT £42,329
£45,000 + £0
After 15 years £45,000+£70,733
TOTAL DEBT £115,733
TOTAL DEBT £76,297
£45,000 + £0
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

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.