A New Kind of Lifetime Mortgage
Introduction
If you’re over 55 and own your home, you might be thinking about how to use your home’s value to support your retirement. A new type of plan is called a payment term lifetime mortgage, you may also hear this referred to as a hybrid equity release plan. This plan can give you money now and help you control how much you pay back.These plans are innovative, flexible, and give you more control over your money.
What Is a Payment term lifetime mortgage?
A payment term lifetime mortgage lets you borrow money against your home, just like other lifetime mortgages. But with this plan, you commit to making monthly payments for a set number of years.After that time, you don’t have to make any more payments, and you can still live in your home for life.
A Real Example: more2life’s Flexi PTLM
One company offering this type of plan is more2life. They call their plan the Flexi Payment Term Lifetime Mortgage (Flexi PTLM).Here’s how it works:
– You must be between 55 and 62 years old and own a home worth £125,000 or more.
– You make part-interest payments every month until the oldest person on the plan turns 66.
– After that, payments stop, but you can still stay in your home.
– You can potentially borrow more money at the start than with some other plans.
– The interest rate can often be lower than with a regular lifetime mortgage.
Who Is It Good For?
This plan can help lots of different people:– People who still have a bit of income and want to reduce how much interest builds up.
– People coming to the end of an interest-only mortgage who don’t want to sell their home.
– People who want to leave more money to their family by paying off some interest early.
– People who want to borrow more now but still want options later.
Pam and Mike’s Story
Pam and Mike are in their early 60s. They were worried about paying off their old mortgage. With Flexi PTLM, they borrowed enough to pay it off and made payments until they retired. Now, they don’t have to make any more payments, and they still live happily in their home.What Are the Risks?
While payment term lifetime mortgage plans offer more choice and flexibility, there are still some risks to think about:– The loan is secured against your home, your home may be repossessed if you do not keep up with mandatory payments in the early years before the plan switches to a regular lifetime mortgage.
– Interest will build up over time if you stop paying after the payment term.
– Taking money from your home might mean your beneficiaries get less when you pass away.
– Releasing equity could affect your right to some benefits or support from the government.
– You might face an early repayment charge if you decide to pay off the loan early or move home.
It’s very important to understand all your options and speak with an equity release adviser before you choose a plan.
Things to Think About
This type of plan has many good points, but it’s important to understand it fully:– You must keep up with payments during the early term, or you might lose your home.
– After the payment time ends, interest will build up if you don’t keep paying.
– It might change your benefits, so it’s good to talk to an equity release adviser.
