A Lifetime Mortgage is the most popular type of Equity Release plan. Unlike traditional mortgages, there are typically no monthly repayments to make. Instead, interest rolls up and is repaid in addition to the amount originally borrowed when your plan ends. The plan ends when the last living borrower dies or moves into permanent long term care. At this point, the house is sold to repay the full amount of rolled up interest and loan. How much you can borrow on a Lifetime Mortgage will vary according to the lender you chose. It will also depend on the value of your property and your age.
Most Lifetime Mortgages will offer a ‘drawdown’ option. Instead of taking the amount you borrow as a large lump sum, you take a smaller initial lump sum and draw down further amounts from a pre-agreed cash facility when you need to. Because you take out smaller amounts of money over a period of time, your lifetime mortgage could grow more slowly as you are only charged interest on the money that is actually withdrawn. Equity Release Council approved Lifetime Mortgages will also allow you to make regular interest payments on the loan, and in some instances penalty free repayments of capital are possible. You can decide to stop and start these payments and control these payments.
With a Lifetime Mortgage, you have the right to remain in your property for life or until you need to move into permanent long-term care, as long as the property remains your main residence and you abide by any terms and conditions of the plan.
Lifetime Mortgages also provide a ‘no negative equity guarantee.’ This means that when your property is sold, neither you nor your beneficiaries will be liable to pay more than the amount of equity left after Estate Agents and Solicitors have been paid.
There are usually eligibility criteria that customers must meet before they can qualify for a Lifetime Mortgage. These can vary dependent upon which lender you choose for your Lifetime Mortgage. Firstly, you must be a homeowner and your property must have a minimum value of £70,000. In addition a minimum age, usually age 55,applies and a maximum amount you can borrow depending on your age and your property’s value. You must fully pay any debt secured against the property either from the equity you release with your Lifetime Mortgage or from other funds. You must borrow a minimum amount, typically £10,000. Finally, there may be restrictions on the types of property a lender will accept and the condition of the property.
There are costs involved in setting up a Lifetime Mortgage. These could include arrangement fees charged for the setting up of the Lifetime Mortgage, application fees to cover administration costs, valuation fees and solicitors’ fees covering the legal work involved in obtaining your Lifetime Mortgage.
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