Lifetime Mortgage Plans
Sometimes called "roll-up mortgage plans",
these plans allow home owners aged at least 55 (with most
lenders, 60 is the younger limit) to raise cash against their homes by way
of loan. The cash may be taken in the form of a lump sum, a regular income, or a
combination of both.
Although the loan is secured on your property, there
are no monthly payments required and you retain ownership of your home
throughout. The loan is repaid after death or going into care.
You should note that the rolling-up effect of interest on
a lifetime mortgage can significantly reduce the amount of equity in your home,
and it is potentially possible for the loan and accumulated interest to
reduce the equity to zero, leaving nothing for your family to inherit. If
leaving something behind to your family is important to you, it is vital
that you take professional advice to understand all your options. To see
an example of the way a loan and its interest builds up, and the consequent
reduction in a home-owner's equity in their property over time, click here.
The amount you may borrow is dependent upon your age (the youngest if
you are a couple).The (approximate) range of loans allowed by lenders (expressed as a
percentage of the value of your home) is shown in the next column:
The table deals with raising lump sums
only, and is drawn from several lenders' tables. The lump sums which may
be borrowed are subject to a minimum, e.g. £25,000.
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Age of Youngest borrower
|
Maximum % of Home's Value
|
|
60-65
|
20-25%
|
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66-70
|
25-35%
|
|
71-75
|
30-40%
|
|
76-80
|
35-45%
|
|
81-85
|
40-50%
|
|
85-88
|
45-50%
|
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89 and over
|
50-55%
|
|
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If you are interested in a plan in order to supplement
your income, some Lifetime Mortgage plans are designed to generate a regular
(e.g. monthly) income. Note that it is important to check the effect of
releasing money from such a plan against your entitlement to any State
benefits. These could be affected if it is determined that the funds
raised from an Equity Release scheme supplement your income to
such an extent that your entitlement to State benefits is reduced or
lost.
The main features are:
-
The borrower(s) retain(s) ownership of the home throughout.
-
The Lender takes a legal charge over the property
No repayments need be made during your
lifetime. You will be able to live in your own home as long
as you wish. -
The interest rate may be fixed or capped for the full term of the
loan
-
Interest rolls up indefinitely, and
can add up to a significant amount over time. This interest eventually
has to be repaid.
-
The Lender guarantees that you can will never owe more than the
value of your home
-
The borrower need not have an income.
-
There are no restrictions on how you spend the
money.
-
There is no maximum age limit
-
The loan is normally repayable by the estate on death (second death
if joint borrowers), or upon the (second) borrower permanently moving
into a care home.
-
A valuation of the property is necessary and a fee for this is
payable, together with solicitors costs
-
There will be a fee for mortgage advice. The
precise amount depends upon your circumstances but we estimate it will
be £500.
    
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