A Comprehensive Guide to Retirement Mortgages in the UK
A lifetime mortgage refers to the financial product that allows you to release equity from your home tax-free when you are 55 and above.
You borrow the money using the value of your home as leverage whilst keeping
total ownership for the rest of your life. You are not to make any monthly
payments once you clear all various withstanding charges against your home,
you can spend the money lawfully; however you see fit.
A lifetime mortgage covers your entire life. Also, the interest rolls up with
time. Getting a hold of just a fraction of your accumulated equity can be a
marvellous option for you to attract capital and a great substitute for using
your savings.
A lifetime mortgage is an equity release loan held against your home. It gives you access to the untapped wealth
invested in your property’s value whilst permitting you to carry on occupying
it. You will only be eligible to pay back after you move into long-term care,
or are deceased.
Important Facts about a Lifetime Mortgage
A lifetime mortgage is a channel to gain a tax-free lump sum of cash to spend as you please, or perhaps receive sizeable amounts only when they are
necessary. You borrow the money using your home as leverage.
You only get charged interest for the sum of money you have borrowed, though you can still
opt to reserve some of your property’s value for your family’s
inheritance.
You maintain ownership of the home and only pay off the loan when it gets sold
after your passing shift into long-term care. You also keep responsibility for
the property’s maintenance and upkeep.
Your beneficiaries inherit the responsibility of the mortgage that may remain
from the sale of the property—considering that the balance may be inadequate.
However, most lifetime mortgages in the UK offer a guarantee against negative
equity (you pay back nothing more than your property’s value). Your
beneficiaries can pay off the loan minus selling the property if they’d like
to.
When Can I Get a Lifetime Mortgage?
All property owners that are 55 and over can apply for a lifetime mortgage.
For couples, both partners need to qualify for a lifetime mortgage; you must
be over 55. However, you might lose eligibility if your house has an
outstanding lease of fewer than 75 years.
Why Must You Choose a Lifetime Mortgage?
You can easily upgrade your home decor or even make renovations that will help
make your home more adaptable and accessible as you become less able and grow
older.
A lifetime mortgage provides the means to bring your travelling dreams to life
upon retirement. Most people like to make travelling the world and taking
their dream holiday a top priority on their wish list.
A pension seldom provides an appropriate amount of money for you to live a
comfortable retired life. You can unlock some extra capital from the money
that’s tied up in a property and receive some rational income.
Most times, it is more profitable to help your children become financially
sustainable as you live rather than having them wait to receive an
inheritance. Getting an equity release lifetime mortgage provides a cushioned
means to give your beneficiaries an early inheritance or other necessary
reasons for rendering financial help, like starting a business.
Rates for a Lifetime Mortgage
Provided that your lender is in the registers of the Equity Release Council, no matter how much equity you release from your home on a lifetime
mortgage, you will only pay back what is equal to the value of your
property.
As you draw a lifetime mortgage, you reserve the right to decide upon getting
either a fixed interest rate for life or variable rates.
Most people opt to get fixed rates, as it enables you to see what you pay
precisely. Whereas a variable rate plan might offer a lower rate
initially, but it remains subject to rising.
Lifetime Mortgages and Its Benefits
The flexibility that a lifetime mortgage offers provides one of the most
significant benefits for you to enjoy.
All lifetime mortgages plans allow you to maintain your property as your own;
you use it as leverage when borrowing.
Thanks to the strict regulations by the Financial Conduct Authority (FCA),
lifetime mortgages present multiple customer safeguards, especially when your
lender has approval from the Equity Release Council. For example, the fact you will not pay back more than the value of your property. Also, if
you want to move but want to avoid repaying the money, you can leverage your
plan using another property that is subject and suitable to criteria.
Lifetime Mortgages Plans
Enhanced Lifetime Mortgage
These loans are for those people with specified medical conditions, and they
allow you to release even more cash from your home.
Roll-up Lifetime Mortgage
With a roll-up lifetime mortgage, you receive money with monthly payments, and
they only pay the sum along with any interest of buy after they sell your home
when you die or go into a care home.
Drawdown Lifetime Mortgage
This mortgage happens when you release equity when you need it, and they only
charge interest
for the amount you have drawn.
Interest-only Lifetime Mortgage
As opposed to letting your interest roll-up, you can access a cash lump from
your home, with interest paid off monthly rather than it rolling up over the
years.
Flexible Lifetime Mortgage
This plan is the one to go for if you would like the option to make payments
regularly to reduce the equity release charge.
How do I Contrast a Lifetime Mortgage and Home Reversion Schemes?
First, you must note the fact that both forms of equity release enable you to
release the cash locked in your property whilst permitting you to remain
accommodated there until you are deceased or shift into permanent care.
When you draw a lifetime mortgage, you get a loan using your property as
security, whereas a home reversion plan requires you to sell some shares of
your property at a lower price than its market value.
With a home reversion plan, the payments get made every month until the end of
the contract. Whilst with a lifetime mortgage, you only get to repay the sum
after you die or shift into permanent care.
Getting Advice on Lifetime Mortgages
Wanting to get a lifetime mortgage is a life-changing decision that requires
serious consideration. You need to make some complex calculations and assess how best it can work for you in your particular situation.
It is, therefore, more than necessary for you to seek expert advice.
You are free to speak with our friendly experts via live chat or perhaps you would like to request a callback from the team to find out whether a lifetime mortgage can work for you.
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