What is a Lifetime mortgage
A lifetime mortgage essentially lets you borrow against your home. With this long term secured loan, you can borrow against your property, and the money owed will be repaid when you either enter long-term care or die.
This type of mortgage differs from a regular mortgage, because interest is charged on an increasing sum as opposed to the lowering amount of your mortgage. As you don’t make any repayments on a lifetime mortgage, interest is added to your debt to offer the lender some protection. With a conventional mortgage, you can normally borrow up to 85 per cent of the value of your home, while you can typically borrow up to 60 per cent with a lifetime mortgage. There are four primary types of equity release mortgages:
- Lump sum – with this mortgage, interest accrues until you move into care or you die, upon which the interest is paid out in a single payment.
- Drawdown – you may be able to borrow in a more flexible method with a lifetime mortgage, during which you will borrow a smaller amount initially and borrow further only what you need. You therefore pay interest only on what you take out.
- Interest repayments – some lenders will allow you to pay off interest as you go for the duration of your loan.
- Enhanced lifetime mortgages – those will ill health or a low life expectancy can opt for this type of mortgage, as it will essentially allow you to access more money to pay for medical care and associated costs
Home reversion scheme
With a home reversion scheme, you sell either your entire home or a portion of your property to a provider in order receive either ongoing payments, or a tax-free lump sum.
This enables you to stay in your home without having to pay any rent, however, it’s important to note that typically a provider will purchase a portion of your home for less than market value – anywhere between 20 and 60 per cent of the market value in fact. This is something you should consider when making the decision.
My Mortgage Finance can help
Any method of releasing equity has implications on the future sale of your home, moving into full-time care, along with other costs and fees. Equity release could well be a means of funding care and other costs associated with later life, or it could be that downsizing and switching to a smaller mortgage could be the solution. At My Mortgage Finance, we will take the time to get to know exactly what you hope to achieve through releasing equity, and we’ll show you a number of different impartial options that can be of help.