Lifetime Mortgages

A lifetime mortgage product shares many beneficial similarities with a conventional mortgage:

• You retain 100% ownership of your property
• You have the right to sell at any time
• You can transfer/port the mortgage to a new property that is acceptable to the lender

However, unlike a conventional mortgage, you are not obliged to pay mortgage payments throughout the term. You can let the interest ‘roll-up’ and accumulate. The mortgage will continue until you or, if in joint names, the last survivor either dies or moves into long term care. Another key difference between a lifetime mortgage and a conventional one is the formula for calculating your loan sum. For conventional mortgages, income and financial commitments are the significant drivers of affordability. Whereas, for lifetime mortgages, the age of the youngest applicant and the property valuation are the two sole determinants of your maximum loan. Older applicants and larger equity in the property will result in a larger loan sum. An applicant’s income and financial commitments are irrelevant in the eyes of many equity release lenders. To discover the maximum sum that you could raise through a lifetime mortgage, even if just out of curiosity, we encourage you to contact our advisers.

Usually, the rate of interest for equity release is fixed for life. Therefore, if you decide to let the interest roll-up, you can accurately forecast the sum owed throughout the term on a year by year basis. You will receive annual statements that show the sum owed to the lender. However, many of our clients prefer to meet all, or a portion of, the interest payments to avoid any roll up of outstanding debt. You are currently allowed to make overpayments, in excess of the fixed interest rate, up to 12% of the outstanding balance each year without any charge. All recommended plans, which are approved by the Equity Release Council, provide a ‘no negative equity guarantee’. This means that when your property is sold at market value, on the death of last survivor, if the proceeds are not enough to pay the amount due, lenders will not ask you or your beneficiaries to repay the shortfall. There is no charge for this guarantee.

This article has provided a brief insight into lifetime mortgages. For more information, click the ‘Contact Us’ button and submit an enquiry form. You will receive a free consultation with one of our advisers to discuss your requirements in depth.