Compare lifetime mortgage deals for over 55's
You could enjoy a more comfortable retirement with a lifetime mortgage
A lifetime mortgage enables you to release money tied up in your home by providing a loan secured against the value of your property. The amount you receive will depend on several factors, including your age and your property’s value. The idea of a lifetime mortgage is that it allows you to stay in your current home, while releasing tax-free cash which you can then use as you wish.
How does a lifetime mortgage work?
When you apply for a lifetime mortgage the mortgage provider calculate the amount of money that you can release, based on factors such as your age, your life expectancy, and the value and type of property you own. Any other outstanding mortgages or debts will also be taken into account.
A lifetime mortgage is repayable when you sell your home, or in the event of your death. It is important to remember that, with a lifetime mortgage, the interest charged on your cash lump sum is added to your outstanding debt, which can, over time, affect the proportion of your home that you actually own outright.
Who is eligible for a lifetime mortgage?
If you want to apply for a lifetime mortgage you will need to meet several criteria, one of which is the minimum age. This is usually 55 or 60. The percentage of your property that you can borrow as a tax-free lump sum depends on your when you take out the lifetime mortgage.
Generally speaking, the older you are, the more you can borrow. If you apply for a lifetime mortgage at 65 you can normally borrow around a quarter of the value of your property, but if you are older you may be able to borrow up to half the value of your home.
Not all properties are eligible for lifetime mortgages - your home will have to meet a minimum value specification before many lifetime mortgage providers will consider your application. This minimum value tends to be around £70,000 to £100,000.
Advantages of lifetime mortgages
- A lifetime mortgage could allow you to retain ownership of your home - this means that you can still benefit from any house price increases.
- Lifetime mortgages can offer flexibility - you can choose to take the money you release as either a lump sum, as regular payments, or on an ad hoc basis when you need it
- There are normally no repayments to be made
- Most offer fixed rates of interest, irrespective of what happens to interest rates
- Reputable providers offer a no negative equity guarantee which means you will never owe more than your property's value
Disadvantages of lifetime mortgages
- With a conventional mortgage, interest is charged on a decreasing amount (i.e. as you pay off the mortgage, the sum owed and thus the interest goes down). Lifetime mortgages, on the other hand, charge interest on an increasing amount of money. With most lifetime mortgage plans you make no repayments until you die or go into residential care – a situation which can be beneficial in the short term, but can mean that the interest accumulated on the loan can be significant.
- Lifetime mortgages are designed to be held for the long term, so if you choose to repay the loan early you may incur repayment charges.
- The interest rate on a lifetime mortgage is usually higher than that of a conventional mortgage.
- As with any type of mortgage, remember that the application process for a lifetime mortgage can involve fees for valuation, legal advice, and other charges.
- Taking out a lifetime mortgage could affect the amount of means-tested benefits you are eligible to receive, so it is important to check if you will be affected before making a decision.
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If you are thinking about taking out a lifetime mortgage, make sure you speak to an expert first to go through all your options, our free service can put you in touch with a lifetime mortgage specialist. There are four main types of lifetime mortgage, including:
Roll up mortgage
- Can pay out a cash lump sum or a regular amount
- Fixed or variable interest is added monthly or annually
- Interest is 'rolled up', in other words, no interest is paid until your home is sold
Interest only lifetime mortgage
- Pays out a cash lump sum
- You pay monthly interest payments for the loan
- The loan amount is usually repaid upon the sale of your home after death or if you have to permanently move to a care home
Fixed repayment lifetime mortgage
- Offers payment in a cash lump sum only
- Instead of paying interest, you agree to pay the lender a higher sum than you borrowed when the house is sold
- The sum you will pay back is decided from the outset so you will know where you or your relatives will stand when it comes to selling the house
Home Income Plan
- Receive payment in a cash lump sum
- The lump sum is then used to buy an annuity that supplies a regular income
- You pay the interest on the loan with the annuity
- The loan will be repaid when your home is sold
Whatever you want a lifetime mortgage for, our free enquiry service can help. Just fill in our no obligation enquiry form and we will put you in touch with an equity release specialist who can go through your options and get competitive lifetime mortgage quotes for you.
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