If you are currently retired or are considering retiring you may be worried that your pension pot is not enough to comfortably enjoy your retirement. If so you may have been thinking about releasing equity from your home to supplement your income with a life time mortgage, Prudential Equity Release lifetime mortgages are not currently available but there are many other lenders who may be able to offer the right plan for you.
Key facts about lifetime mortgages:
- Allows you to access equity tied up in your home without having to move.
- The property remains yours until you die or move into care.
- No need to make monthly interest repayments unless you choose to.
- The property still belongs to you.
What is a lifetime mortgage?
Although your home will still belong to you your lender will usually require you to keep the property in good condition, they may occasionally ask to come around to inspect it.
A lifetime mortgage is a loan secured against your home, but it does not work like a traditional mortgage you may have had or currently have on your home. In a lifetime mortgage you can raise funds by borrowing a percentage of your home’s current market value, but you do not need to make any monthly repayments on the loan and its interest, instead the debt is repaid from the money generated from the sale of your home after you either die or move.
How much equity could you release?
The actual amount of funds you can release by applying for a lifetime mortgage depends principally on the value of your property, the amount you can typically release is between 30-60% of the market value however the maximum amount will depend on other factors such as whether it a single or joint mortgage, your age and how much you would like to leave to your beneficiaries in your will.
This is known as negative equity. Many lenders offer a ‘Negative Equity Gurantee’ on their lifetime mortgages this means that even if your property becomes valued at less than the amount you borrowed neither you or any of your beneficiaries will ever be charged more than the amount the property is sold for.
What happens if your property decreases in value?
During the application process you would need to pay your solicitor’s legal fee however.
The specific costs involved vary by each plan but you will usually be required to pay arrangement fees during your application as well as some administrative fees to the lender. Some lenders will allow you to bypass the initial arrangement fee and instead will take the amount into consideration when calculating your interest rate. Similarly some lenders will give you the opportunity to pay any administrative costs from your loan so you do not have to pay it up front.
Are there any costs involved?
Is a lifetime mortgage right for you?
Your broker will help you to understand schemes and will search the whole market, comparing equity release plans with others to find the right deal for you.
Therefore if you are considering any type of equity release you should make sure you fully understand all aspects of it. Our equity release service can put you in touch with a specialist advisor who can offer free quotes and advice on the leading UK equity release plans. You can speak to a specialist on the phone or arrange an advisor to meet you at your home.
There are many different types of lifetime mortgage plans available on the market from various providers, all of which have different terms and conditions and there are other alternatives to lifetime mortgages which might be better suited for you.