There are new and innovative plans being developed within the sector of Equity Release, these include a flexible Interest Only Option and a Capital Repayment Option. They are lump sum lifetime mortgage secured against the client’s home similar to a standard mortgage; they allow you to release an amount of money to spend now. The full loan is drawn down initially; further loans may be available in the future but would need to be re applied for.
The benefits of a lifetime mortgage
- You receive an amount of money to spend on whatever you want.
- You can choose to pay Full interest only or part interest only starting at £25 per month, if a client cannot afford at outset the full interest only payment, they can opt to pay a smaller amount and have some of the interest roll up within the loan.*
- You can pay up to 10% of the balance of the loan off each year without any ERC’s.**
- You can choose to stop paying the payments at any time and revert to a normal roll up lifetime mortgage.
- You keep ownership of your home and can continue to live there until you die or go into long–term care.
- The loan is repaid by the sale of your property when the plan ends. This is normally when you die, or move into long–term care.
- You can still move if you want to, as long as your new property meets the lenders criteria at the time.
- A ‘no negative equity guarantee’ means you’ll never have to repay more than the money you receive from the sale of your property as long as this is for the best price possible.
The range of lifetime mortgages in the market
There are many different lifetime mortgage plans available:
- A true Interest only Lifetime mortgage fixed for life
The plan is fixed at outset and never changes, there is no end date so can run for the rest of the clients life.
- A Capital and Repayment Lifetime Mortgage fixed for life.
The Capital Repayment Plan allows you to release a one–off amount of money at the start of the plan, allowing you to make part repayments twice per year minimum £500, up to 10% of the outstanding loan. This allows you to pay the interest and the capital without an obligation to make the payments each month and allow you to decide when to make the payments.
Things to think about
- A lifetime mortgage charges interest on the total amount of the loan including the interest that has already accumulated, so the amount owed will quickly increase, paying the interest will therefore keep the balance of the loan static.
- Taking a cash lump sum from your home will reduce the value in your home and the amount of inheritance you will leave.
- There is no tax to pay on the amount you borrow, but it may affect your entitlement to tax and means–tested benefits, which will be calculated by your advisor.
- A lifetime mortgage is a long–term commitment – it can be expensive if you decide to repay the loan early and you may have to pay a substantial early repayment charge.
How much could you borrow?
The amount you can borrow depends on your gender, age and the value of your home. Our Equity Release Calculator can give you an idea of how much you may be able borrow, you will need to make an appointment with one of our specially trained advisors to find out the amount based on your own circumstances.
Why choose this option?
- You wish to gift a lump sum to your children
- Repay your existing mortgage to free up income
- Repay other debts such as loans and credit cards
- A special purchase or a special occasion
- Pay privately for a medical operation.
The list is endless.