A lifetime mortgage is a form of equity release, typically available to homeowners aged 55 and over. The money made available to the homeowner may be used for any purpose. Typical uses may include a boost to retirement income, home improvements, paying off debts such as credit cards, or even a once-in-a-lifetime holiday. The amount of money which may be released will depend both on the homeowner’s age, and the value of the property. The provider can arrange a no obligation personalized illustration. Equity release providers will also provide information about any disadvantages and costs as part of the personalized illustration.
There are a number of different equity release schemes available to homeowners aged 55 and over. Lifetime mortgages are one of the ways in which homeowners can release some of the value tied up in their home. To be eligible it is normally necessary that the home is owned outright. There should be no outstanding mortgage or any other debt secured on the home.
In a lifetime mortgage money is borrowed, and secured against the home. There are no monthly repayments, instead the interest builds up throughout the life of the mortgage, and the total amount of the loan and the interest are repaid by the sale of the property when the owner dies, or if they go into long-term care.
The amount of money which can be released in a lifetime mortgage will depend both on the age of the homeowner, and their spouse if they have one, and on the value of the property. Typically the older the homeowner is, the more money they will be able to release by taking out a lifetime mortgage. An illustrative example shows that a homeowner aged over 80 years old would be able to release about 40% of the property value. A younger homeowner, aged 65, would only be eligible to release about 25% of the value.
The exact amount of money available in the lifetime mortgage depends on the product chosen, and providers offer a no obligation personalized illustration to any homeowner who is considering one of their products. Further details about individual products can normally be found on the provider’s website, or in brochures which they publish. Some providers also offer a free DVD explaining their products.
There can be disadvantages, as well as advantages, to a lifetime mortgage. The expert adviser from the company will explain any costs, such as valuation fees, and will explain how a lifetime mortgage will reduce the inheritance left in the homeowner’s estate.
Other disadvantages can include a change in tax liabilities, and a reduction in eligibility for state welfare benefits. Again the expert adviser will ensure that the personalized illustration, which is given to each prospective customer, fully explains any financial changes to the customer.
For those who own their home, and have retired, or are approaching retirement, their home is often the biggest single asset. Equity release schemes allow value to be released from that asset, and enjoyed during the owner’s lifetime. Lifetime mortgages are one form of equity release, and providers of these products offer a no obligation personalized illustration to any prospective customer.