A single lump sum lifetime mortgage
These plans often allow the largest amounts to be released for any given age. Under these schemes you chose at the outset how much you want (subject to maximum percentages for any given age) To find out just how much you could borrow why not try our free instant calculator the whole amount is paid to you at the beginning.
The maximum amount you can borrow is a percentage of your home's value being dependent on your age or the youngest age in joint cases. The amount offered by different providers varies depending on your age (or youngest age if joint). Typically schemes offer between 20%-25% at age 60 going up to 60%, if, at outset, the youngest is approximately 90.
Lifetime mortgages are widely available from age 60, but a small number of schemes will offer from age 55.
Not only does the amount you can borrow vary, so does the interest.
Interest on such loans is compound interest, i.e interest is added to the amount owing at the
beginning of each year, which of course includes any interest added in earlier years. By taking all of the money initially,
the interest increases quite quickly, and can consume a considerable percentage of the home’s equity over the remaining
lifetime, although under the no negative equity guarantee- the debt at time of sale cannot exceed the value of the property.
If you do not need all of the money initially but just want the reassurance that further money
is available to draw on in the future then not only would a drawdown lifetime mortgage be more suitable,
but it would save the interest building up so fast.
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Flexible Drawdown Lifetime mortgage
This variation of a Lifetime Mortgage allows you to set up an agreed maximum facility for a specified
period (based on age and house value) but initially take just as much as you need for immediate needs, subject to a minimum (varies with providers), and
take further money (up to the maximum agreed facility) when required. This helps save the debt building up as fast, as interest is only charged on what
has so far been taken, not what is held in reserve.
For example, you may agree to borrow £100,000 on a £300,000 property but only take
£20,000 initially. In this case, for a period of time, you would then have the ability to take further withdrawals up
to a total of a further £80,000 at anytime and without any need for further valuations or legal work. Until such
time as any of this reserve is taken, interest only accrues on the initial £20,000 taken.
To find out how much of a facility you could create why not try our free instant calculator.
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Home Income Plans
An interest only loan, or mortgage, is taken out against the security of your home. The lump sum released is used to buy an annuity, which generates guaranteed income for life. Part of the income is used to make interest payments on the mortgage and the remaining net balance is yours to use as you wish. The capital amount of the mortgage is repaid when the house is sold.
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration
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Ordinary Interest Only mortgages
There are a few Building Societies and Banks that are prepared to offer ordinary interest only mortgages to retired people,
to allow them to release capital.
Interest only mortgages mean that you only repay the interest not the capital to the lender, therefore, the monthly repayments
can be relatively affordable. Also providing you pay the interest each month, your debt remains the same, unlike other specialist
lifetime mortgage schemes. The amount you can borrow under such schemes are based on your incomes including pensions not your age
or life expectancy. Find out more about ordinary mortgages.
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Your home may be repossessed if you do not keep up repayments on your mortgage.
For arranging ordinary mortgages we can be paid by commission, or a fee of usually £750 or
a combination of both.
Understand some of the advantages and disadvantages of each type of lifetime mortgage.
