Lifetime mortgages, perhaps more commonly referred to as equity release by many, are not what they once were. They are significantly improved products from yester year, so should all the taboo and stigma surrounding them be a thing of the past? Often though people still tend to feel uncomfortable by the prospect of a lifetime mortgage.
Before I go into a few points in a little more details please note I am only discussing lifetime mortgages here and not discussing home reversion plans.
An example of a lifetime mortgage could be as follows. A couple, with the younger person in the couple being 75 years old, own a house which is valued at £200,000 wanted to raise £50,000 to pay off an interest only mortgage and conduct some home improvements.
As of 30th January 2019 the couple could potentially get a lifetime mortgage with Legal & General, on a roll up basis, for the £50,000 on an interest rate of 3.86% fixed for the life of the mortgage. This option has a £30 completion fee but also would provide a drawdown facility of £14,800. Please be aware there can be additional costs incurred in the mortgage process such as broker fees and legal costs.
As with the example above the vast majority of lifetime mortgages offer an interest rate that is fixed for the life of the mortgage. This fixed rate for life gives long term security so you know how much the mortgage will be costing you throughout the arrangement.
Lifetime mortgages also now have a lot more variety than what they once had. In the example above the product offers a drawdown facility, which allows the borrow to go back to the company and take extra funds if needed without the need for another underwrite. This also means that if the funds aren’t required immediately you could leave the funds in the drawdown account until needed so that interest doesn’t accrue on that part.
You can also move house with a lot of lifetime mortgages, provided the new property meets the lenders criteria you could take the lifetime mortgage with you to a new property. Additionally you can explore the option of buying a new residential property with a lifetime mortgage.
If you are considering looking at a lifetime mortgage you should seek independent advice so you can discuss the options available to you.
Daniel Brown BSc (Hons), Cert SMP
4th February 2019