Lifetime Mortgages

How Does a Lifetime Mortgage Work?

A Lifetime Mortgage is a loan secured on your property while you still retain ownership and freedom to live there. Interest will roll up during the life of the loan, or you can choose to pay the interest each year to avoid it building up (known as an Interest-only Lifetime Mortgage). When the homeowner dies or moves into long-term care and the house is sold, the loan amount and any accrued interest is paid back from funds from the sale.

Who Can Get a Lifetime Mortgage?

As with all types of Equity Release, a lifetime mortgage is available to home-owners aged 55 or over, who have usually already paid off their mortgage, or have very little left to pay.

Can You Repay a Lifetime Mortgage?

Yes, you can repay a lifetime mortgage, although if you do so you may be charged a substantial early repayment fee. However, there are a few plans that will allow you to pay back portions of the loan annually, usually up to 10%, without any penalty, giving you control over the balance and interest charges.

Many plans exist which also allow you to pay the mortgage interest each year, to prevent it accruing, as well as paying part of the loan amount, often making voluntary repayment lifetime mortgages the lifestyle equity release product of choice.

Which is the Best Lifetime Mortgage?

The best lifetime mortgage for you will vary according to your circumstances. You and your adviser would need to take into account various factors such as how much money you are looking to release, how quickly you need it, the value of your home, whether you might want to pay back the interest and perhaps a portion of the loan each year, and how long you might expect to stay in the house until you die or go into permanent care.

If you are simply concerned about retaining as much of your estate as possible to pass on to your inheritors, then you might prioritise a low interest rate over everything else. If, however, you need a larger sum, and do not expect to stay in the house for a long period of time, then you might not feel so affected by a higher interest rate.

What is an Enhanced Lifetime Mortgage?

This is a relatively new innovation in the Equity Release market, where you may be able to release more money from your property due to a shorter life expectancy, either due to your age or ill health. Also known as ‘impaired lifetime mortgages’, they rely on assessments of your general level of health and lifestyle – whether you smoke, take regular exercise, are overweight, and if you have any diseases such as cancer, Parkinson’s, leukemia, tumour, angina, or if you have previously suffered a stroke. They will also assess medications you may be taking.