If you think lifetime mortgages are best avoided, it’s time to think again. Perceptions are changing evidenced by significant market growth and demand in recent years. Despite this, there are still myths that need dispelling around lifetime mortgages.
With most lifetime mortgages, you’re able to move home and transfer your lifetime mortgage to the new property providing it meets the lender’s terms and criteria. A partial repayment may be required.
Providing the terms and conditions are met, no debt is left to your estate and you’ll never owe more than the value of your home once sold upon death or permanently moving into long term care.
You can apply for a lifetime mortgage providing you pay off your existing mortgage balance. This can be done either through the equity you release or through your savings. Using equity release to repay an existing mortgage could cost you more in the long-term.
There are products that offer you the option to make partial repayments with no early repayment charges. The amount that can be repaid is usually up to a fixed amount each year. Some products also offer fixed early repayment charges that apply for a set time period so any repayments after this won’t have a charge. There are also products available that allow you the option to pay monthly interest. Although this will not reduce the amount borrowed, the debt will not increase as much as it would if you let the interest roll up over the life of the mortgage.
A lifetime mortgage is designed to be repaid by selling the property after you move into permanent long-term care or pass away. Once the loan has been repaid, any money left over can go to your beneficiaries. Also, some products let you ringfence a portion of your home’s equity to leave as an inheritance for loved ones.
Lifetime mortgages are regulated by the FCA. Also the Equity Release Council (ERC) was established in 2012 to provide consumer protection specifically for this market. Members must adhere to its standards of conduct and practice.
Chadwick are members of the Equity Release Council and hold the specialist qualifications to advise on Equity Release since 2006 but we have been offering advice to clients long before regulation came in and have over 20 years-experience in this specialist market and have many happy lifetime mortgage clients.
With lifetime mortgages, you’ll be the owner of your home for as long as you want to live there. This is in the same way as you would for a regular mortgage providing you meet the conditions of the lifetime mortgage.
As part of adhering to the ERC Statement of Principles, all members must now feature a ‘No Negative Equity Guarantee’, which means you’ll never owe more than your home is worth once sold, even if this is less than the amount owed. This applies upon death or permanently moving into long term care. The guarantee only applies when you meet the product’s terms and conditions.
Note: • Taking out a lifetime mortgage will reduce the value of your estate • Taking out a lifetime mortgage may effect your entitlement to state benefits • Consolidating other debts could cost you more in the long term. Source: Just Retirement 02/19.