Equity Release Lifetime Mortgages are specialist mortgages aimed at those over 55, (or in the case of joint applicants, both are over 55), who want to release some of the equity built up in their home. |
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The most common type of lifetime mortgage does not require you to make any repayments at all until you sell your home; instead the interest is rolled up and added to the amount you owe.
Some providers also offer interest only lifetime mortgages where you pay the interest in the same was as a normal mortgage, and only repay the loan when you sell your home.
Under an Equity Release Lifetime Mortgage scheme you keep full ownership of your property but you obtain a secured loan paid as either a lump sum or monthly income (or both) and you pay nothing back during your or the last survivor (if joint application) lifetime, or you finally give up owning a home whichever is the earlier.
The interest which would otherwise be payable per month is rolled up on the loan until the loan is finally repaid by your executors or family, when both the loan plus accumulated interest are repaid from the sale proceeds. You or your representative selling the property still receive the balance between the sale price and the amount required to repay the accumulated loan. This type of scheme is also variously referred to as a Lifetime Mortgage or in the past has been known as Rollup, or Cash Release Mortgage.
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) and the amount of interest they charge. Typically schemes offer between 20%-25% at age 60 going up to 60%, if, at outset, the youngest is approximately 90. Equity Release mortgages are widely available from age 60, currently one scheme offers this at 55 and some will only offer it to couples where the youngest is 65.
For a comparison of Equity Release Lifetime Roll Up Mortgages and other equity release schemes click here.
Please note: All equity release products involve borrowing against, or selling all or part of, your home and may work out more expensive in the long term than downsizing to a smaller property, and may affect your entitlement to State benefits and grants. There may be more suitable methods of raising the funds you need.
The equityRelease Centre are independent specialists in all forms of equity release schemes and all schemes recommended by us guarantee that no matter what happens to the value of your home, you will never have to pay back more than the home is worth at the time of death – this is called the no-negative equity guarantee. This is a very reassuring point, but it does limit the amount companies are prepared to lend at the outset.
Equity Release Lifetime Roll Up Mortgage schemes – advantages
- Available to younger people (55/60) than other schemes such as Home Reversion Plans were it is typically 65 or 70 if joint.
- Unlike ordinary mortgages you have no monthly repayments to make and the amount available doesn’t depend on your income.
- Money is given to you to decide how to spend or invest it.
- You retain full ownership of the property and therefore the right to remain living in your home as long as you want.
Equity Release Lifetime Roll Up Mortgage schemes - disadvantages
If you start it whilst young and live a long time, the loan and interest may represent a significant percentage of your home's value, especially if property prices do not increase.
- The loan and interest accumulated will reduce what your family inherit.
- As the interest is not received until you die, the interest rate is higher than ordinary mortgages.
- If you spend all the money released you may find yourself in a similar financial position as before.
- All equity release products involve borrowing against, or selling all or part of, your home and may work out more expensive in the long term than downsizing to a smaller property, and may affect your entitlement to State benefits and grants. There may be more suitable methods of raising the funds you need.
To help reduce the speed with which the loan and accumulated interest can build up The equityRelease Centre is able to offer those over 60, flexible Lifetime Mortgage Plans. For those who do not need all of the equity immediately, this can help reduce the speed with which the loan builds up because although a maximum borrowing facility is created at the outset (still based on your age or youngest age if a couple and your home's value), you can initially borrow as much or as little as the schemes permit and/or you like and leave the rest to be withdrawn at later dates although any new borrowing may be at a new fixed rate set at the time you borrow the additional money. This way you only pay interest on the amount actually borrowed at anytime and not the total facility. Providing you do not need to take the balance shortly after the initial loan this should lead to a lower total amount being owed at any given time in the future.
If you would like advice, please complete our equity release enquiry form and we will call you back shortly. Alternatively please feel free to phone The equityRelease Centre on 0118 958 8810 or click through to our Equity Release Centre home page and follow the links from there.
You will always receive courteous service in the strictest confidence from highly trained staff who all value your custom. Your business will be dealt with in a friendly, efficient and personal manner at all times. |
