Please note this is a generic guide, it is important to check the Key Facts Illustration for the particulars of any recommended mortgage.
A lifetime mortgage is when you borrow money secured against your home, provided it’s your main residence, while retaining ownership. You can choose to ring-fence some of the value of your property as an inheritance for your family. Additionally, some providers might be able to offer larger sums to those with certain medical conditions, or even ‘lifestyle factors’ such as a smoking habit.
The home still belongs to you and you’re responsible for maintaining it.
Interest is charged on what you have borrowed, which can be repaid or added on to the total loan amount. When you die or move into long-term care, the home is sold and the money from the sale is used to pay off the loan. Anything left goes to your beneficiaries. If your estate can pay off the mortgage without having to sell the property they can do so.
If there is not enough money left from the sale, your beneficiaries would have to repay any extra above the value of your home from your estate. To guard against this, most lifetime mortgages offer a no-negative-equity guarantee (Equity Release Council standard).
With this guarantee the lender promises that you (or your beneficiaries) will never have to pay back more than the value of your home. This is the case even if the debt has become larger than the property value.
Types of lifetime mortgages
There are two different types with different costs you can choose from:
· An interest roll-up mortgage: you get a lump sum or are paid a regular amount, and get charged interest which is added to the loan. This means you don’t have to make any regular payments. The amount you borrowed, including the rolled-up interest, is repaid at the end of your mortgage term when your home is sold.
· An interest-paying mortgage: you get a lump sum and make either monthly or ad-hoc payments. This reduces, or stops, the impact of interest roll-up. Some plans also allow you to pay off capital, if you so wish. The amount you borrowed is repaid when your home is sold at the end of your mortgage term.
Lump sum or income?
When taking out a lifetime mortgage, you can choose to borrow a lump sum at the start or an initial lower loan amount with the option of a drawdown facility. The flexible or drawdown facility is suitable if you want to take regular or occasional small amounts, perhaps to top up your income.
Rather than one big loan, as it means you only pay interest on the money you actually need. A lifetime mortgage is not suitable for everyone which is why you must take specialist advice before you buy. It's a large financial commitment that’s designed to last a lifetime.
Please contact our specialist adviser Steven Wills who can discuss your options or if required help you explore alternatives.
Chancery Mortgage Services Ltd Registered in England No: 04249982
Chancery Mortgage Services Ltd is authorised and regulated by the Financial Conduct Authority
©2017 Chancey Mortgages Services Ltd. All rights reserved.