Lifetime mortgages explained
There are two types available;
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The most popular is an interest roll-up mortgage, here interest is added to the loan. If you make no payments the debt will increase over time. After death, or if both parties move into long-term residential care, the house is sold, and the mortgage repaid. Most life-time mortgages offer a no-negative equity guarantee, this means that your debt is repaid in full after death, you won’t leave a debt behind. Sometimes it is possible to refinance the debt perhaps as a buy to- let mortgage and pay off the debt, which means your family can still inherit a valuable asset after the debt is repaid.
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The other type is an interest only repayment mortgage. With this type of mortgage borrowers can elect to pay a fixed amount of interest, sometimes capital as well. The amount you owe is paid back when the house is sold.
For And Against Of A Lifetime Mortgage
FOR | AGAINST |
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Fixed rates of interest, limits the cost | The inheritance you pass on may be reduced and the people you leave your home to may have to sell the property in order to repay the loan |
Monthly incomes, or a lump sum, or a combination of both. | You will need the lenders permission for someone else to live in your home. A new partner, relative or carer |
You get to stay in your own home and it remains yours. | Your entitlement to benefits might be affected |
Many schemes guarantee that the total debt won’t exceed the value of your home. (called a no-negative guarantee) | You might have to pay some fees, valuations, arrangement fees of legal fees. |
The Loan is only repaid when you stop living there, because of death, or re-location to a care home. | You might not be able to transfer all the equity to another less expensive property |
For And Against Of A Home Reversion Plan
FOR | AGAINST |
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You get to live in your home until death, or move permanently into care | You No Longer own your home |
Will reduce or eliminate any inheritance. May help with Inheritance tax planning, if you live more than 7 years. | You will get much less than it is worth usually between 20% and 60% |
If you only sell part of your home, some will still be available for your beneficiaries | Reduced inheritance, may not exist at all |
May affect your benefit entitlement | |
Will need lenders permission to have a relative, carer, or new partner living there |
We do not advise on Home Reversion Plans
Important
All equity release schemes require independent legal advice, the person advising you must be qualified to do so. If you don’t take advice you may not be covered by the protections available. All equity release advisors will have passed Equity release examinations, in order to give advice.
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