At Key Solutions we understand that retirement is an important stage in your life when you want to feel financially secure and able to enjoy the plans you have made. Unfortunately sometimes, the finances needed to have as fulfilling a retirement as you wished for, may not be available, or perhaps unforeseen events mean that your income is being stretched preventing you from doing all that you want to do.
If you are over 55 and own your own home, releasing equity that you have built up in your property using a lifetime mortgage could be a suitable option to give your finances a boost and make your retirement more enjoyable.
What are lifetime mortgages?
Put simply a lifetime mortgage is a long term loan secured against your property which enables you to secure a tax-free lump sum from the equity you have built up in it. The funds released can be used for any purpose or alternatively it can be an affordable way to fund the purchase of a retirement property.
Lifetime mortgages are available to anyone aged 55-95 that owns their own home as long as it has a value over £60,000.
Lifetime mortgages differ to Home Reversion Plans in that you retain full ownership of your home.
There are a number of different lifetime mortgage products to consider:
Standard lifetime mortgages
A standard lifetime mortgage will enable you to draw between 13-55% of the value of your home dependent on your age. Compound interest is charged (usually at a fixed rate) throughout the term of the plan but is rolled-up so you do not have to make any repayments. The loan and accrued interest is repaid when your property is sold, when you move home, when you and your partner have both passed away, or when you move in long-term care.
Once the loan has been repaid any remaining funds after the sale of your property go to your beneficiaries.
If you do not need the full funds available immediately, then a drawdown plan may be the best option for you. Drawdown lifetime mortgages work in the same way as a standard plan with an initial percentage of your property value being agreed as a loan facility. You then “drawdown” the money as and when you need it up to this limit and are only charged interest on the amount drawn.
Enhanced lifetime plans
If you or your partner have health conditions or make certain lifestyle choices it is possible to get a higher age related loan as a percentage of the property’s value through some providers using an enhanced lifetime plan. Health issues such as diabetes, heart problems, or high blood pressure would be typical examples of health issues and smoking is an example of a lifestyle choice.
Interest payment lifetime mortgages
An Interest Payment lifetime mortgage enables you to pay as much or as little of the interest payment due each month. This means that the debt does not increase to the same degree as with a standard plan, and can therefore result in a larger residual amount for your family once the loan has been repaid.
A combined plan enables you to tailor the lifetime mortgage product to meet your specific needs combining different features from the different products available into one combined plan.
If you are considering a lifetime mortgage and want help and advice to understand whether it would be suitable for your circumstances and/or information on the different types of plans available contact our team on 0800 138 5856
Help & advice from qualified advisers
At Key Solutions we understand that for many deciding to release equity from your home using a lifetime mortgage or other product can often be a difficult decision to make. There are a number of different options available depending on your circumstances each with their own pros and cons as well as wider implications for family members.
We provide a free, no obligation consultation service with one of our qualified advisers to help guide and support you. Our consultations are usually completed in two stages and in person rather than over the telephone.
At your first appointment, which can take place at your home or a location of your choice, one of our qualified advisers will take the time to get to know you. We will review your current financial circumstances so that we can make informed recommendations on a suitable way forward for your individual circumstances.
We will discuss your aspirations and requirements in depth so that we can fully understand what you want from your retirement. We can also provide answers to any questions you or your family might have and make sure that you have considered all of the possible options available to you.
Our adviser will then take all of this information away and use it to produce a detailed report specific to you and your circumstances.
At the second appointment your adviser will provide you with the report detailing the best option for your own personal circumstances. This will include details of how your existing state entitlements and benefits may be affected as well as provide you with details of other benefits you might be able to claim.
If a lifetime mortgage is right for you, we will provide guidance on all of the products you qualify for, explain the positives and negatives of each and help you find the best solution to meet your needs and future aspirations.
Involving your family and other beneficiaries
We understand the importance of ensuring your family are involved in the process and encourage you to invite your family and other beneficiaries under your will to either or both of these appointments so that they are involved in the decision making process and give them the opportunity to ask any questions they may have.
If your family members are unable to attend we are happy to have a telephone discussion with them so that they are fully aware of all of the facts and remain involved in the process.
Things to consider about lifetime mortgages
As with any mortgage product there are a number of things to take into consideration when looking at whether a lifetime mortgage is suitable for you. Many of these will be dependent on your individual circumstances but the following list provides an overview of some of the areas to be aware of:
- You will need to be aged 55+ to be considered for a lifetime mortgage although some exceptions may be made for those with long-term illnesses
- The amount that can be released depends on your age and the value of the property
- You don’t know how much of your property value will be left for your family and beneficiaries when you pass away, although you may be able to guarantee a percentage of the value with some plans
- The lender will take a first legal charge against your property. When the property is sold the loan and interest due is repaid first with your estate getting any surplus afterwards
- If you have an existing mortgage on your home a condition of the mortgage will be for the amount of the current loan to be repaid before any funds are paid to you
- You may have to pay early repayment charges if you decide to repay the loan early
- The value of your estate and your entitlement to state benefits may be affected by taking out a lifetime mortgage
Our Customers Say…
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