A Complete Guide to Income Lifetime Mortgages
I think you’ll agree with me when I say…
Life after retirement can be difficult, especially if you don’t have enough money to supplement your needs or to maintain your lifestyle – that’s where income lifetime mortgage plans come in.
However, it can be challenging trying to wrap your mind around this plan, especially with the limited research options and expenses that come with consulting professional advice.
Or is it?
Well, by checking out this guide, you will get unbiased information on what income lifetime mortgages are, how they work, and the costs associated with these schemes.
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What is an Income Lifetime Mortgage Plan?
The income lifetime mortgage is basically, an equity release scheme that allows you to top up your retirement income, via getting a fixed income every month into your account.
It’s the ideal option if you’re looking to supplement your current retirement income – or maintain your lifestyle bridge an income shortfall period (probably till you reach state pension age) or perhaps to go on that life-long vacay on your bucket list.
It also comes in handy when you don’t require a substantial amount of money that either a lump-sum or drawdown equity release scheme can offer you.
If this scheme does not suit your needs, however, be sure to check out the on ‘Types of Lifetime Mortgage Schemes’ get to choose the plan that will help you solve your financial needs.
The Mechanics of an Income Lifetime Mortgage Scheme
Every equity release plan works in almost the same manner. You get to unlock the equity locked up in your home and the amount you receive, plus you get to repay the interest that compounds’ over time when your plan ends (when you die or move into permanent care).
The schemes vary in terms of how you want to access this.
You can opt to withdraw this cash as a lump sum, a drawdown, or a combination of the two.
A lump sum plan enables you to access the capital as a single, lump sum amount of money.
A drawdown plan, on the other hand, provides you with a cash reverse facility which allows you to borrow against now and take extra in the future.
The income lifetime mortgage also offers you a monthly fixed income over an agreed period, which is mostly between 10-25 years.
Just like how monthly salaries work, this payment plan, the lender pays the amount directly into your bank account each month, but tax-free.
If you don’t require a substantial amount of money right now, but could benefit from extra finances in your pocket every month, an income plan could be your best option.
However, since this plan is new to the equity release market, the providers that can offer it to you are limited.
The Qualification Criteria of Income Lifetime Mortgages
As with other schemes, the income lifetime mortgage plan’s qualification criterion is dependent on your age, property portfolio, and the lender’s requirements.
According to most lenders’ criteria; however, the minimum initial amount you can take out is £2,500 to assist you in covering the set-up costs, up to a maximum 10% of the amount you borrow.
The minimum income payment is usually £200 per month, and you have several options to get this over 10 to 15, or 20 to 25 years.
Your estate also needs to have a minimum valuation of £100,000, and the youngest homeowner should be over 55 years to qualify.
Here is an indication of how this plan can work across the three different income plans that Legal & General offer their consumers.
Let’s say, Liza Gödel is 60 years of age, her estate has a market value of £500,000, and she opts to take out a 20-year income term and chooses to take out the maximum initial loan.
|Plan Name||Max Loan||Max Initial Loan||Max Monthly Income|
|Income Max Plus||£216,000||£21,600||£883|
As you see, Liza can opt to get the monthly payout between £555 and £883.
To get more information and see how much you can borrow, why not use our free calculator?
The Costs Associated with Income Lifetime Mortgages
Like other lifetime mortgage schemes, before going ahead to take out a pan, it’s vital that you know the costs associated.
They can include:
- The financial adviser’s fee – they help you set up your income lifetime mortgage plan
- An arrangement fee to the plan provider
- The solicitor’s fees – for legal advice
- Property valuation fees – the surveyor fees
- The completion fee – you can pay at the point of completion or add it up to your mortgage
As with most lenders, these costs can add up to about £1,500-£3,000. You might also have to pay extra charges if you opt to make ‘early repayment charges.’
An income lifetime mortgage plan can be one of the best financial decisions you can make when done correctly. If your income is limited and you want to maintain your lifestyle then it may be the best option for you – and the best part is that you’re not limited to the ways you can spend the money.
Call up your financial adviser today and get this plan rolling today.
How much money could you release?
A lifetime mortgage plan allows you to access the value of your home, tax-free without having to sell up, so that you can have money to spend on whatever you want or need.