Income Lifetime Mortgage

How Does an Income Lifetime Mortgage Work: The Complete Guide!
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
Are You Considering an Income Lifetime Mortgage? Find Out If You Qualify & What Costs Are Involved Here. Keep Reading to Learn More.

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Don’t get caught in a terrible financial situation when there could be an easy solution with income lifetime mortgages!

Life after retirement can be difficult, especially if you don’t have enough money to support your needs or to keep up with your pre-retirement lifestyle.

Great news! That’s where income lifetime mortgage plans come in.

We’re here to help you discover:

  • An introduction to income lifetime mortgage plans.
  • How they work in Aug 2022.
  • Income lifetime mortgage plan qualification criteria.
  • The expenses involved.

We’ve spent hours studying plans from over 25 of the best equity release lenders and we’re here to give you sound advice.

Now, let’s get into income lifetime mortgages right away!

TABLE OF CONTENTS

What’s an Income Lifetime Mortgage Plan?

An income lifetime mortgage plan is a type of equity release scheme that allows you to top up your retirement income. This is possible through a fixed income paid into your account monthly.

The Mechanics of an Income Lifetime Mortgage Scheme

Every equity release scheme works in almost the same manner. You get to unlock the equity tied into your home and nothing is owed during your lifetime.

The loan, plus fixed-rate compound interest, is then repaid from the sale of your home when you pass away or move into permanent care.

In the case of an income lifetime mortgage, the funds released are paid into your account each month.

The income is seen as a loan and not a salary and is, therefore, completely tax-free.

If you don’t require a substantial quantity of money right now, but could benefit from excess 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 companies that can offer it to you are limited.

4 Qualification Criteria of an Income Lifetime Mortgage

As with other schemes, the qualification criteria for an income lifetime mortgage plan in 2022 is dependent on:

  • Your age
  • Your property portfolio
  • The lender’s requirements
  • The condition of your health

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 charges.

Up to a maximum of 10% of the amount you borrow.

The minimum income payment is usually £200 per month, and you can usually receive this over 10 to 15, or 20 to 25 years.

Your estate also needs to have a minimum value of £100,000, and the youngest homeowner must be over 55 years to qualify.

Here’s an indication of how this plan can work across the 3 different income plans that Legal & General offer their consumers in Aug 2022.

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.

Legal & General’s Plans as of Aug 2022

Plan NameMax LoanMax Initial LoanMax Monthly Income
Income Plan£137,500£13,750£555
Income Plus£159,000£15,900£645
Income Max Plus£216,000£21,600£883

As you see, Liza can opt to get the monthly payout between £555 and £883.

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5 Costs Associated with Income Lifetime Mortgages

Like other lifetime mortgage schemes, before taking out a plan, it’s vital that you know the expenses associated with it.

In 2022, these can include:

  • The financial adviser’s3  fee – to help you set up your income lifetime mortgage plan.
  • An arrangement fee – paid to the plan provider to cover their administration and legal fees.
  • The solicitor’s4  fees – for legal advice.
  • Property valuation fees – the surveyor fees.
  • The completion fee – you can pay at the point of fulfilment or add it to the final mortgage amount.

As with most lenders, these costs can tally up to about £1,500-£3,000. You might also have to pay more charges if you opt to make ‘early repayment charges.’

Common Questions

What's An Income Lifetime Mortgage Plan?

How Do I Know If An Income Lifetime Mortgage Plan Will Work For Me?

What's The Difference Between How An Income Lifetime Mortgage Works Versus Other Loan Types?

What's The Maximum Home Value That I Can Obtain With An Income Lifetime Mortgage?

In Conclusion

Each year, £3.5bn in benefits remain unclaimed by UK retirees. You are likely entitled to benefits, but if you’ve claimed yours, and they’re still not enough, an income lifetime mortgage plan could be the solution.

If your income is limited and you want to keep up with your lifestyle, then it may be the best option for you. The best part is that you’re not restricted on how you can use the money.

Give your financial specialist a ring for expert advice today to get the ball rolling. Your life could change forever with an income lifetime mortgage.

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Editorial Note: This content has been independently collected by the SovereignBoss team and is offered on a non-advised basis. SovereignBoss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.