Lump-Sum Lifetime Mortgage

How to Unlock the Hidden Value in Your Home With a Lump-Sum Lifetime Mortgage

All You Need to Know About Lump-Sum Lifetime Mortgage for Pensioners. Here's How to Choose Best Equity Release Scheme for Your Personal Situation.

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What’s a Lump-Sum Lifetime Mortgage?

A Complete Guide to Lump Sum Lifetime Mortgages in Oct 2021

When you need cash in retirement there are very few available options.

If you require money to fund you for a lifetime, the lump sum lifetime mortgage plan may be your best option.

However, with unscrupulous lenders cropping up every day, you can get yourself cornered especially if you have no clue as to the workings of a lump sum lifetime mortgage.

Lucky for you, here’s an exhaustive guide that will help you understand the benefits, pitfalls, and workings of a lump sum equity release in Oct 2021.

If you don’t think this is your golden key to financial freedom though, be sure to check out the guide on ‘What’s Equity Release’ and figure out which best suits your needs.

What's a Lump Sum Lifetime Mortgage Plan

What’s a Lump Sum Lifetime Mortgage Plan?

A lump sum lifetime mortgage1  is one of the most popular forms of equity release in Oct 2021.2 

It allows homeowners, to make interest payments at the end of the term of your program. It enables you to make a single withdrawal so eliminating the need to consider provisions for future withdrawals or repayments.

Therefore, you do not make any extra payments for the duration of the scheme, but the interest is collated every year until you breathe your last or decide to move into residential care. It’s among the lifetime mortgage schemes that only have the fixed interest rate.

It’s in essence, a core lifetime mortgage product with a few additional elements that result in you benefiting from a low-interest rate.

If this scheme does not suit your needs, however, be sure to check out the ‘Types of Lifetime Mortgage Schemes’ get to choose the one that will help you solve your financial needs.

How Does a Lump Sum Lifetime Mortgage Scheme Work

How Does a Lump Sum Lifetime Mortgage Scheme Work?

The scheme works by you selecting how much cash you need to unlock from your home to meet your financial needs.

It means that you will take out a secured loan against your residence in exchange for a tax-free lump sum. Your provider will charge you a fixed interest rate3  on the amount you borrowed, with typically no obligation to make any repayments over the lifespan of the loan, even though you can opt to consider this alternative if required.

If you choose not to make any voluntary repayments, then the interest will roll up4  over time with an ever-increasing balance.

You repay the lump sum equity release when the last homeowner dies or relocates to permanent care.

You should, however, keep in mind, that equity release ultimately reduces the eventual level of inheritance you pass on your family. It’s therefore vital that you discuss it with your family and children beforehand.

The Benefits of Taking Out a Lump Sum Lifetime Mortgage Plan

The Benefits of Taking Out a Lump Sum Lifetime Mortgage Plan

There are specific reasons why most people are opting to take this instead of other lifetime mortgage schemes. Some of these reasons are:

  • If you don’t need a financial product with many add-ons or extra features, then this may be the best solution to your cash needs.
  • Most providers also provide you with lump sum schemes with competitively priced interest rates.5 
  • Since you don’t have to make any financial provisions for future drawdown reserve facilities or regard any month-to-month repayments, your pan provider can pass on these savings by providing you with more reliable equity release deals, including bigger lump sums.
  • These are also perfect if you are looking to control your balance. It serves as the ideal option since it allows beneficiaries to monitor how the parents use the money.
  • This gives you the financial liberty to use the capital as you please.
  • You still retain 100% of your house until the life of the plan ends.
The Pitfalls to Taking Out a Lump Sum Lifetime Mortgage

The Pitfalls to Taking Out a Lump Sum Lifetime Mortgage

Since every policy is not flawless, this does have some drawbacks which include:

  • The interest can accumulate and be costly in the long run
  • If you need to release more equity, you might need to consider going through another application process
  • It can affect your entitlement to means-tested benefits
How Much Can You Borrow With a Lump Sum Equity Release Plan

How Much Can You Borrow With a Lump Sum Equity Release Plan?

The amount you can borrow with a lump sum mortgage is dependent on the seniority of the youngest homeowner and your estate’s market value.

In essence, the older you are, the more substantial the amount of tax-free cash you can release.

It, however, point out: how much can you borrow out of this? Well, the best thing to do is to examine and evaluate your requirements with your financial adviser. Your professional adviser will then conduct a thorough analysis and find the exquisite equity release policy for you for the right amount.

If, however, in the future, you decide to borrow more money, your lender will consider the terms of your policy and possibly offer you more cash. He/she will, however, need to make fresh calculations to find out if any additional funds are available.

The estimation will be dependent on the balance at the time, your years, and if the estate value will allow for a higher borrowing limit than the balance.

In such cases, the minimum further advance you can release is usually £5,000, and it comes with setting up costs.

If you want to see how much equity you are eligible to be sure to use our free calculator and be a step closer to making your retirement unforgettable.

Equity release can be one of the most confusing financial products available in Oct 2021. It’s, therefore, essential to research and ensure you carefully understand the terms of the plans before going ahead to take one out.

That said, if you want to know more about lifetime mortgage plans, click below to see how much money you can borrow or talk with one of our experts absolutely free.

Editorial Note: This content has been independently collected by the SovereignBoss advisor 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.

Contributors: Nicola Date, Katherine Read
Reviewed by Francis Hui

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Written by
Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
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John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.

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Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
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Written by
Katherine Read
Financial Planning Reporter

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.

Written by
Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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