Lifetime mortgage
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Lump-Sum Lifetime Mortgage

A Complete Guide to Lump Sum Lifetime Mortgages

I think you’ll agree with me when I say…

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

If you require money to fund you level of 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 is an exhaustive guide that will help you understand the benefits, pitfalls and workings of a lump-sum equity release plan.

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

How Much Equity Can You Release? Use Our Free Lifetime Mortgage Calculator

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What is a Lump-Sum Lifetime Mortgage Plan?

A lump sum lifetime mortgage is one of the most popular forms of equity release.

It allows homeowners, to make interest payments at the end of the term of your plan. It enables you to make a single withdrawal so eliminating the need to factor in 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 plans that only have the fixed interest rate plan.

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

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.

How Does a Lump Sum Lifetime Mortgage Scheme Work?

The scheme works by you selecting how much capital 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 rate 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 up 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 leave your family. It’s therefore vital that you discuss your plans with your family and children beforehand.

The Benefits of Taking Out a Lump Sum Lifetime Mortgage Plan

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

  • If you don’t need a financial product with many add-ons or extra features, then this may be the best solution to your capital needs.
  • Most plan providers also provide you with lump-sum schemes with competitively priced interest rates.
  • Since you don’t have to make any financial provisions for future drawdown reserve facilities or factor in any month-to-month repayments, your pan provider can pass on these savings by providing you with more reliable equity release deals, including higher lump sums.
  • The plans 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 spend the money.
  • The plan gives you the financial freedom to use the capital as you please.
  • You still retain 100% of your residence until the life of the plan ends.

The Pitfalls to Taking Out a Lump Sum Lifetime Mortgage

Since every plan is not perfect, this plan 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?

The amount you can borrow with a lump-sum mortgage is dependent on the age 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, begs the question: how much can you borrow out of this? Well, the best thing to do is to discuss and evaluate your requirements with your financial adviser. Your professional adviser will then conduct deep-dive research and find the perfect equity release plan 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 plan 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 calculation will be dependent on the balance at the time, your current age, and if the current estate value will allow for a higher borrowing limit than the current 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. 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 need more information on lifetime mortgage plans, click below and see how much equity you can release or chat with an expert for free.

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.

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