A Quick Guide
I think you’ll agree with me when I say…
It’s challenging trying to choose a lifetime mortgage scheme that perfectly suits your needs.
Or is it?
Well, it turns out that with careful considerations, unbiased professional advice and by checking out this guide, you can easily select the lifetime mortgage plan that will help you resolve all your financial difficulties.
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The Types of Lifetime Mortgage Plans
A lifetime mortgage scheme offers you tax-free cash to enjoy in retirement – while also allowing you to keep ownership of your home. You can either choose to take all your money at once (lump sum) or access smaller sums as and when you need them (drawdown).
If you also still have a mortgage left to pay on your residence, the cash you release will go to pay that balance off first. After that, it will be up to you how you decide to spend the rest – whether it will be in buying that luxurious jeep, going on that holiday vacation, making home improvements, or assisting your children onto the property ladder – you have the financial freedom to do as you please.
Some of these choices include:
1. Enhanced Lifetime Mortgage
If you’re looking to release the maximum equity from your estate or potentially acquire a lower interest rate, the enhanced lifetime mortgage or the ‘impaired’ lifetime mortgage plan could be your ideal option.
It involves a lending criterion that is based on your health records. It allows you to unlock more cash depending on the answers you give to the health and lifestyle questionnaire the plan provider will offer you.
Generally, the weaker your health, the more money you can borrow.
The qualification criterion when it comes to this plan is dependent on the kind of medical issues that you have – your plan provider will work on the underwriting code that your life expectancy is likely to be lowered if you’re sickly.
Learn More About » Enhanced Lifetime Mortgages
2. Drawdown Lifetime Mortgage
It is one of the most popular lifetime mortgage plans because they offer you a flexible cash reserve facility that provides you with easy access to your capital.
The drawdown mortgages’ first design was in response to the old schemes where a homeowner who was looking to budget over a long period, required to evaluate the amount he/she would need in the future.
The funds were invariably left sitting in a bank account, earning less interest than that being charged on the equity release plan.
Today, when you decide to take out a smaller initial lump sum, it means that the plan provider will charge you less interest (which means a lower balance) and you get to retain more equity in the property for future use if you need to.
With a drawdown facility, you eliminate the need to leave any unused equity release funds in the bank, and, instead, leave additional cash funds with the plan provider. So, your lender will never charge you any interest on the cash you secure with him/her, only the monies you withdraw.
Learn More About » Drawdown Lifetime Mortgages
3. Lump Sum Lifetime Mortgage
If you’re looking to have a one-off release of equity – get all your money in one go, then a lump sum plan may be the best equity release solution for you. It is, in essence, a core lifetime mortgage financial product with little bonus features, which on the whole results in a lower interest rate.
It works by allowing you to choose the amount of cash you need to release from your estate to meet your immediate financial needs. Invariably, to meet the requirements of a lump sum scheme, your objective will be a need for a single amount of money presently, with little or no need for additional cash in the future.
Therefore, you will be taking a secured loan against your home in exchange for a tax-free lump sum. Your plan provider will charge a fixed rate of interest on the property equity amount you unlock, with usually no need to make any repayments over the life of the loan, even though they can consider this option if need be. If you do not make any repayments, then the interest will compound over time with an ever-growing balance.
Learn More About » Lump Sum Lifetime Mortgages
4. Interest-Only Lifetime Mortgage
If you’re worried about your plan’s interest rolling up, you may need to look into the interest-only lifetime mortgage scheme.
It allows you to make month-to-month interest payments, and when you can do this for the life of your plan, you will not have to repay any additional balance when it dies- only the initial amount you borrowed.
If you have a reliable extra income and would prefer to facilitate the interest charged on your lifetime mortgage scheme and avoid it rolling up, this plan could be one of the ideal ways to retain as much equity in your residence as possible – getting the most out of the inheritance you leave.
The interest-only mortgage is popular with people who are not eligible for a residential mortgage in retirement, as, in reality, it works similarly as the residential interest-only mortgage.
Learn More About » Interest Only Lifetime Mortgages
5. Income Lifetime Mortgage
True to its name, the income lifetime mortgage plan allows you to use equity release as a way to top up your pension, via paying you a fixed income every month.
It is one of the ideal ways to supplement your current retirement income – possibly to help in maintaining your lifestyle after retirement, to bridge an income shortfall period or to enjoy a few of life’s luxuries like a vacation.
It is the best option if you do not require a large amount of money that either a drawdown or lump sum lifetime mortgage can provide you with.
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6. Voluntary Repayment Lifetime Mortgage
Perhaps you’re looking to safeguard your inheritance and control the balance of your equity release scheme. If so, the voluntary repayment plan is your best option.
The voluntary repayment scheme offers you the flexibility you need in an equity release plan by providing you with the ad-hoc repayments of interest and capital that helps control your balance.
Instead of the interest rolling-up, these optional partial payment plans allow you to repay up to 15% of the initial amount you released every year (dependent on the plan provider) with no penalty.
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7. Buy to Let (BTL) Lifetime Mortgage
Are you looking to borrow against, or secure a buy-to-let estate? If yes, then you need to consider taking out the buy-to-let (BTL) equity release plan.
It is tailored to assist landlords in designing their BTL property portfolios, which, in turn, could ultimately profit their retirement and tax arrangements.
Moreover, to qualify for this scheme, you need to be over the age of 55 (but no older than 90 years) – it applies to the youngest proprietor if it is in joint names. Also, for you to be considered eligible for this landlord scheme, your property needs to be located in either England, Scotland or Wales and its value should be a minimum of £70,000 and no more than £6 million.
It also allows you to take the option of considering a lump sum, roll-up, or voluntary payment, all on a buy-to-let basis. Every individual plan has its benefits and drawbacks, so you need to consult your financial adviser.
Learn More About » Buy to Let (BTL) Lifetime Mortgages
If you’re looking to take out an equity release plan, then it is imperative to get independent advice before you make any final decisions. A financial adviser will talk you through the details – including the costs you will incur, the pan that suits you best and the features that will best cater to your needs– so you can finally decide on whether it is the best option for you.
If you need to know more about lifetime mortgages and other plans, or even your eligibility, then ensure you click here to see how much equity you can release and 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.