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Lifetime Mortgages

Lifetime Mortgages

It is possible to borrow a set amount of money against the value of your home. The money is borrowed in the form of a mortgage. More commonly this is in the form of one lump sum. However there are plans available that allow you to take money out as you need it for regular income, or smaller amounts initially and then capital amounts when needed in the future. In this case there can be advantages in minimising the amount of future interest which you owe.

Any outstanding mortgage, or secured debts, have to be settled first, but then you can spend the money released however you want to. Probably the best way to try and understand this is to think of it as a long term loan. The loan is secured against the value of your property and then paid off when your home is sold - when you move, die, or go into long term care. Your partner and yourself simply continue to live in your home and do not have to pay the interest on the loan during your lifetime. The interest is added to the amount you initially borrowed and this continues to grow during the period of the loan. This is called compound interest or rolled up interest. Everything - including the interest - is then paid off when the last survivor dies or moves into a care home, or simply sells the property. However there may be early repayment charges or penalties if you pay off the Lifetime Mortgage early. Bright Equity Release Solutions will advise you of all of these details during course of our discussions.

There is no need to worry about how this will affect your partner, spouse or someone else you are living with, because the property will only be sold after the last of the surviving dies, or starts to receive long term care. However, if somebody comes to live with you after an agreement is made, there may be rights to reside issues. All the money left after settling the loan will still go into your estate.

Of course it is always recommended that you seek Independent Legal Advice before entering into an equity release agreement. Bright Equity Release Solutions can introduce you to legal experts in this area.

The advantages of Lifetime Mortgages...

• Lifetime Mortgage schemes are agreed at a fixed rate of interest. This allows you to see right from the start what your debt will be in the future.
• Lifetime Mortgages give you the choice of a cash lump sum, income - or sometimes a combination of both - with no monthly repayments to meet.
• Ownership of your home remains completely with you and so you will still benefit from any rise in its value.
• Younger people (aged 60+) can sometimes more easily qualify for lifetime mortgages than with other kinds of equity release schemes.
• All the money left after paying off your loan and accrued interest will go into your estate and can be left to your beneficiaries as normal.
• With some lifetime mortgage plans an inheritance for your family can be guaranteed.
• You can guarantee that you will not suffer from negative equity. This is because SHIP (Safe Home Income Plan) approved schemes ensure that whatever may happen to property values in the future, the amount which you owe will never be more than the value of your property. We at Bright Equity Release Solutions only deal with providers of equity release products that are members of SHIP.

The disadvantages of Lifetime Mortgages...

• Over time the overall debt will grow as the interest is compounded or rolled up. Releasing the money from the scheme when you need it - rather than in one lump sum - may help to limit this.
• It is not possible to raise as much money from a lifetime mortgage as it is with a home reversion plan. This is especially the case at a younger age.
• The amount which you leave to your beneficiaries will be reduced.
• If you find yourself in a financial position where you want to pay off the loan early, early repayment charges may be applicable.
• Your eligibility for means tested benefits may be affected as might your tax position. Additionally your future options for moving home or selling your house might be affected.

Bright Equity Release Solutions will charge a fee for advising on equity release products. The precise amount will depend on your circumstances but we estimate that it will be £595. This will not be charged until the money from the lender is released. Bright Equity Release Solutions will also receive a fee from the lender on completion of the loan to you. We offer an initial consultation for which no fee will be charged and there will be no obligation for you to proceed.

The scheme is regulated by the Financial Services Authority.