Lump Sum Lifetime Mortgage
A lifetime mortgage allows you to retain ownership of your home (your main residential property) and access the equity it by securing a mortgage on it.
This amount you can access is usually around 60% of the value of your home depending upon its value and your age, health and lifestyle.
The mortgage and any accrued interest is simply paid back when you and your partner die or once you or your partner move into long-term care. The interest if not fixed and is set as variable will be subject to an upper cap limit.
Usually you don’t have to make any monthly repayments while you’re alive. The mortgage interest simply ‘rolls up’ which means the unpaid interest is just added to the mortgage loan figure.
If you choose to, some lifetime mortgage products will allow you to make interest and even capital payments if you wanted to which would mean less mortgage to be repaid upon your death which leaves more inheritance for your family if you have ringfenced a percentage of the home’s value for this purpose.
Some lifetime mortgage products will allow you to access the equity in regular sums which means you would only pay interest on the amounts you have withdrawn.
Drawdown Lifetime Mortgage
Drawdown lifetime mortgages work in the same way as lump sum lifetime mortgages but with added flexibility.
Once you know the maximum amount of money you can access via your lifetime mortgage you can choose an initial amount to ‘drawdown’ and then leave the remaining cash to drawdown in stages in the future. The interest is only added to the amounts you drawdown. This form of Equity Release is very flexible and can be a very useful way of planning your finances and replacing a regular income.
Downsizing Protection: If in the future you need to move into a smaller property then usually after 5 years of taking out your lifetime mortgage you will be able to pay the loan back without a penalty, this is subject to the terms of your lender. You may even be able to take the loan to your new home. This flexibility gives you reassurance that if your needs change in the future and you need to move then you still can.
Partial Capital Repayments: As previously mentioned you do have the flexibility to make voluntary repayments (up to 15%) of the amount you have borrowed each year. Doing this means you will reduce the size of the debt that interest is being charged on and means a lower amount of interest will be accrue each month.
Inheritance Protection: Choosing equity release doesn’t mean you can’t leave any inheritance. You can ring fence a percentage of your properties values with a protected lifetime mortgage. This guarantees a percentage of your home will be left for your family to inherit once your property is sold, regardless of how much interest accrues.
Enhanced Lifetime Mortgage: If either you or your partner suffer from health conditions or opt for certain lifestyle choices you may be able access more equity, a better interest rate of even both via an Enhanced Lifetime Mortgage.
Interest Payment: This feature allows you to choose how much interest you want to pay, and for how many months (subject to a minimum requirement). This feature is advantageous as paying some interest during the term of the mortgage means the amount due to your provider at the end of the plan will be less due to you having already paid off some or all of the interest.
Selecting which flexibility features are best for you
|Leave inheritance for loved ones||Inheritance Protection Lifetime Mortgage|
|Reduce debt as you go by paying monthly interest||Interest Payment Lifetime Mortgage|
|Reduce the portion of debt that interest is charged on||Partial Capital Repayments Lifetime Mortgage|
|Be able to move home in future||Downsizing Protection Lifetime Mortgage|
|Access the most amount of money possible||Lump Sum Lifetime Mortgage|
|Access some funds & be able to access more in the future||Drawdown Lifetime Mortgage|
|Explain my health/lifestyle to access more money||Enhanced Lifetime Mortgage|
A summary of Equity Release
- Receive a tax free cash lump sum
- Usually no monthly repayments unless you opt for this
- You will still own your home
- You can stay in your home for as long as you choose to
- You can spend the money however you want
- You have the ability to ringfence a portion of your property to guarantee inheritance with some plans
- You will never owe more than the value of your home with Equity Release Council approved plans
- You can still move house in the future with Equity Release Council approved plans (subject to criteria)
- It will reduce the value of your estate and may affect your entitlement to means tested benefits
Stages of the Equity Release Proces
- Telephone: Speak to Renew Advice and ask any initial questions, if you would like more information we can arrange a free, no obligation consultation in your home with our fully qualified Financial Adviser at a time to suit you.
- Loved ones: Talk to your family and encourage them to be present when we make our home visit consultation.
- First Consultation: At your first consultation we can discuss the options and find out more information about your circumstances to establish if Equity Release is the right option for you.
- Choosing the right plan: Our Financial Adviser will search the market to find the most suitable plan for you.
- Second Consultation: Our Financial Adviser will return to your home to discuss the plans found, you will be provided with a personal illustration and you can ask more questions.
- Paperwork: If you choose to go ahead our Financial Adviser will submit your application to the provide and your property will then be valued by an independent surveyor
- Offer: The provider will issue an offer, you can discuss the full terms and conditions with our Financial Advisor.
- Legal work: Independent solicitors acting on your behalf will cover the legal work.
- Timescales: Although not guaranteed it is usually an 8-12 week process from application to completion.
- Money released: Time to make those plans reality!
A note on Home Reversion
A Home Reversion Plan is where you sell part, or all, of your home to a Home Reversion Provider in return for either a lump sum or regular payments.
You retain the absolute right to live in your home until you pass away on a rent free basis but you do need to agree to maintain and insure your home.
With Home Reversion Plans you do not normally receive full market value for the percentage you sell due to the fact you retain an absolute right to remain in the property and both you and the Provider will share any increase in the property’s value.
As with a Lifetime Mortgage you are still able to ring fence a particular percentage of your property for inheritance. At the end of the plan, when you pass away, the property is sold and the sale proceeds are distributed according to who owns the remaining percentages.
At this time, Renew Advice do not offer Home Reversion Plans.