What is a Lifetime Mortgage or Equity Release Scheme?
A lifetime mortgage enables you to take out a loan secured against your property. This will give you either:
- A cash lump sum, OR
- A regular income for the rest of your life.
The loan, plus the interest that has accrued, is repaid when the house is sold (when you either die or move into long term care).
These mortgages represent a serious financial commitment and should only be taken out when you have received the relevant professional advice. Only a specialist adviser authorised by the Financial Conduct Authority (FCA) can sell you this type of mortgage after having fully discussed all the implications with you. We have mortgage advisers with the specific qualifications needed to sell and advise on lifetime mortgages and equity release. This means they have to follow specific rules set out by the FCA. We can talk to you about home reversion schemes but these schemes are not covered by FCA rules. You don't have to take advice before you take out a lifetime mortgage. If you choose not to and there are problems in the future, you will have fewer grounds for complaint.
Who can have a lifetime mortgage?
Most companies will only offer lifetime mortgages to the over 60's although some are available if you are over 55. You also need to own your own home or have only a small mortgage outstanding.
What types of Equity Release are available?
There are three main categories for equity release but within each category are several variations so you need to make sure that the product suits your needs.
- Lifetime Mortgage - allows you to release equity from your home in a cash sum. This is repaid (with the interest that has accrued) when you die or sell the house to move into long term care.
- Drawdown Lifetime Mortgage - this is similar to a lifetime mortgage but is more flexible as you take your cash over a period of time when you need it. This can mean that less interest builds up.
- Home Reversion Plan - you give up part or all of the ownership of your property in exchange for a lump sum of money. You remain in your home, rent free, until you die.
What are the disadvantages of a lifetime mortgage?
The cash you receive from your mortgage could reduce or remove any means-tested benefits you are entitled to. If you change your mind, any early repayment charges could cost you several thousands of pounds.
All of these plans can have big implications, especially if you have family that were expecting to inherit your estate. It is extremely important that you choose the right plan to suit your needs. We can offer you the specialist, sympathetic advice to help you make the right decision for you and your family.
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