What is an Equity release or lifetime mortgage?
We spoke to Natalie Barlow from Best 4 U Mortgages about this topic. “A lifetime mortgage or also known as an equity release mortgage is a mortgage you can take out on your property when you are any age over 55. The amount you can borrow depends on the value of your house, your age and whether you have an existing mortgage already. If you have an existing mortgage already, as long as you can pull out enough to repay your existing mortgage then its possible to still get one.
They are mortgages that are designed to be repaid when you go into long term care or you die (so your estate has to sell the property to pay it back). While you have the mortgage there are no repayments like a normal mortgage but instead the interest is applied to the mortgage and rolled up instead of having to pay the interest upfront.
These type of mortgages use to be quite scarce and they had a lot of bad press and left a lot of people in negative equity with no money to leave to their estate.
Because of what previously happened they are now heavily regulated and there are a lot more variants of them, roughly around 300 different schemes out there now. Most of them have a fixed rate for the life of the mortgage and they now have other benefits/options like being able to pay off some of the interest or capital each month.
How do I know if a lifetime mortgage is right for me?
It is beneficial to use a mortgage advisor/broker, they have to be qualified in lifetime mortgages but it is also beneficial that they also give out normal mortgage advice too. This is because during their process of obtaining all your details (called factfinding), it might be that because you have income (i.e, private and state pension) a normal interest only mortgage or a retirement interest only mortgage (RIO) may suit you better and therefore the advisor is able to switch to regular mortgage lenders without the need to move brokers and go over the whole factfinding process again.
What reasons can I raise the money for?
You can raise the money for any legal reason and the lender won’t necessarily check unless for major home improvements, and this is because they want to check you wont de-value the house during the process. Whatever reason you are thinking of, just put the idea to your broker and they will let you know, here are some reasons:
- To create income for a better quality of life
- To release a lump sum for home improvements (maybe to help you stay in the property longer)
- To pay for care so you can stay in your own home longer
- To release capital to pass to your children or grandchildren – to allow them to maybe get onto the property ladder or pay off some debts for example.
- To go on a round the world trip (if Covid will ever let us do that!) or a holiday of a lifetime you have always dreamed of.
- To buy a car or a big purchase like a campervan.
- Help with inheritance tax issues in the future
- To help purchase a new property
- To pay off a mortgage that has come to the end of its term
Should I involve my family in this decision?
This a grey area because there are 2 sides to this:
1. You don’t like your family and its your money and you can do what you want with it.
2. You love your family and you want them to help you make sure you’re making the right decision and if you go into long term care or pass away they know what to expect from your estate. We encourage people to talk with their families but on the same token we will have private conversations away from the family member if we feel you might be being coerced into this by your family, especially if the money is intended for them.
Will you explain the process to me?
Yes we explain and guide you every step of the way and we don’t charge any fees until completion making sure you feel under no pressure at any time and it wont cost you a penny with us if you don’t proceed, there may be costs involved if your solicitor has already started some work if you pull out.
Will I need a solicitor?
Yes you will need a solicitor and they also need to be qualified in lifetime mortgages, they will also go over every part of your mortgage offer with you to make sure you understand what you are doing and are happy to proceed, this whether it is a re-mortgage or a purchase. They will also want to make sure you aren’t vulnerable and or being coerced by family or other third parties. They have to be able to perform a face to face interview and this can be at their office or it can be arranged in your home (an extra fee can apply for this).
How Do I arrange an appointment?
Please call us at our office 01536411144 or email us at email@example.com and we can have a chat and arrange a suitable time to set up an appointment face to face over over Zoom.
We look forward to helping you.
Natalie and the mortgage team at Best 4U Mortgages.