Equity Release Scheme
Lifetime mortgage schemes have quickly become the most popular form of equity release currently available in the marketplace. They allow for some level of flexibility while also providing a series of features and options that make them tailorable to each individual homeowner’s needs.
A lifetime mortgage scheme is intended to last for the remaining lifetime of the homeowner(s) and essentially functions as a loan secured by the homeowner’s property. There are a variety of factors used to determine the maximum equity release available including the homeowner’s age, health, and property value. The money received can be used for whatever the homeowner wants, without restriction. For many homeowners, that means following through on lifelong dreams or goals during retirement that simply couldn’t be accomplished during the working years. For others, it means being able to provide gifts or cash to loved ones including children and grandchildren and again for some others it means being able to make repairs on existing property or paying down debt so as not to worry about it in the future. If you are interested in a lifetime mortgage scheme, you would be able to spend the cash however you wanted.
To qualify for a lifetime mortgage scheme, you must be a minimum of 55 years old and your property must have a minimum valuation of £60,000. You may be also eligible for a higher maximum payment if you have chronic health conditions or lead a particularly unhealthy lifestyle, through the use of an enhanced product.
Types of Lifetime Mortgages
Along with becoming the most popular equity release scheme, lifetime mortgage schemes have now introduced different versions of the product. The most well-known, primary lifetime mortgage is the basic roll-up plan. This is basically a lump sum of tax-free cash that you receive, and you are not required to many any repayments against the loan balance. This means that the loan balance will continue to increase over the years of the loan, due to the interest accruing, and the full balance owed will be repaid when the home is eventually sold.
There are now features available to be used with lifetime mortgages:
1. Health factors. An enhanced lifetime mortgage can be used to increase the maximum release of equity available. A health questionnaire, and subsequent health records, is used to determine if the homeowner has chronic health conditions or leads an unhealthy lifestyle. If either of those are true, the homeowner may be able to get a higher payout.
2. Flexible Withdrawals. There are now drawdown lifetime mortgages available which allow the homeowner to set aside some of the release available in a cash reserve facility. From this facility, the homeowner can draw down funds as needed and the homeowner does not incur any interest on the funds in the facility. Interest is only incurred once the funds have been withdrawn.
3. Repayments. Interest only lifetime mortgages allow the homeowner to many monthly interest repayments against their loan. This means that if the homeowner were to continue to pay all of the interest accrued, the amount owed would only ever be equivalent to the amount borrowed.
4. Ad-hoc payments. Voluntary repayments allow payments of up to 10% of the original amount borrowed to be paid each year without the homeowner incurring an early repayment charge. This feature allows the homeowner to have a level of control over their loan balance.
With a lifetime mortgage, the homeowner retains full ownership of the property. This means that the homeowner is still able to capitalize on any increases in property value. And as such, the homeowner must maintain th property.