Your Choices are Endless Once you Obtain your Lifetime Mortgage

Your Choices are Endless Once you Obtain your Lifetime Mortgage

Lifetime mortgage is a tax free lump sum of cash that can be used for any purpose that you want. More and more retirees who have homes now obtain this mortgage, so that they can have more income or capital coming into their household. When it comes to receiving a lifetime loan, you don’t have to borrow the entire equity on your home.

You can just borrow what you need initially and the remainder over time. By doing this, it will allow you to pay less interest as you are only charged on any capital actually withdrawn. This is known as the drawdown equity release and is not the only option available to home owners under lifetime equity release.

Inheritance Guarantee Concepts
If you want, so that a loved one can still inherit the home when you pass away or go into a nursing home you can build in an inheritance protected guarantee. This guarantee has to be started before the mortgage is in place. It is typically used to protect inheritance in the form of cash, but could be used as a means of time; time for the beneficiary to pay off the mortgage debt and keep the house.

Using the Funds
When you receive the funds from a lifetime mortgage, you can use it for whatever purpose; you may want to upgrade your car, make home improvements or consolidate debts such as credit cards and loans. Since you are retired, you probably deserve a new car and holiday to go with it. You shouldn’t be driving around the city with a car that is having mechanical problems in retirement!

Exploring the Different Options in Mortgages
Since there are more than two main types of lifetime equity releases, you will want to make sure you are getting the right one. Speak with an independent equity release adviser to find out which one is the best one for you. The two main ones are the interest only and roll-up lifetime equity release.

With an interest only scheme you can take a one-off maximum lump sum on your home. With a roll-up, you don’t have to get the maximum amount all at once. You can just borrow what you need at the time and take the remainder by drawdown, a more flexible approach. With both of them you can remain in the home rent free, except with an interest only, obviously you have to pay the interest each month.

To be specific both of the equity releases thus far mentioned is going to require interest to be paid. It is the timing that matters between the types. With the drawdown option a borrower is going to repay the interest and borrowed amount at the end of the agreement meaning the house is sold after death or during life as the owner moves on.

With the interest only option, interest payments are required each month. The payment is based on an APR that is in place until the principle sum is paid back.

Other Equity Release Products
While there are two types already discussed, you should know that there are four total options. A lump sum mortgage is like the interest only product in that you get a sum of cash all at once. However, with the traditional lifetime loan you do not pay interest and you get the money all at once. This differs from the drawdown where you take money as you need it.

Another option is the enhanced equity release which is set up to provide a larger lump sum than the traditional, but all other parameters are the same. This is because an illness is usually affecting the life expectancy of the borrower in which the lender feels the money will be returned quicker than the typically homeowner.

Qualifications of Home Owners
Standard qualifications require a person to be 55 years of age at least. If it is a joint loan then both parties have to be 55 years or older. The younger age is taken into account to ensure that both parties qualify.

The life expectancy is determined by a medical questionnaire everyone fills out.
The home value has to be over 70,000 pounds, and the amount provided is determined by the actual home value.

Key Points to Remember
On both of the lifetime mortgages, interest will continue to be added monthly or annually dependent upon the terms of the lender concerned. You don’t have to pay the interest back, except with an interest only. Once you pass away, the interest and capital is automatically repaid from your estate. While you are still alive, you deserve to spend the money that is on your home to get out of life what you deserve.