A Lifetime Mortgage is an equity release scheme that is available to individuals age 55 or older and does not involve selling any part of the property, much like a home reversion scheme includes. Since the property remains 100 percent in the ownership of the borrowers, they will continue to have the right to live at the home for the remainder of their life.
Lifetime Mortgages are then repaid when the borrower passes away or moves to an assisted living facility, when the house is sold and funds are used for repayment.
How Are Lifetime Mortgages Calculated?
When it comes to calculating a Lifetime Mortgage, there are a few different factors that come into play. The two most important details that financers will look at is the value of the property in questions as well as the applicant’s age – these factors are the most heavily weighed and can be the biggest determinant of the outcomes of the mortgage.
Generally, the younger the applicant is, the lower the release of equity he or she will receive and the older the applicant is the higher the release of equity will be.
How is Interest Handled with a Lifetime Mortgage?
In the United Kingdom, a roll-up lifetime mortgage does not require the borrower to make monthly payments on the loan. Instead, the interest that is charged is added to the existing mortgage balance on either an annual or monthly basis.
Because of this, the lifetime mortgage balance will increase over time, which can negatively affect the amount of money the borrower’s beneficiaries will receive. With the long term housing prices increasing, however, this can help compound interest to some degree.
What Are Enhanced Lifetime Mortgages?
If the applicant has a history of poor or declining health, either presently or in the past, an Enhanced Lifetime Mortgage could be a valuable option for him or her to explore. Experience has shown that if a specific illness or condition is present, a normal United Kingdom equity release scheme term can be shortened to meet the applicant’s specific needs.
Additionally, some financial institutions will also offer a larger lump sum payment than the standard amount associated with a normal Lifetime Mortgage.
Depending on the applicant’s unique circumstances, there are a number of different Lifetime Mortgage options available to fit his or her needs. The choices and options can be overwhelming and comparing equity release schemes is always a recommendation for those looking into this financing option.
It is also recommended that applicants seek the advice of an independent financial specialist who can help them choose the best equity release scheme to meet all of their needs and fit into their financial budget.