Lindley Financial Management Limited

4 Gatesgarth Crescent, Lindley, Huddersfield. HD3 3LG

Telephone (01484) 316547

Lifetime Mortgages

A lifetime mortgage is a form of equity release scheme where a loan is secured against your property to provide you with a cash to spend as you wish, typically with no monthly repayments to meet.

Lifetime mortgages have become a highly popular form of equity release over the past few years, prompting many providers to offer a variation of a lifetime mortgage called a drawdown plan which allows you to release equity as and when you need it, rather than taking a lump sum or regular income.

Another option is to take the money as a regular income, although this is usually a less popular choice.

Usually interest is added to the lifetime mortgage loan throughout your lifetime, accruing at a fixed or variable rate. The loan plus interest is eventually paid back when the home is sold, usually when you move into long term care, or when you and your partner die. You can typically release between 18-50% of the value of your home with a lifetime mortgage, depending on your age.

Advantages of a lifetime mortgage

• A lifetime mortgage gives you the choice of a cash lump sum or income, typically with no monthly repayments to meet
• You retain full ownership of your home
• Lifetime mortgages are available to younger people (aged 55+)
• Some lifetime mortgage plans let you guarantee an inheritance for your family

Disadvantages of a lifetime mortgage

• The amount you leave as an inheritance will be reduced
• The interest applied can grow quickly as it is compounded
• You can’t usually raise as much money with a lifetime mortgage as you could with a reversion plan, especially at younger ages
• If you repay the lifetime mortgage early, you may have to pay an early repayment charge

 Equity Release – Home Reversion Plans

With a home reversion plan you sell part or all of your home to a reversion plan company in exchange for a tax-free cash lump sum and a guaranteed lifetime lease with no monthly payments to meet.

You stay in your home rent free for as long as you choose and are able to guarantee an inheritance to your beneficiaries. Both you and the reversion scheme company share in any increase in your property’s value, according to the percentages owned.

Advantages of a home reversion plan

• You are able to guarantee an inheritance
• There are no monthly repayments to make
• You benefit from any increase in value of the percentage of the property that you still own
• You can typically raise more money from your home at a younger age with a reversion plan than a lifetime mortgage would allow
• The older you are, the more money you will be able to release with a reversion plan

Disadvantages of a home reversion plan

• Typically, you do not receive the full market value of the share of the property you sell because the reversion plan company will give you the absolute right to live in it rent free for the rest of your life, and will not get their money back for a number of years
• The reversion plan company owns a share of your home and will also benefit from any increase in value
• Reversion plans cannot usually be reversed as you are selling part of your home
• The majority of reversion plan providers do not guarantee further advances

Tags: drawdown plan., Equity Release, paying for carers