The overwhelming majority of equity release arrangements are lifetime mortgages. These are loans secured on a property, usually your main residence and are available to older customers aged 55 or over. You have the right to remain in your home for life or until you move into long-term care (and for the life of the second or until the second moves into long-term care, where the property is jointly owned).
Nearly all lifetime mortgage interest rates are fixed or if they are variable there must be an upper limit to which the rate could rise.
All Equity Release Council approved plans have a no negative equity guarantee. This means that when the property is sold your estate will not be liable for any shortfall even if the sale price achieved is lower than the mortgage debt and interest which has been added. All lifetime mortgage plans which meet the Equity Release Council standard also include a right to move to another property provided that it is an acceptable security to the lender.
All lenders have a maximum which they will lend based upon the age of the borrower (or the younger borrower) and this percentage increases with age. So as an example 20% of the property value might be available at age 60 and 40% of its value might be available at age 80.
Many lenders now offer plans which permit the drawing down of further funds, at some time in the future, without additional loan underwriting. This facility is known as drawdown and the advantage is that interest will only be charged on these additional amounts as and when further loans are taken.
The money raised from a lifetime mortgage arrangement can be used for a variety of different purposes. These might include:-
Many lifetime mortgage plans now allow payments to be made to reduce or eliminate the interest which is being charged and, on some occasions, to reduce the capital amount outstanding. These payments are either voluntary or are contractual. In the latter case this is exactly as they might be with any other regular mortgage. The vast majority of borrowers still prefer to let the interest being charged “roll up” but these newer plans are designed for those customers who want to reduce the rate at which the debt increases.
Michael Forward Financial Services Ltd is a member of the Equity Release Council and is authorised and regulated by the Financial Conduct Authority. FCA No: 630157
If you would like further information regarding a lifetime mortgage or would like a face-to-face meeting with a qualified equity release adviser please click here and complete our enquiry form.
Equity release may involve a lifetime mortgage or a home reversion plan.
To understand the features and risks, obtain a personalised illustration from a professionally qualified adviser. A lifetime mortgage is a loan secured on your property. Your home may be repossessed if you do not keep up repayments on your mortgage.
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