Later in your Home Ownership Journey
Later Life Lending is when you take cash out of your home without having to move. It's available in two main types. The first is a lifetime mortgage, which is a long-term loan secured against the value of your home. The second is a home reversion plan, where you sell all or part of your home to a provider for less than the market value in return for a tax-free cash lump sum or a regular income.
We offer advice in a lifetime mortgage, which is the most common type.
We don’t offer advice on a home reversion plan.
The Details
A Lifetime Mortgage is a loan secured against your home, the amount offered will depend on your age, and value of the property on application which is repaid on 2nd death or entrance to long term care. The property is then sold by the family as normal and the loan with the interest repaid. After the lender has been repaid as above the remaining equity would be divided in line with your will.
You retain ownership of your home and have the right to remain in it until the second of you passes or goes into long term care.
The rate on the initial sum is fixed for life and you can elect to pay some or all of the interest each month on some products or allow it to roll up and be repaid along with the initial amount.
A Reserve can also be set up if you are not taking the full amount of funds offered at the start.
The reserve account does not attract interest unless you draw down from it.
You can draw down as many times as you wish with a minimum each time of £2,000 with most providers.
The rate is also fixed for life on the draw down but will be at the best rate the provider can offer you at the time of draw down.
If you decide to move you could “port” the mortgage to a new house but will depend on the lender criteria. You are able to make an overpayment of 10% of the balance each year.
Risk Warning
This is a lifetime mortgage. To understand the features and risks, please ask for a personalised illustration. Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.
A FEE MAY BE CHARGED FOR MORTGAGE ADVICE.
THE EXACT AMOUNT WILL DEPEND ON YOUR CIRCUMSTANCES.
Example
If the youngest of you is 75 and if your house is worth £500,000 with no mortgage you could release up to circa 48% of the value which would be £240,000. You could take an initial amount and leave the rest in reserve for the future. If you did not make any interest payments, over time, the interest that accrues gets added to the loan which is then repaid on 2nd death or entry into long term care
Finding the right outcome for you
Depending on your age(s) and the value of your property, this will denote how much you can borrow, and it may not be right for you as it will affect any potential inheritance and your entitlement to means-tested state benefits.
You can take it all in a lump sum or an initial lump sum with a reserve account whereby you can draw down as and when you need additional funds without paying interest until you require the funds. We’ll discuss all options with you to help you make an informed choice that will meet your initial and long-term plans.
The Myths
I will lose my home and don’t own it anymore.
Not true, you still own your home, as you would with a “standard” mortgage, and the lender has first legal charge in the same way. You will not be forced to sell your home or move out in your lifetime and if the loan is joint then this applies to the last surviving homeowner.
I won’t be able to move.
You can transfer or port the mortgage to another property, for instance if you decide to downsize or move to a cheaper property. This prevents you having to repay the mortgage and then buy cash from the remaining equity. In some cases where the property value is a lot less the lender may ask you to repay some of the loan depending on its value at the time.
My family will be left with a debt when I pass.
This is not the case, all lenders have a “No Negative Equity Guarantee” which means your estate can never owe more than your home sells for. If it does then then the lender takes the loss.
You can also elect to protect some of the equity as a percentage so there would always be an amount of inheritance.
I will have to pay interest on money that I don’t need.
You can take an initial sum and leave the remainder in a reserve account, which does not attract interest charges unless you draw down from the reserve funds. If you never draw from the reserve, then will have only paid interest on the initial sum taken. It is like an overdraft, if you don’t use, you do not pay for it.
My credit history is poor, or I have been bankrupt.
This is not a major issue for the lenders as there are no mandatory monthly payments they are more excepting of any issues that you may have had in the past. They consider your age(s) and the value of the property as security, not your monthly income or credit history like a “standard” mortgage lender does.
I already have a mortgage and therefore can’t have a lifetime mortgage.
You can still have a lifetime mortgage, providing the amount offered on the lifetime mortgage is enough to clear the standard mortgage, any surplus would be available to you upfront or left in the reserve. A lifetime mortgage has to be the only charge on the property.
There is a place for a lifetime mortgage, and they may not be for everyone. These products are one of the most regulated financial products in the UK as they should protect you in later life when your home is so important to you and your family.
Have a chat with us at no obligation, and we can explain in a totally transparent manner all the advantages and disadvantages and help you decide if it may be right for you.
Hear from our customers
Mark Braidford
Mortgtage and Protection Advisor
Mark has been a mortgage broker since 2004, working in estate agencies in the early days and then specialist lending and advising the Met Police. Since 2012 he has focused on later life lending, advising his clients how to reach their financial goals and unmasking the myths around equity release, alongside mortgages and protection. He takes great pride in client care and building long term relationships with his clients and their families, helping them all in their home ownership journey. With 21 years experience as a broker, he has a wealth of knowledge in the property finance spectrum from buying your first home to releasing capital once you have retired.
