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Lifetime Mortgages West Yorkshire – PFS Finance Ltd

What is a lifetime mortgage?

Lifetime mortgages are a type of equity release that let you access the money tied up in your home. There are no monthly repayments to make as the loan and interest are repaid once you die or move into long term care.

Available to homeonwners aged 55 and over, lifetime mortgages are often referred to as later life mortgages. The money you release can be used however you wish, perhaps to pay off loans, make home improvements, help family financially or increase your retirement income.

A lifetime equity release mortgage could be worth considering if you want to free up some cash, however it’s not the right option for everyone. Which is why it’s important to understand how they work before making your decision.

How does a lifetime mortgage work?

With a lifetime mortgage, a loan is secured against your property in return for a tax free cash sum. Instead of monthly repayments, the interest compounds and is added to the loan. When you die or move into care, the property is sold and the loan plus interest accrued repaid.

As the interest is compounded either monthly or annually, lifetime mortgages are more expensive compared to residential mortgages and will impact your family’s inheritance. However depending on the type of lifetime mortgage you choose, there are ways you can reduce the amount owed and guarantee an inheritance.

What are the different types of lifetime mortgage?

There are several types of lifetime mortgage to choose from depending on your requirements:

Lump Sum Lifetime Mortgage

Lump sum lifetime mortgages often referred to as a roll-up lifetime mortgages pay out a cash sum in one single payment. The interest grows and is repaid along with the loan once the last homeowner dies or moves into care.

Drawdown Lifetime Mortgage

Drawdown mortgages give you flexibility to release money in stages, leaving some in reserve to drawdown as and when you need it. The benefit of a drawdown mortgage is you only pay interest on the money release, not the funds held in reserve.

Interest Only Lifetime Mortgage

Interest only lifetime mortgages give you the option to make monthly interest repayments. This will reduce both the size of the overall loan when it comes to repayment and the impact to your family’s inheritance.

Enhanced Lifetime Mortgage

Enhanced lifetime mortgages are designed for people with medical conditions and can offer larger cash sums with improved interest rates.

Protected Lifetime Mortgage

Protected lifetime mortgages let you protect a percentage of the value of your property, guaranteeing an inheritance for family.

Home Reversion Plan

You give up the ownership rights of the property, but are guaranteed to live in your property for the rest of your life. You can give up part of the property or all of it depending on your circumstances.

Benefits:

This will allow you to draw on a lump sum. It can also guarantee a % of the property is left to estate.

Disadvantages:

It is very expensive if you ever wish to buy back your property. You are not the beneficial owner of the property. The money received for the % of property sold is not directly related to the market value.

Questions & Answers

What is the difference between a lifetime mortgage and a residential mortgage?

The main difference between lifetime mortgages and residential mortgages is how the loan is repaid. A lifetime mortgage has no fixed term and no monthly repayments, as the loan is only repaid once you have died or moved into long-term care. Whereas a residential mortgage lasts for a fixed term and requires monthly repayments.

How much can you borrow with a lifetime mortgage?

The amount you can borrow with a lifetime mortgage depends on your age and the property value. Typically the older you are, the more you can borrow.

Can you pay off a lifetime mortgage?

You can pay off a lifetime mortgage early however you may be charged an early repayment fee that could be quite prohibitive. Having said that, some equity release lifetime mortgages allow you to repay a percentage of the loan off at certain stages whilst others let you repay the whole amount after a fixed period.

So if you’re considering a later life mortgage but think there’s a chance you may want to repay your loan off in full, seek advice as a specialist equity release adviser will be able to find the most appropriate plan for you.

What are the benefits of lifetime mortgages?

The main advantage of a lifetime mortgage is that it lets you make the most of the hard earned cash that is tied up in your home. It’s a way of increasing your retirement income without having to worry about monthly repayments.

What are the disadvantages of a lifetime mortgages?

The main disadvantage of a lifetime mortgage is that it will reduce any inheritance you intend to leave to family, as the interest will quickly grow. There is a risk that you will owe far more than you originally borrowed, however as long as your lender is a member of the Equity Release Council, you will never owe more than the value of your home.

These days lifetime equity release mortgages allow you to repay some or all of the interest, which is a way you can keep the overall cost of the loan to a minimum.

Who qualifies for a lifetime mortgage?

To qualify for a lifetime mortgage, you need to be at least 55 years of age, a UK resident and own your own home. You can also qualify if you have an existing mortgage however this would need to be paid off with the money you release.

Lifetime mortgage providers also have a minimum property value threshold which varies depending on the company but is usually around £70,000.

Are lifetime mortgages safe?

Lifetime mortgages are safe as they are highly regulated by the Financial Conduct Authority. However it’s also important to choose a provider that is a member of the Equity Release Council. The ERC sets both product and sales standards for equity release, ensuring schemes are safe for consumers.

As part of these standards, the ERC stipulate that:

  • Interest rates must be fixed or if variable, there must be an upper limit or cap that is fixed for the lifetime of the loan.
  • You must be able to stay in the property for life or until you move into care, providing you abide by the terms and conditions of your lifetime loan.
  • You have the right to move to another property as long as your provider is happy that the new property offers continued security on your equity loan.
  • The lifetime mortgage must come with a ‘no negative equity’ guarantee. This guarantee ensures that if there are insufficient funds to repay the loan once the property is sold and solicitors and agents fees paid, neither you or your estate will be liable to pay any more.

Is a lifetime mortgage right for me?

A lifetime equity release mortgage could help you and your family in many ways, be it to live a lifelong dream or just make life a little more comfortable financially. For example, you may want to:

Make home or garden improvements

Perhaps a new kitchen, conservatory or patio. Or maybe you want to adapt and future proof your home, making it more accessible for later life and your retirement years.

Pay off outstanding debts or loans

Or if you have an existing mortgage, you could use a lifetime mortgage to clear the outstanding balance. You would need to pay off your existing mortgage with the money you have released, however the remaining cash sum can then be used how you wish.

Help your family

By releasing equity to get them on the property ladder, assist with education, help raise grandchildren or use towards wedding fees. A so called ‘early or living inheritance’.

Enhance your retirement income

Using an equity release lifetime mortgage to help supplement your funds and boost your pension pot or savings, making your retirement that bit easier.

Enjoy life

treating yourself to that luxury holiday, new car, caravan or motor home.

Whether a lifetime mortgage is right for you will depend on your personal situation. It will affect any inheritance you wish to leave for family and could affect any benefits you receive, A qualified later life mortgage specialist will explain and advise you on all aspects of a lifetime mortgage so you can agree whether it is the right option for you.

How do I get the best lifetime mortgage?

A lifetime mortgage isn’t suitable for everyone, so it’s important to get the right advice from the professionals and to speak to your family, as releasing money from your home will ultimately affect them too.

Speaking to a company like lifetime equity release mortgage specialist PFS Finance Ltd, as they compare schemes with leading UK lenders and can help you look for the best lifetime mortgage based on your personal situation.

In addition, because of their prominent position PFS Finance Ltd has agreed preferential rates with leading lifetime mortgage lenders that may not be available elsewhere. With no obligation they can talk through your options, explain how an equity release mortgage could work for you and help you decide whether it is the right decision.

Get In Touch Today!

If you wish to ask initial questions or discuss equity release without obligation then feel free to call me on 07988 859200.