GETTING MORE OUT OF RETIREMENT
A lifetime mortgage can help you make the most of retirement in many different ways.
Unlock the equity in your home
With property price rises over the years, you may have lots of equity tied up in your home. At the same time, you may have much less in savings. What’s more, State pensions have fallen behind earnings for years, so your income may be less than you would like. Taking out a lifetime mortgages or home reversion plans allows you to free up a substantial part of the capital tied up in your home, without having to move.
Enjoy life with a little extra cash
People are generally healthier and more active in retirement than ever before. You may want extra money to pay for the holidays and pastimes you enjoy, or to provide the lifestyle you had hoped to lead in retirement, while still living in your own home.
Invest in your family’s future
Getting started in life is becoming more and more of a financial headache. You may want to help support your children or grandchildren through further education, a career change or help them get onto the property ladder.
Extra cash when you need it
Of course you will have your own reasons for considering generating extra cash. You could be looking to realise your dreams for retirement, such as extra holidays or buying a new car, or you may need to pay for home improvements or modify your home to suit a change in lifestyle.
WHAT IS A LIFETIME MORTGAGE?
A lifetime mortgage is not that different from the standard mortgage you probably took out when you originally bought your home. It is a loan secured against the value of your property on which interest is paid. However, unlike a standard mortgage, there are no monthly instalments to pay (although some providers may require you to pay the interest on the loan). However, with the majority of products interest is added to the loan to be repaid on the death of the borrower or if the borrower goes into permanent residential long term care. The loan is usually repaid from the proceeds of the sale of the property.
All reputable companies guarantee that your beneficiaries won’t find themselves owing more than the house is worth - this is often described as a no negative equity guarantee.
This is a Lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
WHAT IS A HOME REVERSION PLAN?
A home reversion plan differs from a lifetime mortgage in as much as rather than mortgaging your property the provider "buys" a fixed percentage of the property from you usually at a reduced value. Then when the house is eventually sold, usually under the same circumstances as a lifetime mortgage, the plan provider receives the proceeds from the percentage of the house that they own.
For example if your property is currently worth £100,000 the plan provider may offer you £40,000 for 60% of the property. If in ten years time the property is sold for £150,000 the provider would receive 60% (£90,000), alternatively if the property sold for only £50,000 the provider would receive 60% (£30,000).
This is a home reversion plan. To understand the features and risks, ask for a personalised illustration.
SOME THINGS TO CONSIDER
When making any important financial decision it is vital to consider all the implications carefully. Taking a lifetime mortgage is no exception. This is why taking proper independent advice from a qualified adviser is essential.
This summary highlights some of the key things to think about. We also recommend you discuss this with your family if possible.
How much can I borrow?
The maximum you can borrow depends on your age and the value of your property.
Remaining in your own home
You can continue to live in your own home for as long as you wish. This is your legal right, provided you meet the terms and conditions of the mortgage or home reversion plan.
Before you take out any arrangement it is vitally important to understand how these terms and conditions will affect you.
This is a summary of some of the key points to consider. You will need to make sure:
- You keep adequate buildings insurance;
- You keep up the maintenance of your property so it remains in the condition it was when you took out the lifetime mortgage;
- And you obtain permission from the provider before you allow any other person to occupy any part of your home.
To help make sure you are comfortable with what you need to do your Solicitor will go through the full terms and conditions with you before you finally go ahead. This is important because if you don’t keep to the terms and conditions the provider has the right to insist you pay back the mortgage.
What is the position with other people living in the property?
If you’re living with your partner, civil partner or spouse, you’ll both need to be named on the deeds and in your application.
If there are friends or relatives living in the property or children over the age of 18 who are not dependant on the applicant, they will need to sign a waiver releasing their rights to the property.
If there is a child who is under the age of 18 or a dependant adult living in the property, we’ll need confirmation, from the applicant’s solicitor, that there are adequate arrangements in place to care for them if you go into permanent residential long term care or die.
If you have any tenants living with you, they will need to sign a tenancy agreement. You’ll need to check with us if you have tenants living in the property
Pension and State Benefits
Your chosen plan will not affect your State Pension, or any income you receive from an occupational pension scheme or personal pension.
However, Pension Credits and other state benefits are means tested and may be affected if your income or savings are above specified limits as a result of your lifetime mortgage.
Under current tax rules, if you borrow money on your house you don’t pay tax on it and there is no stamp duty to pay. Although remember tax rules do change from time to time.
‘No negative equity’ guarantee
Even if the value of your home ends up less than the amount you owe, you can be sure that neither you nor your estate will be left owing any money after your house has been sold on your death or entry into permanent residential long term care.
When the house comes to be sold it is important to engage us at the earliest opportunity so we can help make sure everything goes smoothly.
Any reputable provider will agree a reasonable sale price for the property. This is important as the no negative equity guarantee depends on the property being sold for a reasonable price agreed by one of the providers professional valuers.
Alternatives to a lifetime mortgage/home reversion plan
Whatever your particular reason for wanting extra cash, remember lifetime mortgages are not right for everyone so before you go ahead it is important to have considered the alternatives.
Options could include:
- Selling your home and buying a less expensive property. Although this may mean you moving to a different area or having a little less space, and paying the moving costs, your new home will be mortgage free.
- Using savings or other investments.
- Speaking to your local authority, particularly if you need extra cash to pay for essential repairs or home improvements. They may be able to provide you with some financial assistance, or a grant.
- Checking that you are claiming all the state benefits that you’re entitled to.
If you would like to know more about options available for releasing equity from your property to fund your lifestyle in retirement please contact me on the number above or using the form on our contact page.
This website article refers to home reversion plans and lifetime mortgages. To understand the features and risks, ask for a personalised illustration.
For advice on Equity release we act as introducers.