Lifetime mortgages are such an equity release plan that allows you to access tax-free cash lump sum in the form of loans which have been secured against your home. In certain cases, and depending on the particular needs of the property owner, the equivalent released amount may be accessed in tranches once the value of the property has been released. The lifetime mortgage is one of the most popular types of equity release plans for homeowners as it allows them the luxury of remaining the owner of the home till death or they have moved away to a long term care facility.
For property owners who choose to take the money in one lump sum, rather than a drawdown which is collected in tranches, they may accrue interest on the full amount which has been borrowed from the beginning of the plan, a characteristic which is typical of the fixed interest rate.
Lifetime mortgages offer a wide range of advantages and disadvantages. However, if you have decided to choose this plan, there are some key advantages which you are exposed to. Some of the main advantages of a lifetime mortgage are:
- You do not have to sell your home or move out of the property, during the period when you and your partner are alive, you retain the full ownership of the property.
- The lump sum which has been released from your property is subject to a tax-free treatment
- You are exposed to a typically no monthly interest repayment plan
- You are exposed to options to protect inheritance as part of the plan
- Cash released in value of your property’s equity can be used for any purpose.
Having decided to choose the lifetime mortgage, there is the need to understand the various types of this mortgage that are available to be chosen from.
Types of Lifetime Mortgages
Lifetime mortgages are available in a variety of forms, all designed to present homeowners with different perks to meet their specific needs. It is recommended that you speak to a professional equity release adviser as they are well vast in these plans and will be able to offer professional help and guidance through the process.
The major types of lifetime mortgages are:
Drawdown Lifetime Mortgage
The drawdown lifetime mortgage is one that allows the property owner to release smaller tax-free cash lump sums from their equity after the initial release. This plan allows the property owner to access the funds whenever they need it, all tax-free, and without hassles.
One of the greatest known benefits of this plan, however, is that you can accrue interest on the amount which you have released from the plan provider.
The flexibility of this plan also gives you an additional financial advantage as in most cases, you can call for the money when needed to offset some financial imbalance or to pursue whatever venture feels right.
Enhanced Plans
An enhanced plan may be made available to homeowners who exhibit some certain life-threatening conditions. In most cases, qualifying for an enhanced plan may be based on possession of certain health conditions or certain lifestyle choices. This type of payment, however, allows the homeowner to release more funds from their home than with a conventional lifetime mortgage.
There are several health issues which can be considered for eligibility. Some of the commonly considered health conditions include diabetes, heart problems, high blood pressure, and other related conditions. Additionally, some lifestyle choices such as smoking can qualify homeowners for this plan.
Interest Payment Plans
This plan allows property owners to make regular monthly payments in order to retain as much property value as possible after releasing their equity. This option can be a preferred choice especially for homeowners who wish to preserve more of their estate for inheritance purposes.
How Much Can I Release From My Home?
The amount of tax-free equity that can be released from the home is dependent on two major factors, you and your property.
There are several online Calculator which can be used to calculate the amount which can be freed up as equity release from your property.
Some of the factors that should come into play when making use of the Calculator and considering how much equity you can release are:
- Age: The minimum age requirement for an equity release is 55 years. The amount you can release increases as you grow older. You may be able to release between 11 to 55% of your property value with a lifetime mortgage.
- Property type and value: The amount of cash you can release will depend on the value and type of your property. A higher property value means a larger sum.
- Health and lifestyle: Presence of certain health conditions such as cancer, high blood pressure, diabetes and more can influence the amount which you can release.
