Lifetime mortgages: what you need to know

Signs advertising residential property for sale and to let.
Signs advertising residential property for sale and to let.
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Lifetime mortgages are available for the over 55s and they allow you to borrow a lump sum or a series of lump sums against the value of your property.

The amount you can borrow depends upon the value of your property and how old you are.

Kieron Bassett

Kieron Bassett

Just like a conventional mortgage, you still own your property and can stay in it for as long as you live or have to move into long-term care.

You won’t have to make any payments until one of these events occurs.

Then the house is sold and the amount owed is taken back by the lender with interest having been added and the amount over then passes to your beneficiaries. If you decide to move house most lifetime mortgages are portable and providing the property you are moving to is of standard construction and you can fit loan to value criteria there should be no problem porting the loan.

I believe lifetime mortgages are suitable for people who don’t want to move house but could do with some money for anything from home improvements to a holiday of a lifetime.

Often when people retire and have to live on a fixed income it is difficult to save for items mentioned above so in these circumstances this type of loan comes into its own.

In the past similar plans attracted bad publicity as I believe providers marketed poorly designed plans which lacked flexibility.

However, all this has changed with borrowers having the ability to draw relatively low initial amounts of £10,000 and then having a facility to draw more money in the future that can be drawn down for as little as £2,000 with the interest only being charged when you draw this money down.

This type of plan combined with a no negative equity guarantee makes for a far superior product than we have had in the past.

Recently I believe the design has improved further and combines relatively low interest rates that are typically 5.60 per cent fixed for life with the ability after the first year of the loan to pay off 10 per cent of the original amount borrowed each year without penalty.