For those over the age of 55 who consider themselves “property rich but cash poor”, a Lifetime Mortgage could help free up some of the money tied up in their home to raise funds without the expense or inconvenience of having to sell and downsize.
Understanding if a Lifetime Mortgage can work for you
Releasing money from a home you’ve worked hard toward owning is a big financial decision with lots to consider before you’ll know if it’s the right path to go down.
- You must be able to keep your home in a good state of repair
- It could affect the amount you’re able to leave as inheritance
- The amount owed can increase quickly depending on your chosen product
- You may be able to make repayments to reduce the borrowing
- It could impact entitlement to benefits or care fees
A Lifetime Mortgage works by securing a loan against your property. The loan plus the interest incurred is repaid when your home is sold, which means you don’t have to make monthly repayments.
You can choose to borrow one lump sum, or a smaller loan amount with a drawdown facility so you are paid regular or occasional small amounts. There are two kinds of Lifetime Mortgage, and while both offer the lump sum or income option, they do work differently:
An interest roll-up mortgage doesn’t require repayments but will incur interest, which is payable, along with the amount borrowed, after the home is sold.
An interest-paying mortgage does require repayments, but incurs little to no interest. The amount borrowed is repaid upon selling the home.
You must check your chosen Lifetime Mortgage product doesn’t compromise your rights to your property and matches your circumstances.
Getting legal advice on your Lifetime Mortgage
Often, mortgage providers will require you seek independent legal advice before taking out a Lifetime Mortgage, but even if you don’t need to, it’s a good idea to get impartial advice from an expert. Before you sign anything, speak to a legal professional about your Lifetime Mortgage options so you fully understand how it works.
Backhouse Solicitors cannot, and are not authorised to, give investment advice or recommend specific providers. However, your experienced team can explain the benefits and potential problems of these financial arrangements, and discuss how they will affect your estate.
The Backhouse Solicitors Team
Tel: 01245 893400
Visit: 17 Duke Street, Chelmsford, Essex CM1 1JU
Or send us a message through the Contact Us page on this website