Homeowners who have retired, or who will soon retire, often find that the biggest single asset they possess is their family home. Equity release schemes, which include lifetime mortgages, are a way to release some of the funds tied up in that asset, allowing the homeowner to enjoy use of those funds during the remainder of their lifetime. Funds made available by a lifetime mortgage can be used for any purpose, ranging from a once-in-a-lifetime holiday, to paying the deposit to help a child or grandchild get on the property ladder. Advertisements can provide only general information about products such as lifetime mortgages, but providers will offer a no obligation personalized illustration, showing each prospective customer how much funds could be released from their home, and identifying any disadvantages, such as changes in tax status, which a lifetime mortgage might cause.
Lifetime mortgages are one of the ways in which those who have retired, or who will soon retire, can release some of the funds tied up in the equity of their family home. Eligibility for a lifetime mortgage usually depends on being 55 or over (with some providers the minimum age is 60 or over), and being the outright owner of the home, that is there are no debts secured on the home.
When a person chooses a lifetime mortgage product, the money they borrow is secured against their home. They do not make any monthly repayments, and the interest is allowed to build up during the time in which they remain in the property. The mortgage is repaid either on the owner’s death, or when they leave the property to go into long-term care.
The funds releasable with a lifetime mortgage depend on the homeowner’s age, their spouse’s age, and the value of the property. Normally older people are able to release more value from their home. An example published by one of the mortgage providing companies, shows that homeowners who are 80, or over, might release about 40% of the total value of their family home, while those who are 65 might release about 25%.
The exact figures depend on some other factors as well, including the product chosen, but those who are interested can get a personalized illustration, was no obligation, from any lifetime mortgage provider. Details about specific products can often be found on providers’ websites.
Lifetime mortgages may not be the best solution for every person, there may be some costs, such as valuation fees, and they will reduce the amount which can be left to beneficiaries after death. These disadvantages will be explained to all prospective customers as part of their personalized illustration.
There can also be some other disadvantages. Some people may lose the ability to claim certain state benefits, while others may have a change in their tax situation. Once again the personalized illustration will identify these changes, and whether they affect a prospective customer.
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