What is a lifetime mortgage

You can read more on this topic here:-


https://ukcareguide.co.uk/lifetime-mo...


Hello, In this video we are looking at what is a lifetime mortgage.




Unfortunately, more and more people are finding they have left it too late to prepare for the cost of long-term care in later life. As a result, equity release is understandably becoming an increasingly popular option.


So, what are lifetime mortgages? A lifetime mortgage is the most popular type of equity release scheme, as it’s the most flexible and versatile option. It provides instant access to a loan that can be used to pay for long-term care in later life. The amount you receive depends on your property value.
But as the needs of customers continue to diversify, new products emerge on the market to meet them. We recommend seeking advice from money experts or advisors, to ensure you make an informed lifetime mortgage comparison and choose the right equity release plan for you.
Your loan amount will depend on your property value. Therefore, you will need to get a home valuation to find out exactly how much you might expect to borrow. The amount you can borrow also depends on your age. Those who take out plans in later life can typically borrow a higher percentage of their property value.


Primarily, there are two different types of mortgages that you can choose between. The thirst is An interest roll-up mortgage. This is where you get a lump sum at the start of your equity release plan, or you are paid a regular amount over a period of time.
You are then charged interest on the amount that is borrowed., which is added to the loan. The effect of this is that you don’t have to make any regular repayments back to the mortgage provider. The amount that you initially borrowed plus the rolled-up interest is repaid at the end of your mortgage term when your home is sold. The second is An interest-paying mortgage.


This is where you get a lump sum and make either monthly or ad-hoc payments to cover the cost of the interest on the amount borrowed. This reduces or stops, the impact of interest building or ‘rolling-up’. Also, some mortgages allow you to pay off the capital as well. The amount you borrowed is repaid when your home is sold at the end of your mortgage term, minus any repayments already made.


A range of alternatives to lifetime mortgage products are available – further increasing the potential for complications and confusion as you make your decision.
Each has benefits and drawbacks of its own – but many have been developed to circumvent or alleviate problems that have been run into by traditional standalone policies.


One such example is the ‘interest-only lifetime mortgage’. This prevents the need for a huge repayment inclusive of interest on termination of the contract. By making low monthly repayments that cover interest accrued you have less to repay when your home is sold.


An interest-only lifetime mortgage also helps homeowners to protect a greater portion of their property for inheritance purposes. Another type of scheme, known as a ‘home reversion plan’ has additional benefits for those looking to retain residence in their property long-term.


Like with many financial products, there are often costs involved with setting up a mortgage. Also, there may be other insurance and products that you need to purchase as part of your agreement.


If the calculation from the mortgage provider shows that you owe more than your home is worth when it’s sold on the open market, the mortgage provider isn’t able to try and get any more money from your estate. This is where the ‘no-negative equity guarantee’ kicks in.


In this circumstance, when the property is sold, the entire proceeds of the sale will be paid to the mortgage lender. Clearly, this also means that you will have nothing left to pass on to your family.


This means that you can look to structure your loan like an interest-only mortgage, and opt to make interest payments throughout the life of the loan. This allows you to keep the outstanding balance fixed rather than seeing it escalate with the interest amount rolled up.


That is the end of this video, but if you would like to read more you can do so on the help and advice website.