The lifetime mortgage equity release scheme is one of the most popular types of these schemes available today. The way this scheme works is quite simple. It allows individuals to borrow money against the current value of their property without any need to make monthly payments. The effect of therefore having no reduction in family budget is a great reason for this type of loan.
The lifetime mortgage equity release scheme is arranged on a predetermined interest rate basis. This way, you can find out the amount of interest that is charged in the future. You can also know the interest added to the principle loan amount. As you are not required to make any monthly payments, interest gets compounded against a fixed rate of the loan amount taken. Your key features illustration will clearly state the balance of the loan over the forthcoming years & can aide in calculating the inheritance tax liability left behind at the end of the day.
The interest is usually charged on yearly basis. However, before making your final decision, it is recommended to consult an adviser. Some lifetime mortgage providers such as New Life Mortgages & more2life do charge interest monthly hence caution should be taken when a comparison is being made to the other providers. So long as the mortgage loan remains unchanged, the interest will be charged depending on increasing principal amount. The repayment of mortgage loan is usually made either after the death of the borrower or after selling the property. Therefore, there is the security of knowing the year-on-year balance is an important feature.
With the ownership of the property being retained by the applicant, then also any escalation in the property value will also be retained. This is another important consideration & should one feel house prices will increase over the years, then the roll-up lifetime mortgage would also be more favourable.
General features of lifetime mortgage equity release
Cash released from this scheme is tax-free, being classed as a release of capital. The only potential tax payable would be tax on any savings left on deposit. As the interest rates are fixed, fluctuating inflation is no longer a point of concern. With this lifetime mortgage scheme, you can now safeguard some amount of property value for your heirs by way of an inheritance protection guarantee available with both Aviva & more2life.
Things to consider before applying:-
- Assessment of your monetary requirements, now & in the future
- Likelihood of moving in the future
- Drawdown facility required?
- Interest calculation technique
- Early repayment penalties
- Equity protection
Valuation fee, costs, lender fee and solicitor’s fee would be additional considerations before opting for lifetime mortgage equity release schemes. However, it is always best to shop around to find the best equity release scheme available as these mortgage lenders do have special offers. These can include free valuations, cashback deals or even reduction in standard interest rates.