Is really a Lifetime Mortgage Best For Me?Posted by Hatfield Williams on May 18th, 2021 Why look at a Lifetime Mortgage? One asset which has almost certainly risen in value during recent years is your home. Indeed, compared to the price you paid for it years ago it really is probably worth thousands now. In those countries where in fact the property market is well toned, the value of the average home has increased by about 20 times during the last 35 years. In the event that you get an up-to-date valuation of your house, its present-day value could surprise you, especially if you have not had your property valued for some time. Be that as Finance Hunt London 2021 might, it does not help you if you cannot actually access the money tied up in your house. There are several ways to unlock the cash tied up in your property. You can move to a smaller home or to among less value, perhaps by moving to some other portion of the country where property prices are lower, or even to another country. Such "downsizing" gives you the maximum value out of your home, but there may be "downsides" also. For example, you may love the area in which you live, or you might consider that moving would cause too much disruption or be very costly Let's assume that your mortgage has been paid, or, at least, almost paid off, a lifetime mortgage gives you another option. It is just a serious step, however, and, before making a decision on a lifetime mortgage, you should consider whether other savings or assets could possibly be used preferably to invest in your intended purchases or your retirement What is a Lifetime Mortgage? A lifetime mortgage has been the most popular means of equity release for a long time. Simply put, an eternity mortgage is a way to borrow money contrary to the value of your home and never have to repay the loan as long as you live. You can find no regular repayments of interest or capital, and you also continue to be the legal owner of one's property, and to reside in it as normal. The loan and the interest thereon are repaid to the lender when your property is eventually sold. The stipulation is your home must be sold as soon as you (and your partner in the case of a joint lifetime mortgage) die or move into permanent long-term care. Lifetime Mortgage facts to consider Before you sign the application documents for life mortgage, you need to weigh certain facts, to see which way the balance tilts. -- You can use the money released for any purpose. -- If you move home before you (and your partner) die or move into permanent long-term care, you can usually move the loan to your new home. -- You can sell your house at any time, in which particular case the loan should be repaid. Just because a lifetime mortgage is really a long-term arrangement, there can be a financial penalty for early repayment. -- Regardless of how long you (and your partner) live, you must never owe more than the best sales price of one's property. Ensure that there's this type of "no negative equity" clause in the documents you sign. -- Your tax position could be affected, as could your eligibility for just about any means-tested State benefits. -- Your heirs will inherit less, as the loan and the accrued compound interest will undoubtedly be deducted from your estate. (See examples below.) These are the main points to consider. There are others, and they vary in line with the lender. You should talk to an independent financial adviser, should you be unsure of anything at all. You should also, needless to say, discuss the matter together with your heirs. Lifetime Mortgage examples Property value = 250, 000 Loan = 100, 000 Your equity = 150, 000 Property comes after 10 years Loan interest rate = 6% (compounded monthly): After a decade you borrowed from 181, 940 Property value increase = 3% (compounded annually): After a decade = 335, 980 You obtain 100, 000 now, and your heirs inherit your equity 154, 040 after a decade Loan interest rate = 6% (compounded monthly): After a decade you owe 181, 940 Property value increase = 5% (compounded annually): After 10 years = 407, 220 You obtain 100, 000 now, as well as your heirs inherit your equity 225, 280 after 10 years Loan interest = 7% (compounded monthly): After a decade you owe 200, 970 Property value increase = 3% (compounded annually): After a decade = 335, 980 You obtain 100, 000 now, as well as your heirs inherit your equity 135, 010 after a decade Loan interest = 7% (compounded monthly): After a decade you borrowed from 200, 970 Property value increase = 5% (compounded annually): After a decade = 407, 220 You obtain 100, 000 now, as well as your heirs inherit your equity 206, 250 after 10 yearsLike it? Share it! More by this author |