Search for articles and online advice on equity release and you’ll find an abundance of material. For example, you’ll quickly find the age requirements (55 and over), you’ll swiftly discover the answer to ‘what is a lifetime mortgage?’, and you’ll easily find articles covering the benefits of equity release.
The one thing that they all have in common is that they largely say the same thing. So, in a bid to bring something new to the growing number of equity release advice articles out there, our team of Maidenhead mortgage brokers have dug a bit deeper and touched on some of the more nuanced aspects; the things that nobody really thinks about.
Here are four lesser-known things to consider when it comes to applying for equity release, which we’ll be referring to as lifetime mortgages hereafter.
1. Don’t fixate on the rate
When it comes to choosing a mortgage, most people tend to look at rates. However, with lifetime mortgages, there are other things to think about, such as the plan’s duration. You might choose a plan that’s competitive in today’s market, but if you decide to downsize, or your family’s circumstances change, then the repayment charges could be substantial. We’d advise you to think hard about how long you intend to keep the loan and go from there.
2. Understanding the downsizing clause
Lifetime mortgages are a great choice for those dead set on staying in their current home. Then, when the owners pass away or go into full-time care, the loan is repaid to the lender – generally via the property’s sale. Simple (kind of). However, life does have a funny way of changing all the time. So, if you do need – or want – to move later on down the line, then you may be exposed to charges. Many lifetime mortgages include downsizing protection so that you can repay the loan without early repayment charges (as long as you’re moving to property the lender deems to be a suitable alternative) – but you must know what they are. So, before signing on the dotted line, understand how many years must pass before downsizing protection applies. Clarify what constitutes an alternative property. And be clear on what happens if your next property doesn’t meet the lender’s criteria.
3. Drawdown deliberations
Lifetime mortgages may change your financial options later on down the line, so it’s best to plan ahead. For example, if you know you want to help your children (or grandchildren) with a deposit for a property in 10 years’ time, it makes little sense drawing down ALL the money in one go. The same applies to the applicant’s care needs, which may be non-existent at the point of application, but which could require at-home support a decade on. With drawdown, you can draw tranches of money down as and when you need it. The result? You only attract interest on what you take, which will make a big difference to the overall repayment figure. It’s worth noting here that drawdowns will be taken at the lender’s prevailing interest rate, which may differ from the rate secured when the initial borrowing was agreed.
4. Lifetime mortgages are NOT a given
Much is made of the age – 55 and above – at which people qualify to apply for lifetime mortgages. But just because you meet that particular criteria, there are other considerations. For example, the property in which you live could play a much bigger role than you think. Non-standard construction, some high-rise flats and properties with unusual lease terms have a tendency to negatively impact a lender’s decision. It’s not that you’ll be refused a lifetime mortgage, as such. But you may have a smaller pool of lenders to choose from, or even be offered a deal with more restrictions than those who own ‘standard’ properties. A good mortgage broker will help you navigate this area.
There are many variables to consider when it comes to applying for a lifetime mortgage, which is why it’s more important than ever to consult a mortgage broker before making any firm decisions. As a specialist equity release mortgage broker in Berkshire, we can help. So, why not give our team of Maidenhead mortgage brokers a call.
Get in touch
If you’d like to discuss whether lifetime mortgages might be suitable for you, contact our team of Berkshire mortgage brokers on 01628 560820 or email enquiries@altonmortgages.co.uk to arrange an initial consultation.