It’s a good question, and one that we’re being asked a lot right now.
In fact, as a Maidenhead mortgage broker that’s been in business since 2005, we’ve never seen as many people enquiring about taking equity out of their property as we have over the last two years.
From paying down debt and funding home improvement projects, to helping children (grandchildren, even) and pursuing long-held travel dreams, there are many reasons for lifetime mortgages. But if you’re aged 55 – the minimum age for an equity release lifetime mortgage – and above, and are currently wondering ‘is a lifetime mortgage right for me?’, then it’s worth reading on.
How do Equity Release – lifetime mortgages work?
If we had to choose the most asked equity release question, then our team of Maidenhead mortgage advisers would say it would undoubtedly be this one. So, let’s answer it.
For many people who’ve gone down this route, lifetime mortgages are seen as a way in which to have your cake and eat it, too.
The reason being is that you are able to release equity that you’ve accrued over decades of homeownership without even selling your property. If staying in your current property is important to you but you also need to bolster your finances, then a lifetime mortgage might be the ideal option.
As is the case with most things in life, there are a number of ‘fors’ and ‘againsts’. So, here is a selection of pros and cons of lifetime mortgages to consider.
Advantages of lifetime mortgages
First on the list has to be quick access to money. Whether you agree a lump sum payment, or decide to draw down on a pre-agreed pot over time, this is unsurprisingly a huge draw.
Secondly, as we’ve already mentioned, is the fact that you can stay in your home. Of course, when it comes to lifetime mortgages vs downsizing, many would prefer to downsize. However, there is a large proportion of the UK that would rather stay in their family home for as long as possible. Lifetime mortgages facilitate this.
Third on the list is arguably the fact that this tax-free pot of money doesn’t require monthly payments; the debt is simply paid off when the lifetime mortgage holder moves into care or dies.
Disadvantages of lifetime mortgages
Firstly, a lifetime mortgage is still a loan, and all loans attract interest. If, for example, you take on a lifetime mortgage at 55 years old and live until 85 years old, the interest accrued is likely to be significant.
Secondly, from an estate planning perspective, you won’t be able to add your property as part of your legacy as its sale will be required to pay back the loan.
Finally, you won’t be able to take out another loan against your property.
Speak to a professional
The equity release mortgage is a growing – and often complex – part of the mortgage landscape, the result of which means that anyone considering a lifetime mortgage should speak with a mortgage broker before making any firm plans or taking any big decisions.
Also, everyone’s circumstances are very different, so what’s right for one person won’t be right for another. This, too, is something that will become clear during an initial consultation with a broker.
If you’re thinking about lifetime mortgages and would like to speak with a Berkshire mortgage broker, contact our team of mortgage brokers in Maidenhead on 01628 560820 or email enquiries@altonmortgages.co.uk.