Lifetime mortgages are secured equity loans made available to the elderly permitting them to release equity from their properties. The advantage of this system is that allows for pensioners to pay back the loan only once their property has either been sold; due to a partner’s death or the need to move in to a care home; ownership of the property is not lost along the way and can be sold on the owners or owners families, say so. Following this, all debts are paid off and remaining balances will be left behind for those stated. The property does not have to be sold in return for legalised ownership and capital, nor do pensioners have to move out at any time.
According to advice on equity release, interest on lifetime mortgages are ideal for those who do not wish for debt build up along the way. More equity is preserved within the property which means there is extra money left over in the pot to use how you will in the future, whether you opt to spend it on a car or holiday; keep as inheritance for the family or continue to save for other reasons, whatever you choose to do with this money, pensioners can be rest assured that debt will not grow.
Further advantages of lifetime mortgages are that a set amount of capital is made available for pensioners to use on whatever they wish to, as well as having the right to maintain solid ownership of their very own property, being able to live there with no hesitation until death or the need to be taken in to permanent care. Monthly payments are completely unnecessary which will put pensioners at ease; safe in the knowledge there are not any regular outgoings which they could potentially struggle with one day. The overall loan and interest that is built on top of it will all be collated and included in the overall sale price of the property once the plan halts to an end (in the event of death or having to move in to permanent care). However if homeowners unexpectedly take the decision upon themselves to sell up and move to another property elsewhere, plans can continue to go ahead, as long as the new property meets the requirements of the initial borrower and pensioners will not be expected to pay back any more than the amount initially received from the sale of the property. Where pensioners are concerned, companies take it upon themselves to ensure that family members, such as children and/ or grandchildren) are also made aware of the decisions made in order to avoid future accusations and action being taken against companies in the event of any potential wrong doings.
However pensioners need to be made aware of any potential risks that may arise during the application of a lifetime mortgage. For example, interest is always charged on the amount of the overall loan that has been taken out, this includes the interest that has already been accrued, therefore this simply means any capital that has to be paid out will continue to increase until paid. Also, costs and lump sums will decrease the value pensioners have in their homes at that moment in time, not to mention the level of inheritance that can be left behind for family and friends. Pensioners do however have the options to leave belongings to loved ones through inheritance guarantees which are offered upon pension transfer specialists; unfortunately this will negatively impact levels of borrowing and affect interest rates that have been applied to the equity loan.