Lump Sum Lifetime Mortgages


What is a lump sum lifetime mortgage and how do they work?

 

What is a lump sum lifetime mortgage?

Lump sum lifetime mortgages enable you to release the money tied up in your home in one cash lump sum. While drawdown lifetime mortgages might offer more flexibility, some people may choose this type of lifetime mortgage because they have specific use for the money in mind, or only want to release a certain amount. Many lenders are also able to consider taking any health and lifestyle conditions you may have into consideration which may result in the potential to borrow an even higher amount.

Typically how much can you borrow?

The maximum amount you can borrow will be determined by a number of factors, including your age and the value of your property. However, as a guide, you could borrow between £10,000 and £600,000 if you live in the UK.

Want to find out your property value? You can look at the Halifax House Price Index, or mouseprice.com, or even rightmove.co.uk to get an idea of property values in your area. But you may need to pay for a current valuation of your property, if you go ahead with an application.

Could I get this type of lifetime mortgage?

Everyone’s circumstances are different. You should talk to a professional adviser, and look at all of those points in detail before considering a lifetime mortgage. However, we can make some general statements about who is likely to qualify (both of you if applying jointly) for a lump sum lifetime mortgage:

  • you’d need to be aged 55 and over 
  • own your own home
  • be a UK resident

Your property must also meet the following criteria:  

  • be in England, Scotland or Wales
  • be your main residence
  • be worth a minimum of £70,000
  • be made of standard construction

How is the interest calculated?

Lump sum lifetime mortgages charge a fixed rate of interest on the amount you borrow – but you don’t have to pay this back until you die or move into long-term care (unless you want to). As you usually make no repayments during the lifetime of the loan, the interest is accumulated. This type of interest is known as compound interest, and it can mean that the total amount you end up owing could be significantly more than you originally borrowed. For an explanation of compound interest please take a look at this short film:

Is there anything else I should know?

Lifetime mortgages may not be right for everyone. It may affect your entitlement to state benefits and will reduce the value of your estate.

We recommend that you talk to a professional adviser before making any decisions about buying equity release products. If you don’t have a professional financial adviser, go to thepfs.org or unbiased.co.uk.

Alternatively, Just Retirement Solutions - our sister company - offers an equity release advice service that could help you decide if equity release is right for you.

Visit the Just Retirement Solutions website

 

In the meantime, we do have a handy tool – just for you

If you’re interested in getting an idea of what a lifetime mortgage could provide, our Indicative Lifetime Mortgage Calculator is here to help.

This provides an indication of the total you could release from your property, for new customers only. It is only an indicative figure and does not constitute an illustration, but it will provide a very interesting insight into lifetime mortgages. Click here to try it for yourself!