Lifetime mortgage schemes now offer the most popular route into the London equity release marketplace. They come in various flexible formats such as drawdown, enhanced and interest only. Lifetime mortgages work by the lender securing a charge on the homeowners London property in return for a tax-free lump sum, similar in principle to a residential mortgage. However, the difference between the two lies in the fact that a lifetime mortgage scheme doesn’t start until age 55 & therefore is geared towards people approaching or already in retirement.
Enhanced Lifetime Mortgages
The concept of the enhanced lifetime mortgage has been around for over a decade, however it is only until now that more lenders are beginning to feature this product as part of their mainstream offering. Taking health & lifestyle into account a lifetime mortgage provider can decide whether to apply enhanced mortgage rates to any equity release application. Thus by enhancing equity release schemes the lender will offer a greater tax-free lump sum than the standard terms.
Drawdown Lifetime Mortgages
The drawdown lifetime mortgage scheme is a special form of lifetime mortgage which has proved to be the most popular plan in the equity release market today. The reason being is the drawdown lifetime mortgage’s flexibility in being able to control how much equity to release, and when. This ultimately has a bearing on the final balance & important for all beneficiaries concerned.
Interest Only Lifetime Mortgages
Equity release schemes have traditionally either been a roll-up lifetime mortgage, or a home reversion. However, in 2006 the mold was broken by Stonehaven, who introduced the first equity release interest only lifetime mortgage. Rather than making no repayments, seeing the interest compounding & balance increasing, Interest Only Lifetime Mortgages provided the facility to repay some, or all of the interest on a monthly basis. Since then, more companies offer such retirement solutions.
Home Reversion Plans
The home reversion plan was the forerunner of today’s equity release schemes. Simple in concept, it basically allows any London homeowner to sell a percentage of their property in order to raise a tax-free cash lump sum. The size of the lump sum is determined by the amount of the property that is sold to the home reversion company, the age of the homeowner & the value of the property. Following transfer, the homeowner effectively becomes a tenant with the capacity to remain in the property for the rest of their lives via a lifetime tenancy agreement.
The Retirement Mortgage has led to the equity release market becoming a safety net for many of those in need of an escape route from mainstream lenders reigning in their mortgages nearing, or in retirement. This is because equity release schemes commence at age 55 and have now adapted to provide access to products such as the interest only retirement mortgage as well as the interest roll-up retirement mortgage.
If any of the above equity release schemes and retirement mortgages are of interest, please do not hesitate to contact Marylyn Melbourne who will be able to help with any additional queries you may have.