Income lifetime mortgage plans
Income lifetime mortgages as their name suggests allow you to use equity release as a way to top up your retirement income, by paying you a fixed income every month into your bank.
They could be ideal if you are looking for a way to supplement your current retirement income – perhaps to make retirement a little more comfortable, bridge an income shortfall period (e.g. until you reach state pension age) or just to enjoy a few of life’s luxuries.
How does an Income lifetime mortgage work?
All lifetime mortgages work in the same way, in that you are accessing the cash locked up in your home and the amount borrowed, plus the interest that has rolled up over time is repaid when your plan ends i.e. when you die or move into long-term care.
They vary in how you want to receive this money and income lifetime mortgages means that you now have 3 lifetime mortgages options to choose from.
- Lump sum plans pay out a single, lump sum amount of money.
- Drawdown plans provide a facility which you can borrow against now and take extra in the future.
- Income lifetime mortgages provide a monthly fixed income over an agreed length of time, for example between 10-25 years.
Rather like a monthly salary, this income payment is paid directly into your bank account each month tax-free. If you don’t need a large amount of money right now, but could benefit from extra money in your pocket every month, an income plan could be right for you.
As these plans are new to market, the providers offering them are limited, but we have written an in-depth article in our news section about Legal and General’s Income Lifetime Mortgage range here.
Do I qualify for an income plan?
With this income plan, you do have to take out a minimum initial loan of £2,500 to cover set-up costs, upto a maximum 10% of the amount borrowed. The minimum income payment is £200 per month and there are options to receive this over 10, 15, 20 or 25 years.
The property must have a minimum valuation of £100,000 and the youngest age being 55 years to qualify.
Here’s an example of how it could work across the 3 of the different income plans that L&G now offer.
Mr. Smith is 65, his house is valued at £300,000 and chooses a 20-year income term and opts to take out the maximum initial loan.
|Plan Name||Max Loan||Max Initial Loan||Max Monthly Income|
|Income Max Plus||£129,600||£12,960||£529.58|
As you can see above, Mr. Smith could choose a monthly income of between £333.33 and £529.58.
To find out more about the current interest rates and best equity release deals on the full range of income plans, why not use our ‘compare deals’ tool?
These are income lifetime mortgages providing a regular monthly income over a fixed term. To understand their features, benefits and risks, please contact Equity Release Supermarket for a personalised key facts illustration. All income quotes can be tailored to your own circumstances and you are under no obligation to proceed.