Lump sum lifetime mortgages
If you are a homeowner, aged over 55 and looking for a one-off release of equity, (i.e. get all your money in one go) then lump sum plans can offer a fantastic equity release solution. They are, in essence, a core lifetime mortgage product with little additional features, which on the whole results in a lower interest rate.
How does a lump sum lifetime mortgage work?
A lump sum equity release plan works by choosing how much equity needs releasing from your property to meet your financial objectives. Invariably, to meet the needs of a lump sum scheme, your priority will be a requirement for a single amount of money now, with little or no need for additional cash in the future.
You will therefore be taking a secured loan against your property in exchange for a tax-free lump sum. The lifetime mortgage provider will charge a fixed rate of interest on the home equity amount borrowed, with usually no requirement to make any repayments over the life of the loan, although this option can be considered if required. If no repayments are made, then the interest will compound over time with an ever-increasing balance.
The lump sum scheme is repaid when the last homeowner has died or moved into long-term care. Remember, equity release will reduce the eventual level of inheritance for your beneficiaries, thus it is important this subject is always discussed with your family and children beforehand.
The advantages of a lump sum scheme
If you don’t require an equity release mortgage with many add-ons or extra features, most lifetime mortgage lenders will offer lump-sum schemes with more competitively priced interest rates. By not having to make financial provisions for future drawdown reserve facilities, or to factor in any repayments, lenders can pass on these savings by offering better equity release deals, including higher lump sums.
Lump sum lifetime mortgage plans are also preferred where control must be exerted over the future of the plan. Such instances arise where beneficiaries wish to ensure their parents do not over-spend unnecessarily, which could be the case if a drawdown scheme is selected.
How much can I borrow with a lump sum lifetime mortgage?
The lending on a lifetime mortgage lump sum is calculated based on the age of the youngest homeowner and the value of your property. In essence, the older you are, the greater the maximum amount of tax-free cash that is available to release.
The question then is: how much should you borrow out of this? This is an extremely important consideration, and not one to be taken lightly, so we always recommend discussing your needs with your local Equity Release Supermarket adviser. In doing so, they will conduct research across the whole market and find the best equity release scheme for you, for the right amount.
If in the future you find that you’ve put all of your cash lump sum to good use, some providers will consider additional borrowing on terms available at the time.
A new equity release calculation will be needed to find out if any extra funds are available. This will be based on the balance at the time, and seeing whether the current age and property value will enable a higher borrowing limit than the current balance. Minimum further advances are usually £5,000 and come with set up costs.
These are lump sum lifetime mortgage schemes. To understand their features, benefits and risks, please contact Equity Release Supermarket for a no obligation, personalised, key facts illustration. All quotes can be tailored to your own circumstances and you are under no obligation to proceed.