Lump Sum Lifetime Mortgage
Lump sum lifetime mortgage schemes are basically a core lifetime mortgage product with no additional features. If you are a homeowner, aged over 55 and looking for a one-off release of equity, then lump sum plans can offer equity release solutions.
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 in order 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 company 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 eventually repaid when the last person has died or moved into 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 children beforehand.
Why Choose A Lump Sum Scheme?If you require an equity release mortgage with no ‘bells or whistles’ included most lifetime mortgage lenders can afford to offer lump sum schemes with more competitively priced interest rates. By not having to make provision financially for future drawdown reserve facilities, or to factor in any form of repayments, lenders can pass on these savings in product design by offering better equity release deals.
Another reason when lump sum lifetime mortgage plans are preferred could be where control needs to be exerted over the future of the plan. Circumstances where this can arise is where beneficiaries wish to ensure their parents do not over-spend unnecessarily, which could be the case if a drawdown scheme is selected. By opting for these measures would mean that if parents did require additional borrowing, advice would need to be provided again as Equity Release Council rules dictate. This usually means the full equity release process needs to be revisited which can vary between lenders.
For information on additional borrowing please call 0800 678 5955 to speak to a lifetime mortgage further advance adviser.
How Much Can A Lump Sum Lifetime Mortgage Lend?The basis of lending on a lifetime mortgage lump sum is down to the age of the youngest homeowner and the value of the 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 do you need to borrow out of this? Therefore, it is always important that you discuss your needs with your local Equity Release Supermarket adviser who will conduct whole of market research and find the best equity release scheme for you.
Once a release of equity is taken and fully utilised, some providers will consider additional borrowing in the future should the need arise. A fresh equity release calculation will be required to ascertain whether any extra funds are available. The formula for this will be calculate the maximum release using the age of the youngest homeowner and property revaluation figure, then subtracting the existing mortgage balance. Should there be any surplus in borrowings then a further advance would be available, subject to minimum lending levels.
To compare the best lifetime mortgage lump sum plans visit our Lump Sum Comparison Tables where in-depth information and quote request facility is available upon request.