A good book for those considering a lifetime mortgage?

Ally1205

Hi,
Can anyone recommend a good book for someone considering a lifetime mortgage? I understand the basics, but I would still like to learn as much as I can before committing to one. There are aspects of the subject that I am vague on, such as how things like future inflation, and property appreciation/depreciation, affect the desirability of such an arrangement - and which type of early-settlement agreement to opt for (fixed penalty vs. gilt-linked).

Many thanks.

holly_hobby

There are 2 basic lifetime (talking about age related equity release) mortgages.

Tradtional lifetime mortgage

% of equity in respect of the age of the applicants age - youngest age with market providers is typically 55 and above.

No monthly repayments, the interest element is rolled up on to the debt, which is traditionally repayable upon entry into long term care or death (although early repayment is possible). Although I also know of a provider who offers the option of paying a monthly payment, representative of all or the applicable monthly interest (effectively ringfening the debt), or a portion of the applicable monthly sum (to reduce the impact on the estate).

Repayment is typically by the sale of the property, although may be made from other funds with agreement.

Home reversion scheme

The applicant effectively "sells" a % of the property to the provider, which again is pertinent to the age of the applican - min age 65 yrs.

Again no monthly repayments made, debt repayable upon entry into long term care. Repayment is by the sale of the property - or may be by indepenent equity from the estate with the agreement of the provider.

in all cases, you should seek a non- negative equity gte scheme, and I recommend only using providers whom are a member of SHIP http://www.ship-ltd.org/ - and you obv must consider the impact such an arrangement will have on your estate and beneficiaries upon your death, inc discussions on any estate and IHT planning that may be pertinent.

Furthermore, its imperative taht you consider how equity release may/will affect any current or future entitlement you may have to any means tested benefits, and what social care assisance you may be entitled to that is not being recieved - which may well actually negate the requirement to enter into any lifetime mortgage arrangement at all.

its a complex area, and you need to ensure that any adviser is a suitably qualified equity release mortgage and/or a later life adviser.

Some further guidance on equity release and local adviser with Age Uk - http://www.ageuk.org.uk/money-matters/income-and-tax/equity-release/, and for suiably qualified advisers local yellow pages, recommendation and/or the Society of Later Life Advisers (SOLLA)http://www.societyoflaterlifeadvisers.co.uk/ , whom will give you details of a local adviser whom has been independently audited as to their profiency in the role.

The above is very general, actually there was a recent good article in Which that may help, but any more guidance you just have to shout.

Hope this helps

Holly

Ally1205

Thanks, Holly.

One thing I am not sure about is which of the two types of early settlement penalty is the best to go for. I gather there are different types of early settlement agreements depending on which lender is providing the loan. For example, one is dependent on the performance of gilt (whatever that means, exactly). Another is "ERC based on fall in long-term interest rate and term remaining". Another is a simple pecentage (5% in yrs 1-5 or 3% in years 6-10).

Which type of early settlement is the best to opt for? I can understand the simple percentage type of early settlement, but not the ones referring to gilts and the fall in long-term interest rate. I need to find out, because I do intend to settle the loan within the first couple of years.

Thanks again.