Lifetime mortgages

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Sofie
Sofie Posts: 56 Forumite
edited 4 May 2013 at 1:13PM in Mortgages & endowments
Does anyone know if you need to be retired to take up one of these please? I'm thinking of equity release lifetime mortgages.

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  • holly_hobby
    holly_hobby Posts: 5,363 Forumite
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    No you don't have to be retired, but the minimum age is 55 yrs (and 65 for home reversion arrangements) - whilst the younger you are the lower the available LTV (which is based on age and property value, rather than affordability as with a traditional timebound residential mortgage).

    Lifetime mortgages can be a valued solution to some individuals, however their interest rate is circa 6%, exit fees are high and the free equity in the property can be completely eroded with the interest roll up arrangement under which most operate (although there is a lender or 2 whom do permit the payment of monthy interest to effectively ring fence the debt and protect the free equity for compound interest erosion).

    Equity release will also affect your qualification for any means tested benefits - and if this is an income driven exercise I would in the first place ensure you are claiming all benefits and income that you are entitled to, which may help to avoid entering into a lifetime arrangement.

    If you are still considering pursuing this, you need to speak to a qualified and regulated equity release adviser, and also for general info review sites such as the Equity Release Council (prev known as SHIP)-http://www.equityreleasecouncil.com/home/ and Age UK - http://www.ageuk.org.uk/products/financial-products-and-services/equity-release/ .

    Hope this helps

    Holly
  • Sofie
    Sofie Posts: 56 Forumite
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    Thank you Holly Hobby, yes helps a lot. I'm 62 with an interest only mortgage due for repayment in December 2014. I'm single with no children. I'm working full time at the moment and not thinking of give up yet so hence my question. Do you think a lifetime mortgage would be a solution for me? I'm unable to repay the balance of the mortgage.
  • TrickyDicky101
    TrickyDicky101 Posts: 3,520 Forumite
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    What is the value of your property and the balance of your mortgage? If the mortgage is >30% of the realistic value of your property I think you will struggle
  • Sofie
    Sofie Posts: 56 Forumite
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    The mortgage is £99k and value approx £150k
  • holly_hobby
    holly_hobby Posts: 5,363 Forumite
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    Sofie wrote: »
    Thank you Holly Hobby, yes helps a lot. I'm 62 with an interest only mortgage due for repayment in December 2014. I'm single with no children. I'm working full time at the moment and not thinking of give up yet so hence my question. Do you think a lifetime mortgage would be a solution for me? I'm unable to repay the balance of the mortgage.

    Ok, so this is an exercise essentially being driven by having an IO mge with no repayment vehicle in place.

    You are also single with no issue, so equity erosion under a lifetime mge arrangement, may not be as big an issue than if you had family whom you wanted to benefit from your property on your passing.

    Lifetime mges aren't based on earned income (as a traditional residential mge is), instead the amount available is based on the property value (ballpark min value of circa 70k - will vary slightly between providers ) and as I said earlier, how old you are (at 62 you are looking at a max ltv circa 26%).

    Now the above may not suit for several reasons, which means you need to consider what alternative action there is.

    Interest only mortgages with NO repayment vehicle (other than selling the house) - and unless a very low LTV, are in reality non-existant in todays market - even approaching your current lender to extend the term won't work, as there is and won't be any repayment vehicle at all in place.

    You could consider remortgaging onto a repayment mortgage, and in choosing a lender that doesn't have a max redemption age of 75, extend the term consistent with affordability and your income during the mge period being sufficient - of course if you have no beneficiaries you may feel this isn't a course of action you want to proceed with.

    Or, of course you could sell the property, repay the IO mge, pocket any residual equity, and either downscale to a smaller house purchasing either outright or with a lower affordable repayment mge (refer above). Of course the option remains of going into rented/shared ownership - and as a single older lady, this may be a good option, given that it will relieve you of all the associated costs and agro of property maintenance and up keep, it instead becoming the responsibility of the landlord/council/housing association.

    Few options to consider ....

    Hope this helps

    Holly x
  • holly_hobby
    holly_hobby Posts: 5,363 Forumite
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    Post crossed with your Sofie .. lifetime mge is out given your age and the figs involved.

    Refer the other suggestions.


    Hope this helps

    Holly
  • Sofie
    Sofie Posts: 56 Forumite
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    My aim is to stay in my property and not move and especially not move in with anybody. Why do you say it's 'out' for me? Can you spell that out for me please? Thanks again.
  • holly_hobby
    holly_hobby Posts: 5,363 Forumite
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    Because at your current age and property value (150k), you would be looking a max lifetime mge advcance of circa 40k - when you state you currently owe 99k to your lender.

    So unless you have around 50k to throw a this from your own funds, you can see the figs dont stack up.

    You want to stay in your home, but have chosen not to effect any repayment plan to facilititate this, and don't appear to have any pepersonal funds to deal with the situ either - which means unless you switch to a repayment mge (applying for a term extension or not), it is in all probability that you will need to sell the property to repay your lender.

    Speak to your current mortgage provider to see, given your age, income and status, what options they can offer to you. If their solutions are not suitable, you could consider speaking to a whole of market mge adviser to establish what other options are available with other providers ..... but be prepared that the only solution may be that of selling the property to repay your lender.

    Hope this helps

    Holly
  • Sofie
    Sofie Posts: 56 Forumite
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    Thank you Holly Hobby. Actually £40k would be fine, even less. If I wasn't paying a full mortgage and because I have a state pension and three other small pensions it would be very doable for me to live on. Do you think anyone would give me a lifetime mortgage? Or am I still not getting it?
  • holly_hobby
    holly_hobby Posts: 5,363 Forumite
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    edited 4 May 2013 at 7:47PM
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    No, you're still not getting it.

    Because I'm confused ... how can a 40k lifetime mortgage be fine ( to repay your current interest only mge), when you have stated you owe them 99k ..... where are you finding the other 50 odd thousand pounds from ??

    If you DO have circa 50k knocking about to add to the circa 40k lifetime mge advance, then yes in theory a lifetime mge is possible - but if you haven't got 50k+ - then NO a lifetime mge is not possible, given that you will need to source a lifetime mge of 99k to repay your current lenders mge, whilst your propery is only worth circa 150k.

    Hope this helps

    Holly
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