Lifetime Mortgage

ACG

Type it in to google, there are quite a few around.

veesharp

Hi Debsa,

This is the advice I received about taking out a Legal & General OPLM. There’s still hardly any like it out there although I’m sure there will be more soon. The advice is from a financial advisor who is the partner of one of my best friends, so no agenda other than to help me with good advice:

“L&G are probably a decent firm (I have a pension investment with them) and the interest rate on the £45,000 loan is quite reasonable but pretty high on the £83,000 loan. The cost over 27 years is eye watering and if ***** lived beyond 87 would be huge but if she’s not bothered about passing any money down to ***** or moving house then the advantage is not paying any interest every month.
!
However, if she can afford to pay the interest (which would be approx. £150/month on the £45,000 loan) then that would be a lot cheaper in the long run (£48,600 compared to roughly £90k with no interest paid). Paying the interest retains the balance of equity and makes it easier to move or deal with any other future changes in circumstances. But she may not be able to afford £150 every month when she’s 70, say?
!
The L&G offer allows her to repay up to 10% of the £45,000 per year without incurring charges but she can only do this a maximum of 4 times per year with a minimum of £500. Therefore, this doesn’t allow her to actually pay £150/month to L&G so she would have to save that up in another account (she could open a monthly saver account) then transfer that balance over to L&G at the end of the year (M&S and First Direct allow £250 - £300/month savings and pay 5% interest if you have a current account with them).
!
If she can afford to pay more than £150/month interest then that would also reduce the £45,000 borrowed.
!
If she borrowed £83,000 she would have to save/repay £373/month interest to stop the £83,000 turning into £360,000 after 27 years!
!
With both loans if she moved house or had to sell and go into care then there is a 25% (of the amount borrowed) charge to pay to L&G within the first 20 years.
!
If she needs the lump sum then as long as she knows the pitfalls then the offer seems reasonable and unlikely to be better anywhere else.
!
She should be aware that L&G have to approve any new house she moved into if she wanted to take the loan with her. If they don’t approve then she would face the 25% charge to clear the debt. If she wants to downsize to another property she would be better off moving first then taking out a lifetime mortgage?
!
If it was me, I would want to pay at least the interest because even if you think you don’t care about losing the equity in the property circumstances may change and you might need that money in the future. Why give your home (or most of it) to the bank when you could give it to charity or something if you don’t want to pass it down to a relative? But at least this also offers the flexibility that if she can’t afford the interest some years she doesn’t have to pay it.“

I hope this helps you & your Mum make an informed decision, as done properly (at least keeping up the interest payments) protects the equity in your Mum’s home too.

Good luck!

getmore4less

If we ignore the compounding for the 4 payments a year rather than 12 a year

£150/month on the £45,000 4%
£83,000 £373/month interest 5.4%

a cross check
£83,000 she would have to save/repay £373/month interest to stop the £83,000 turning into £360,000 after 27 years!

I get £356k on 5.4% which is ball park right

Quite a pricey loan in relative terms 4% and a 25% exit fee is a decent earner for the company.

having a bit of a read on the product.
(both public and advisor)

The fix is for life
monthly DD can be set up to cover the interest(not just 4 a year as I thought from the post)
4 overpayments max 10% can only be done if interest is rolled up and no regular payments.
Interest rate is linked to age and LTV roughly between 4% and 6% slightly under 4% for £100k+loans
Up to 25% ERC not payable on a few events like death going into care porting...

a handy guide from L&G on that product

Onlooker

No constructive replies to posts with regard to the financial futures of anyone getting involved in Lifetime Mortgages i.e.house price inflation or lack of it.25% early repayment charge and how this can cause borrowers no choice but to be trapped because of this plus added on interest will make it unaffordable to change.Depreciation of assets.All matters that need full information from anyone without self interest in this industry.Consider

getmore4less

Onlooker wrote: »

No constructive replies to posts with regard to the financial futures of anyone getting involved in Lifetime Mortgages i.e.house price inflation or lack of it.25% early repayment charge and how this can cause borrowers no choice but to be trapped because of this plus added on interest will make it unaffordable to change.Depreciation of assets.All matters that need full information from anyone without self interest in this industry.Consider

Done right the 25% ERC won't kick in, 4% pay the interest no increase in debt and you can protect some of the equity by using less of the full value.
Can also overpay if you come into money.

Not the cheapest lending out there but on par with very long term fixed rates could look fine if rates climb.

Considered, bargain for the right person.

veesharp

getmore4less wrote: »

Done right the 25% ERC won't kick in, 4% pay the interest no increase in debt and you can protect some of the equity by using less of the full value.
Can also overpay if you come into money.

Not the cheapest lending out there but on par with very long term fixed rates could look fine if rates climb.

Considered, bargain for the right person.

Exactly! When common sense is applied and all things are “CONSIDERED” it can most definitely work well...this is what I intend to do! House prices are rising approx 10% per annum in Manchester where I live. If there’s a crash..well, sh*t happens sometimes...and I fully understand the implications for the banks AND myself.

debsa

Thank you to those that replied and for the very useful information. I am aware that I will have to pay an "advice" fee but could anyone tell me if you then have to engage a solicitor and pay extra for a valuation like you would on a normal mortgage application. I am trying to work out total costs for implementing a Lifetime mortgage. TIA

veesharp

No fees at all to pay if you call the company I mentioned that know these Legal & General OPLMs. Basically they gave me the exact same advice as that of my personal friend who is a finance guy..

You will need a solicitor to put it into place tho should you decide to go ahead

stewmil24

veesharp wrote: »

No fees at all to pay if you call the company I mentioned that know these Legal & General OPLMs. Basically they gave me the exact same advice as that of my personal friend who is a finance guy..

You will need a solicitor to put it into place tho should you decide to go ahead

What was the company you mentioned? Can`t see a name in any of your posts. Thanks.

veesharp

Want to find out more?
The Retirement Lending Advisers (TRLA) are financial advisers who only advise on our Lifetime Mortgages. They’re a separate company, not part of Legal & General. They can answer any questions you may have. Calls are free.
Call TRLA on 0808 302 2660
Lines are open Monday to Friday, 9.00am to 5.30pm. TRLA may record and monitor calls.