Lifetime mortgage the capit

barbedhook

I am currently looking at a lifetime mortgage and getting advice from stepchange which is free my advisor has talked me through all the paperwork and got me a quote for a £30k release at a lifetime rate of 2.56%. The money is to give to my son for a deposit on a new home I am allowed to pay 10% per annum off the loan which I can easily afford. I am 67 years old and my wife is 67 we don’t claim any benefits I looked at taking a lifetime retirement interest only mortgage out but if I died my wife wouldn’t have enough income to be comfortable with the payments if I make the 10% payments every year will it pay the interest plus some of the capital? 

SpiderLegs

You want to have a word with @Onlooker2 as they are the resident expert on lifetime mortgages.

MWT

SpiderLegs said:

You want to have a word with @Onlooker2 as they are the resident expert on lifetime mortgages.

That's not how I'd describe Onlooker at all.

They are the resident harbinger of doom and gloom on all things relating to that type of product though, but that doesn't mean these products are not an appropriate solution for some people and for those who take the time to understand the features of the product they are planning to use...

MWT

barbedhook said:

I make the 10% payments every year will it pay the interest plus some of the capital? 

Yes, the interest is rolled up, by paying £3,000 you will be decreasing the remaining balance each year, so after roughly 12 years you would have reduced the balance to zero.

Do talk to your advisor about your plan to do that and check that the product you are choosing allows you to fully pay down the balance at that point without penalty.

Also consider how frequently you wish to make a payment during the year and check the product allows you to pay down that often.

Your advisor should be able to calculate the total amount you will be repaying once you decide how often you will be making payments during the year, but it is likely to be around £35,000.

barbedhook

I have had some very good advice from my advisor at stepchange who’s talked me through everything with no charge it’s also got no setup fee and free valuation I’ve only to pay for a solicitor. Other companies offer free advice but you end up pay ing between £1500-2000 in fees then they also get a recommendation fee from the provider. All stepchange advisors are salaried so not on commission and provide whole of market mortgages .

MWT

barbedhook said:

... it’s also got no setup fee and free valuation ...

That will often mean that the interest rate is a little higher than it would otherwise be, so it never hurts to ask what those fees would be and the interest rate if you were paying them yourself...

Although given your plan to repay everything over a relatively short period it probably doesn't make a lot of difference in this case and may well be cheaper to take the free offers...

barbedhook

Thank you for your reply