Tag Archives: Lifetime Mortgages

Equity Release

Beat the Taxman Today

Lifetime mortgages can help many people and one of the many ways that they are beneficial is how they give you a lump sum of cash. If you are over the age of 55, lifetime mortgages are potentially available for you. There are several types of lifetime mortgages such as interest only, drawdown lifetime mortgage and the general lump sum schemes. Lifetime mortgages provide you tax free cash, which helps you get the money you need without paying extra to the taxman.

Drawdown lifetime mortgage schemes are a good option for people who want to release cash from their home, especially if nearing the end of their existing mortgage agreement. It is essentially a drip fed mortgage which means that you do not have to take all of the cash offered to you at the beginning. Instead, you can take a small amount initially and then withdraw the remaining reserve facility as and when you require it.

It is important to seek independent equity release advice about drawdown mortgages to see if they are right for you. For example, unexpected emergencies could change your needs and you might find that a drawdown mortgage could work because you can use from the pool of cash that you got for the first instalment.

Another popular type of mortgage that helps people beat the taxman is the lump sum mortgages. These are fantastic, especially if you want to do any extra DIY or renovations on your home. The lump sum mortgage that you can apply for gives you the scope to get your hands on the cash you need to do so. Projects can vary far and wide from simple kitchen improvements to full blown extensions and conservatories, in many cases changing people’s lives.

One important aspect to remember about lifetime mortgages is the fact that they are not on a fixed term. Interest is added onto your loan monthly or annually and this is something you need to be aware about. This is especially important if you are taking out a mortgage as a couple, because you both need to know the ins and outs of the finances required for a lifetime mortgage if either of you dies or needs to move to a long term care facility.

Top tip: Look into your lifetime mortgage contract to check if there is any negative equity built into your contract. It is important to know that you have the right to be protected against negative equity if your lifetime mortgage loan is bigger than the actual value of your property. This is to ensure consumers are protected at all times when taking on a financial risk such as a mortgage. Any company who is a member of SHIP (Safe Home Income Plans) must have this included.

Drawdown Mortgage Benefits
A lifetime mortgages have benefits; however, there are some special aspects of a drawdown lifetime mortgage that might better fit your lifestyle.

1. Interest accrues only on the amount you have withdrawn from your lifetime mortgage account. You may have £100,000 in equity in your account; however, if you only take out £10,000 during your lifetime then you pay interest that accrues on the smaller amount. Regular lifetime mortgages are not the same.
2. You can take an initial lump sum in a drawdown mortgage and then take monthly, quarterly, or other withdrawals.
3. The cash you withdraw is tax-free.
4. You can use this method to provide monthly income to cover expenses while you are alive, go on holiday, or improve your home.
5. You have an option of restructuring your drawdown lifetime mortgage after 5 years if your housing value has changed or you wish to increase the amount available in your account.
6. There is a negative equity clause with SHIP lenders ensuring your safety. You will not owe anything if your home is sold and it does not cover the entire lifetime mortgage and interest accrued.

When shopping for lifetime mortgages and gaining money that is tax-free, remember that each lifetime mortgage plan will have benefits. Even the regular lifetime mortgage is tax-free and can include the negative equity clause. Always speak with an advisor and your family before you consider taking out one of these mortgages. There are some disadvantages regarding inheritance.

Your home may need to be sold to pay for the mortgage, which does not leave it for your family. If you have a lower value in your home than the mortgage amount owed, your family will receive nothing. This is why the drawdown lifetime mortgage can be beneficial as you have a potential option of leaving an inheritance.

Equity Release, Home Reversion

Should I Choose a Home Reversion Plan just because of the Home Reversion Providers?

A home reversion plan is where you sell part or the whole 100% of your property to home reversion providers. In return you receive a tax free lump sum or a monthly income, whilst you are able to stay in your home rent free. Home reversion plans are offered to those who are 65 and over. The home reversion provider recoups their money when the property is sold. This only happens once you have died or move into a long term care centre.

Some examples of home reversion providers are Bridgewater, Newlife Mortgages and Hodge. As these types of companies are in competition they usually offer competitive rates or perks for choosing their products. A customer usually finds that they have loyalty to certain companies as they believe that they are the best provider due to commercials.

This actually might not be true. The plans that providers supply can differ so a customer should actually find the plan that suits their needs. Just because they think a company is the best provider does not mean they will be getting what they need from an Equity Release scheme.

Some companies will require you to sell a certain percentage of your property, others offer better rates based on the property value, and some will only give you a lump sum if you sell all of the property. There are lots of different plans and all have a set of terms that must be followed.

Instead of just picking the provider that you think is best, shop around. You can get quotes from different home reversion companies online with no obligation to proceed with them. This means you are then able to compare the plans of each company and what they are offering. You can also get in touch with a sound independent financial adviser. They will do the research based on your needs finding the provider with the best plan that suits you.

Your home reversion plan is not based on the provider and the provider can actually become irrelevant when choosing a plan. Your home reversion scheme is then based on the plan itself, not from where you obtain it. This is because it has to be suited to you and your needs. As a customer that is what comes first rather than obligation to any of the home reversion providers available to you.

Before you start your search for a provider, it can benefit you to understand some of the main benefits of home reversion versus lifetime mortgages. You have both options available to you. Looking at only one choice in your retired life can be limiting. You may learn after the choice in home reversion plan is made that there was something entirely different and better, unless you continue reading.

Lifetime mortgages are loans where you do not make a monthly payment, but instead obtain a lump sum of money or monthly instalments to help you pay your expenses. You do not sell your home. The main difference is that you have an outstanding debt on the property that has to be paid by your beneficiaries. In most cases this means the home is sold because your beneficiary is unable to pay the loan off after you die or move into a long term care centre.

It is the main difference of selling your property or having a loan on it that usually decides a person’s mind regarding home reversion versus lifetime mortgages. Yet, there are other considerations like your age and life expectancy. A younger person, age 55 and older, can obtain a lifetime mortgage. However, life expectancy is usually more, which can cause a lower lump sum or monthly payment to be paid out.

You do have choices with lifetime mortgages in whether you draw a monthly payment or get a lump sum. You also have the option of obtaining a mortgage based on your health, where an illness can pay out more and in a lump sum due to a lower life expectancy.

As you search around for home reversion providers remember the differences discussed above in order to determine which type of plan would be the best. If you do not like leaving debt behind for your family, the clear choice is home reversion. You also guarantee a small inheritance based on the amount of property you did not sell, which often satisfies the worry of your family or beneficiaries being left without anything. Agents registered with SHIP from the above named companies are the best to seek out if you have questions.