What are the different types of lifetime mortgages?

Friday, 14 December 2012 04:57

What are the different types of lifetime mortgages?

What are the different types of lifetime mortgages?

You might have decided that the best financial decision when you retire is to opt for a lifetime mortgage, which enables you to live in your home rent-free while a loan is secured against your property. However, there are several types of lifetime mortgages to choose from.

Before you make your selection, read the following information about the varying lifetime mortgages.

1)      Brief explanation of lifetime mortgages

The way lifetime mortgages work is that the loan – plus any interest added to it throughout the term of the product – is paid when you and your partner die and your home is sold, or if you move into care and you sell your property. While this is the typical format of lifetime mortgages, there are other plans you can sign up to.

2)      Advantages of enhanced plans

Enhanced plans are available depending on you and your partner's lifestyle conditions. The equity release provider might decide you are able to free more money from your home if you fulfil certain criteria according to your general health and wellbeing. Therefore, if you are hoping to borrow as much you possibly can against the value of your property, this is a package you should consider.

3)      Advantages of protected plans

Some people are put off lifetime mortgages, as they think they wouldn't be able to leave money to their children or loved ones when they die. However, this isn't always the case, and those who are concerned about this should consider taking out a protected plan. This guarantees an inheritance for your family, so that the loan that is repaid on your or your partner's death doesn't affect this.

4)      Advantages of drawdown plans

Drawdown lifetime mortgages enable you to release the money you borrow in instalments. Therefore, you don't have to receive one big lump sum, and can instead get the money in different stages. This might suit you better if you don't want to be responsible for a substantial amount of cash at one time and only wish to receive money as and when you need it.

5)      Advantages of interest-payment plans

You might be keen on interest-payment plans if you want to make sure that the amount that is paid back to the equity release provider upon your or your partner's death is as close as possible to the original value you were lent in the first place. They work by allowing you to pay contributions to the interest on the loan throughout your lifetime, so this is kept to a minimum later on.

6)      Advantages of combined plans

If you haven't found a plan that suits your or your partner's needs best, you can always ask for the equity release provider to be as flexible as possible. This is what a combined plan is, where different lifetime mortgages are put together to create an ideal product for you.



Finance articles

  • How to pick the right retirement financing for your lifestyle

    If you're looking to boost your finances in retirement, you'll find there are several options to choose from – and making the decision over which one to pick will partly depend on the lifestyle you hope to achieve after leaving work. Read on for our guide to the potential avenues open to you.

  • What the new state pension system means for your retirement

    If you're looking to supplement your state pension with additional income upon retirement, you may be affected by plans to change the pension system to make it simpler. Read on to find out more about this issue and what the implications may be for your income.

  • Equity release: don't leave retirement funds down to luck

    A large number of Britons are leaving their retirement to chance when it comes to funding later life, whether that is for care costs or simply maintaining their lifestyle. Around 3.6 million people think that winning the lottery would cover the expense of retirement.

  • How equity release can help cover the costs of social and healthcare

    A new report has detailed the climbing cost of social and healthcare for older Britons. As the care system currently stands, elderly people who own a home that is worth the average £213,000 lose around 65 per cent of their assets to pay for their care.

  • How to find out more about equity release schemes

    When you reach retirement age, you'll no doubt be weighing up all your options for the future. If you're worried that the money you have saved will not be enough to cover your expenditure for the rest of you and your partner's lives, you might consider alternatives to pensions, including releasing equity in your property.

View More Articles

Related stories

LV= cuts rate on its lifetime and flexible lifetime mortgages

LV= has announced a reduction in rates on its lifetime and flexible lifetime mortgages

LV= has announced that it will cut the rates on their lifetime and flexible lifetime mortgages for the second time this year as a result in a fall in the wholesale rates.

10 things you might not know about equity release

10 things you might not know about equity release

Equity release expert Alex Cross, Head of Product Management from McCarthy & Stone guides us through the important points to consider if you are planning equity release to help with your retirement.

Why equity release is a better way to borrow than personal loans

Equity release may be a better way to borrow

If you want an effective way to borrow, there are several ways you can do this. While personal loans are one option, when you think about the advantages on hand with an equity release plan it may be the latter you are most inclined to take out.

Why an equity release plan is a better way to raise finance than personal loans

Equity release may be a better way to borrow

If you're looking for an effective way of raising finance, you'll find there are a number of ways that you can do this. And while personal loans can be one possible option, when you think about the advantages that are on hand with an equity release plan it may be the latter product you are most inclined to want to take out.

Bank of England data shows UK households pay down mortgage debt

UK households paid down housing equity for the 17th consecutive quarter

The latest quarterly Housing Equity Withdrawal report shows UK households continue to pay down mortgage debt combined with a lack of demand for new mortgages.

How to use your property to fund your retirement

Downsizing or releasing equity from a property is one way of funding your retirement

With 35 per cent of people in the UK not contributing to a pension and annuity rates dropping, the need to find alternative sources to fund retirement is clear.

Brits repay £122b more on homes than borrowed since 2008

Fewer people are drawing equity from their homes

Housing equity withdrawal fell in the first quarter of 2012, latest figures show, meaning fewer people borrowed against their homes for other major purchases.

seven in 10 Brits would use property to fund retirement

Seven in ten said they would use their home in some way to fund retirement

Data released from the Equity Release Council suggests more than seven in ten people in the UK would consider using their home to boost their retirement finances.

Newsletter sign up


In addition to the weekly newsletter, which areas of finance would you like to hear from us about:

Tick this box if you would like us to send you promotions from carefully selected third parties.

By signing-up you agree to the terms of use and privacy policy.

sign-up button

Get the latest information on: