Lifetime mortgages are probably the most popular equity release schemes. These are loans that home owners take against their properties. The loans, or equities, are usually paid in tax free lump sums or regular income depending on one’s preference. The home owner need not pay anything. The loan amount, which includes the interest, is recovered by selling the property once the owner dies or moves into home care permanently. There are several forms of the lifetime mortgage plans that are open to people who are 55 years and above.
Enhanced lifetime mortgage plan is available to all seniors who suffer from life threatening conditions or lifestyles. In this scheme, one produces evidence of such ailments as heart condition, hypertension, cancer, or any other condition that can considerably shorten the life expectancy. The assumption that one will receive the equity release over a shorter period raises the lump sum payable to the ailing home owner.
Drawdown lifetime mortgage is another option. In this plan, one is entitled to a specific amount, depending on the value of the house and a few other factors, which can be paid in lump sum or as steady income. However, the home owner only pays interest on the amount he receives, and the rest is put in the reserve facility. The amount in reserve does not attract any interest.
In the interest only lifetime mortgage, the home owner chooses to pay back only the interest on a monthly basis. The plan allows the borrower to decide the percentage of the interest s/he wishes to pay. It also allows you to switch to another plan should you find the monthly payments financially demanding. The good thing about this plan is that the amount the home owner owes the lender does not increase with time since the interest is offset every month.
In a fixed repayment lifetime mortgage plan, the home owner receives an interest-free lump sum. However, one is required to pay to the lender a predetermined amount of money once the property is sold. In this plan, you can keep the property as long as you want, so long as you pay back the agreed amount once you sell it.
The type of lifetime mortgage scheme you choose should be tailored to fit your current financial situation and plans. It is, therefore, advisable to talk to a financial advisor to determine which plan suits you.