2016: The tipping point for lifetime mortgages?
If you’re over 60 and would like some extra money, what can you do?
There may come a time when you come to the end of your mortgage term but still owe some money. Or maybe you’d like some extra cash for home improvements, helping a member of your family or something else.
To get the money you want, you could use any savings or investments you have, and failing that, you could downsize or relocate to a less expensive property. Alternatively, you may be able to renew or extend your mortgage if you passed affordability tests and had sufficient income to manage monthly payments.
You could have another option. The increasing number of people using equity release shows that there may be more choice than you’d previously realised. In fact, it may be that we look back on 2016 as the year where people’s options continued to expand thanks to equity release, with more flexible product features and increased competition leading to more competitive interest rates.
2016: the tipping point for lifetime mortgages?
2016 was a year of change and improvement for those aged over 60 who found themselves in need of a cash injection – either to clear debt or for another purpose. For example, some mortgage lenders extended the maximum age that they’d lend to, meaning that more people over the age of 60 can now apply for a traditional mortgage.
If you cannot take out a new mortgage or renew your existing one (perhaps because you’re over the maximum age limit or because you don’t want to, or can’t, make monthly payments) then a lifetime mortgage could be one solution for you.
What is a lifetime mortgage?
Unless you’ve looked into it yourself or know someone who’s taken one, you may not know what a lifetime mortgage is or what it can enable you to do. It’s a way of releasing money from your home as tax-free cash either as a lump sum or in smaller amounts as and when you need, by securing a loan against your home. There’s no need for you to move house or make monthly payments.
Interest is charged on the total loan amount plus any interest already charged. It means that the total owed grows quickly which means there may be cheaper ways to borrow money. It also reduces the equity left in your home and the value of any inheritance. The lifetime mortgage is usually repaid from the sale of your home when you or the remaining applicant (if the mortgage is in joint names) dies or moves into long term care.
Helping to give more people a choice
A lifetime mortgage is an option that’s becoming more widely known within the UK, and more popular too. 2016 has seen sales of lifetime mortgages continue to increase – for example, in 2016, Legal & General Home Finance helped over 8,000 customers release more than £615million as tax-free cash to help improve their lives in retirement.
Lifetime mortgage customers typically use the money they release for home improvements, holidays, repaying an outstanding mortgage, helping family members and to repay existing debts such as loans and credit cards.
Its growing popularity is one of the reasons why, in June 2016 we were delighted to announce a partnership with Santander to give its interest-only customers the option to consider a lifetime mortgage. It’s meant that those interest-only borrowers whose loans are approaching maturity can receive specialist advice to see if a lifetime mortgage could be used to repay any outstanding mortgage debt.
When you’re thinking about using a lifetime mortgage to repay a debt of any kind, it’s important to remember that it enables you to release some of the equity from your home, by creating a debt against your property. There may be early repayment charges to pay if an existing mortgage is being repaid. It’s a big decision to make with many factors to consider. That’s why you can only get a lifetime mortgage through a specialist lifetime mortgage adviser.
Lifetime mortgages: the future
As sales of lifetime mortgages continue to increase and providers like Legal & General Home Finance continue to develop new product features, it becomes a more viable solution for a greater number of people. Greater flexibility and a continued focus on interest charges mean that 2017 could be a good time to take a fresh look at what’s available, to see if there is a solution that might suit you and your individual circumstances.
And, if you’ve previously taken out a lifetime mortgage then it may also be worth seeing if now’s the time to switch to a more cost effective deal, although it’s important to note that doing so may result in an early repayment charge.
Whatever your situation, it’s important that you talk to your specialist lifetime mortgage adviser. They’ll be able to help you investigate the best course of action for your personal circumstances.
Find out more
Visit the Equity Release Council’s website at www.equityreleasecouncil.com where you can search for qualified advisers in your area.
Legal & General Home Finance Limited is a trading style of New Life Mortgages Limited, a wholly owned subsidiary of Legal & General , and is authorised and regulated by the Financial Conduct Authority (Financial Services Register number: 303418). Registered office: One Coleman Street, London EC2R 5AA. Registered in England and Wales number 04896447.
© Legal & General Group plc 2017
Q0055167 Sub 189187 2017
 Legal & General Home Finance – December 2016
 Key Retirement Market Monitor Q3 2016