Lifetime Mortgages, which are often referred to as Home Equity Release Mortgages (or HERMS), are one of the range of Equity Release mortgage products that are available to borrowers who have reached a certain minimum age.
Here we take a more detailed look at Lifetime Mortgages, including their purpose, how they work, considerations, how much you can borrow, along with the potential advantages and disadvantages. Finally, we explore what a Lifetime Mortgage can be used for and look at how Shire Direct can help with Equity Release schemes, including Lifetime Mortgage solutions.
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So, exactly what is a Lifetime Mortgage then? Lifetime Mortgages (which are often referred to as Home Equity Release Mortgages - or HERMS for short), are a type of Equity Release mortgage that are available to borrowers who have reached a certain minimum age.
Most Lifetime Mortgage providers have now lowered their minimum age of the youngest party to ownership to 55.
So, if you'd like some cash to spend as you wish in your retirement, a wide variety of Lifetime Mortgage plans can be set-up to provide you with a tax-free cash lump sum, or a regular tax-free income, without having to worry about making any monthly repayments!
Many homeowners who are approaching, or who have reached retirement age, find themselves in a position where they have paid off their mortgages, and can be described as "asset rich". Most will have also paid into pension during their working lives.
However, those who have retired in recent years will have seen the value of their expected pension income plummet as a result of much lower investment returns, as in turn the rate of inflation has fallen dramatically to only two or three percent.
Consequently, many elderly people are now struggling to maintain their standard of living, and have little income to cover their day-to-day needs, despite owning their own homes and being classed as "asset rich", their bank balances confirm that they are "cash poor"! The situation deteriorates even further when urgent needs arise, such as urgent property repairs, medical treatment and care costs.
There are a variety of Lifetime Mortgage products that have been designed for homeowners who have reached a minimum age of 55 to meet their particular needs, requirements and aspirations! Lifetime Mortgages include products that will provide you with:
Lifetime Mortgages operate by releasing a proportion of the value of your home as a loan, which is secured over your property. Interest is added to your loan, either at a fixed or variable rate throughout the lifetime of the borrower.
No repayments become due until the loan is finally repaid, at which time the accrued interest is added to the original principal sum, and the mortgage is paid back from the proceeds of the sale.
The sale of the property will usually occur at the earliest of:
Equity Release is a major decision, and should be carefully thought through. These issues will often include:
As a result, wherever appropriate, it would be prudent to discuss your plans with your family, especially your beneficiaries. However, it is of course recognised that many people do not necessarily want to discuss their private affairs with their family. Indeed, many people these days want to enjoy the fruits of their investments for themselves rather than leaving substantial estates to their children!
Basically, that depends on two factors:
The table below gives a rule of thumb indication as to the amount you could borrow, although this could vary from lender to lender and from scheme to scheme.
| Age of Youngest Applicant: | Max Loan as a percentage of Property Value: | Amount of Equity Release (based on a property value of £150,000) |
|---|---|---|
| 55 | 15% | £22,500 |
| 56 | 16% | £24,000 |
| 57 | 17% | £25,500 |
| 58 | 18% | £27,000 |
| 59 | 19% | £28,500 |
| 60 | 20% | £30,500 |
| 61 | 21% | £31,500 |
| 62 | 22% | £33,000 |
| 63 | 23% | £34,500 |
| 64 | 24% | £36,000 |
| 65 | 25% | £37,500 |
| 66 | 26% | £39,000 |
| 67 | 27% | £40,500 |
| 68 | 28% | £42,000 |
| 69 | 29% | £43,500 |
| 70 | 30% | £45,000 |
| 71 | 31% | £46,500 |
| 72 | 32% | £48,000 |
| 73 | 33% | £49,500 |
| 74 | 34% | £51,000 |
| 75 | 35% | £53,500 |
| 76 | 36% | £54,000 |
| 77 | 37% | £55,500 |
| 78 | 38% | £57,000 |
| 79 | 39% | £58,500 |
| 80 | 40% | £60,000 |
| 81 | 41% | £61,500 |
| 82 | 42% | £63,000 |
| 83 | 43% | £64,500 |
| 84 | 44% | £66,000 |
| 85 | 45% | £67,500 |
The main benefits of using a Home Equity Release Mortgage (HERM) Lifetime Mortgage product, include:
There are issues that must be taken into account before entering into an Equity Release mortgage, and these include:
Nowadays, retirement represents a new lease of life for the modern pensioner, and the chance to follow their dreams - a holiday home in the Mediterranean, a luxury caravan perhaps, or maybe a world cruise!
The lump sum equity released is tax-free and can be used for any purpose you wish, such as!
Utilising equity release schemes must always be very carefully considered. All the Equity Release plans that Shire Direct arranges are SHIP (Safe Home Income Plans) approved mortgages, and must comply with the SHIP rules. This means that a solicitor must provide a certificate confirming that the implications of the scheme have been fully explained and understood.
This ensures independent legal advice forms part of the process.
Furthermore, Shire Direct has specialist Equity Release Mortgage Advisors who hold the following Chartered Institute of Banker's Institute of Financial Services, qualifications:
The specialist Advisor will carefully assess your needs and requirements, and will usually suggest that, if you have not already done so, you should talk over the matter with your family. You must also consider that if you are currently in receipt of state benefits, these could well be affected by an increase in your disposable income and/or cash reserves.
Yes of course!
Naturally our aim is to provide all our customers with a first-class mortgage service. You'll find us to be friendly yet professional, and able to discuss, explain and provide the most appropriate product, commensurate with your aspirations, needs and circumstances.
Please don't hesitate to contact us if you would like to arrange a tax-free lump sum, without the worry of having to make monthly repayments!
Simply Contact Us!
You can call us on Freephone 08000 282 281 (lines open 7-days a week from 8am until 10pm), or if you prefer why not enquire online at any time, it's quick and easy to do!
You'll find our service to be friendly, professional and helpful and we believe we have the approach, the skills and the products to help you make use of your property to provide you with a better lifestyle in your retirement.
Well that wraps up our look at Lifetime Mortgages and how we can assist with a Lifetime Mortgage, we hope you found it to be useful. Don't forget there is a wealth of mortgage related information throughout the pages of our website, and that we're only ever a free telephone call or couple of mouse clicks away and would love to hear from you!
This is a Lifetime Mortgage. To understand the features and risks, ask for a personalised illustration.
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