For those who are unaware of this phenomenon, let us define the Lifetime Mortgage. This is a process of borrowing money that is secured against your residence. The major condition, in this case, is that the home you are putting up for mortgage should be your residence. As a result, you retain the ownership and get the money too.
Wondering about the end
If there are some bells in your mind regarding what you will expect once the complete mortgage process ends, then let us guide you. Basically, the home or the residence will still be your belonging, and the only person who will be held responsible for its maintenance will be you. Also, if we talk about the money you borrowed against the property, you will be charged interest. You can either repay it or add it to the total loan amount.
The major details you should not miss
You should pay attention to one major detail, which tells us that the last borrower on the list is the major piece of the story. If he or she has been moved to a facility offering long-term care or has witnessed the unfortunate demise. In such a case, the place against which the money was received will be sold, and the resulting money will be used to pay that person’s debts.
Some of the trusted funds
While taking a walk into the market, you will come across tens of different service providers offering lifetime mortgage services. But there is something that you should keep in your mind not all of them offer similar services. Below we have mentioned a few of the names that stand out in the crowd of service providers:
- Aviva
- One Family
- Legal & General
- Hodge Family
- More 2 Life
Some drawbacks of the process
Although the process seems to be appealing but some disadvantages must be taken into account. According to the general assessment, it has been observed that once you have enlisted for lifetime mortgage, then there is a chance that at the end of the day, you might end up going for a comparatively higher amount as compared to the one that you actually borrowed.
Why the last amount is higher than the initial amount
Although there are many reasons and theories regarding why the final amount is so high. But let us offer you some of the most researched details. The information suggests that the last loan amount might be equal to the house’s actual value. This amount cannot exceed this limit. Also, the major reason is that the lifetime mortgage charges compound interest which in turn increases the figures of the final amount.
Searching for the alternatives
While shooting for a certain solution, you should always keep your options open. This is why many people are in search of alternative solutions offering similar services as a lifetime mortgage. So currently, we have only a single name that stands true to all the customers’ expectations, and that would be the RIOM. Or in other words, the Retirement Interest Only Mortgage. In this case, the clients can borrow money from the banks against their properties, but they only pay monthly interest.
The tax factors
Tax is the biggest cut you will experience on your savings and earnings. Thus, if you want to know whether the taxes apply to the lifetime mortgage, then the answer will be no. Generally, the lifetime mortgage cannot be categorized as the client’s income. Thus the income tax will not be applicable at all. Also, if we talk about the capital gain tax, they might be a different story because they apply to sales and purchases.
Can you get lifetime mortgage services from the banks
It is important that the service provider and the clients have a perfect relationship of understanding and trust. The clients do not trust the funds offering lifetime mortgages that are at the initial stages of their development. Therefore they prefer to go for the banks that are well-known among the public. Therefore the public wants to know whether any bank will offer a lifetime mortgage or not. The answer will be Yes.
Exemplifying Nationwide
So many names are offering these services, including Nationwide. But there are certain requirements that you must meet to get a lifetime mortgage. First of all, it is imperative that you are an existing Nationwide mortgage customer. Secondly, your age should fall within the range of 55 to 85 years.
The age requirement for the lifetime mortgage
The public wants to know about the eligibility for a lifetime mortgage. So let us tell you that although criteria differ with the change in the service provider or the fund offering the service, if we talk about age, then the minimum required age would be 55 years. Also, you will have to ensure that the prevailing debts against that property are paid before going for the Life mortgage.
The sale of the lifetime mortgaged property
Many wonder that whether the lifetime mortgage bounds you regarding the sale of the property or not. So if you have registered for a lifetime mortgage against a property, then you would surely like to know whether you are allowed to sell it or not. So the answer is simple. You can easily sell that property without any issues.
The early repayment factors
You might wonder that is there any option that would allow you to repay the amount of the lifetime mortgage before time. So although you can do so but in such a case, there will be an early repayment charge that you will have to pay in order to meet the demands of the contract. Most of the time, this charge is quite huge. In fact, you agree to the terms of these charges once you sign the contract.
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The take-home message
Lifetime mortgage might be a solution to the problems of many. Still, it is important that we take the specific details mentioned above into account in order to get the perfect picture of the whole scenario. Once you have understood all the pros and cons, only then should you sign the papers.
