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Everything you need to know about Later Life Mortgages
Taking out a Later Life mortgage can seem like a daunting task. Luckily, Quotezone’s independent comparison tool makes the process quick and simple.
What is a Later Life Mortgage?
Usually aimed at those over 55, this type of mortgage allows individuals or couples who already own a home to borrow money based against that property’s value. You can then continue living in the property and the lender recoups what they are owed (plus interest) upon the property’s sale.
What are the different types of Later Life Mortgage?
There are a two main types, each with a different method of releasing money from a property.
A Home Reversion Plan is a form of equity release which gives you a tax-free lump sum of money. The lender is essentially buying a share of your property and they’ll recoup this sum and more when your house is sold.
A Lifetime Mortgage is a more traditional style of mortgage, whereby interest must be paid on the borrowed sum and the lender will then recoup anything still owed to them once the house is sold. There are variations such as:
- Capital and Interest – where you make a monthly repayment of capital and interest in order to pay off the mortgage within a set term.
- Interest Only – where you make a monthly interest payment based upon the sum you borrowed, with the lender recouping the capital once the house is sold.
- No Monthly Payment – where, rather than a monthly payment, interest is added to the sum of money you’ve been given and the lender will recoup the total accrued interest, with the lump sum, when the house is sold.
What are the risks of a Later Life Mortgage?
The lender will always pay you a figure beneath the market value for the share they’re buying of your house. This means neither you or your beneficiaries will enjoy the full value of your property.
When interest is added to your borrowed sum on a rolling monthly basis, the amount the lender will eventually take from the sale of your home will increase. If you continue residing in that property for a long time, you may end up leaving your loved ones far less than you’d anticipated.
Why do people get a Later Life mortgage?
There are many reasons why people choose to take out a Later Life mortgage, but generally it is to allow them to enjoy the equity they have built into their home. That might mean buying a new car, having more holidays, or helping loved ones out financially.
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