Before we actually address the headline and get into the article, there’s something important we need to address first.
As equity release continues to gain traction – and as a Guildford mortgage adviser that offers equity release products – a common question we’re asked is ‘what is the difference between equity release mortgages and lifetime mortgages?’.
It’s a good question, particularly as these two terms are often used interchangeably. So, to clear up any confusion, here’s our answer.
Equity release is the broad name for a type of mortgage – or a category, if you will – that enables those over 55 to release equity from their property. A lifetime mortgage is one of the products that sits within this category. It also happens to be the most common product that our team of Guildford mortgage advisers typically offer, alongside other products that allow those over 55 to release equity from their property.
Now that we’ve cleared that up, let’s also clear up some of the concerns (many of which are unfounded) by those calling our Guildford mortgage brokerage to arrange a lifetime mortgage.
Lifetime mortgage misconception #1: The bank will own my home (not me)
This is not the case. Whilst you live in the property, you still own it. However, you’re essentially committing to handing the property over to the bank at the point at which you die or need to move into care. You still own the property in the meantime and are able gain access to the equity locked within it at the same time.
Lifetime mortgage misconception #2: Why get a lifetime mortgage if I have to make monthly payments?
You don’t. You can, course. But only if you want to. A lifetime mortgage is designed so that the lender essentially hands over a proportion of the equity you’ve accrued over time, offering you the option to spend that money as you wish. It’s worth pointing out that by not making repayments during the term of the loan, you’ll end up with more interest rolling up at the end. However, our team of Surrey mortgage advisers will make you aware of the total non-repayment figure before you take out a lifetime mortgage.
Lifetime mortgage misconception #3: My kids will inherit my debt
Again, not true. Every pound is factored into a lifetime mortgage so that you can see exactly what you will owe before getting a lifetime mortgage. Not only that, but the equity release sector is heavily regulated by the Equity Release Council, which exists to safeguard those taking out an equity release mortgage in the UK. And one of those safeguards includes a measure to ensure that no lifetime mortgage holder will be left in negative equity.
Lifetime mortgage misconception #4: I’ll lose my benefits
This isn’t entirely false. After all, many benefits – such as state benefits – are means tested. By receiving a cash injection in the form of your property’s equity, there is a chance that your benefits will be affected. And for this reason, it’s important to make the right choice when choosing an equity release mortgage broker. What is false, however, is that benefits are automatically stripped when getting a lifetime mortgage in the UK.
Lifetime mortgage misconception #5: I’ll be stuck in the same house … forever
The majority of lifetime mortgages are, in fact, portable. And we would only advise our clients to get a portable lifetime mortgage on the basis that it’s less restrictive. The benefits of using a mortgage broker – and a lifetime mortgage specialist, in particular – mean that you are presented with several options and have the chance to discuss the upsides (and the downsides) before you commit.
Our view
Lifetime mortgages and the entire suite of UK equity release products are growing in popularity. Not only that, but they’re relatively new. As a result, people are generally more wary of them than they are standard mortgages. However, there really is no need to be.
Those interested in applying for a lifetime mortgage just need to get good advice and choose a mortgage broker that is registered with the Equity Release Council.
To access the best UK lifetime mortgages, contact our team of Surrey mortgage brokers on 01483 238280 or by e-mailing info@complete-mortgages.co.uk.
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