Designed for people aged 55 and over, the flexible lifetime mortgage it is partly responsible for equity release sales rocketing by 36% since 2013.
The facts about flexible lifetime mortgages
1. With this flexible plan, you can take as little as £10,000 tax-free and leave more funds in reserve for when you need it. Your property remains your own; you have just borrowed against it.
2. If you want to pay some of the money back into your property, you can do so with optional repayments of up to 10% per year of the amount you borrowed.
3. If you don’t want to pay any back, you don’t have to. Like any other borrowing, an interest rate is charged and any interest you choose not to pay is simply added to the total and paid when you or your heirs eventually sell the property.
4. Things to watch out for are state benefits. If you are in receipt of these, having money in the bank may affect them so you should check this out before proceeding. Also, by taking money out of your property, there will be less left later when you want to leave some money in your will. Try to find a balance between what you want now and what you want to leave.
5. The interest rate starts at 5.21% and this is fixed for life so you can be sure of what you are being charged. Those who remember when mortgage rates in the mid-teens know the value of fixed rate.
6. No matter how much you take with this plan, you will never owe more than the value of your property.
7. You can never pass on any debt to your children with this plan.
8. If you want to move and don’t want to repay the money, you can transfer the plan to another suitable property.
9. If you wanted to repay the full amount, you can do, though there may be an additional charge for doing so. Alternatively, you can repay up to 10% each year with no additional charge.
10. You own your home, like with any other mortgage.
11. A solicitor of your choosing will talk you through the terms and conditions in detail before you commit to anything or incur any costs.
12. Anyone who recommends you take this plan will have to be regulated by the government body called the Financial Conduct Authority, and passed specialist qualifications and exams.