Simply put, a lifetime mortgage is a debt that stays broadly the same throughout the lifetime of the debt, in that it is predictable and easy to plan. Despite this, many lifetime mortgages will allow for flexibility including overpayment's and early full repayments.
The term ‘lifetime mortgage’ is used to describe a wide range of alternative mortgage products that are now available on the market. In the current financial climate, borrowers are prepared to change lenders, on a regular basis, in order to obtain the best possible deals. In fact, as a result of the credit crunch, some borrowers are being forced to find alternative lenders because their existing lender will no longer provide the type of mortgage that they require. Lenders are constantly having to devise new and innovative ways to attract reliable borrowers, so offering lifetime mortgages is one of their options.
As a result, lenders are now trying to create a range of lifetime mortgages which keep borrowers with them at all times and are able to change with the different demands throughout life.
As a general rule, lifetime mortgages, in the sense that they are mortgages that will last for a whole lifetime, used to be offered for twenty-five year periods. However, this is not the standard offering anymore and mortgages can be available for up to forty years. But do bear in mind that this length of mortgage will only be available to individuals who are likely to have at least forty years of working life left. Therefore, in reality, this length of mortgage will generally only be available to those under the age of thirty, or those with independent sources of income.
The term ‘lifetime mortgage’ is often used to describe a loan which is taken out on the property, while the borrower retains full ownership of the property; sometimes the loan is taken out in full as a lump sum and at other times it may be taken as a regular annuity income. The loan will last until the borrower dies or the property is sold. In the case of a lifetime mortgage taken out by two or more people, the loan remains until the last individual dies or again the property is sold.
Broadly speaking, there are three types of lifetime mortgages: home income plans, draw down mortgages, and roll-up mortgages. Depending on the borrower’s individual circumstances and long-term plans, it should be clear which type of lifetime mortgage may be suitable. Advice should be taken from an independent source, before opting for any particular type of lifetime mortgage. Different providers will normally have different rules and criteria, so if you are unable to find the product you are looking for with one lender, try a different or even a specialist lender. The assistance of an all-market mortgage broker will be invaluable for this type of mortgage.