Pros And Cons Of Lifetime Mortgages

Pros And Cons Of Lifetime Mortgages

Pros And Cons Of Lifetime Mortgages

If you are considering using a Lifetime Mortgage as your means of releasing equity from your home, here is a summary of their Pros and Cons:

Pros of Lifetime Mortgages

  • You will be able to keep your home and continue to live in it for as long as you are able.
  • Your Lifetime Mortgage is repaid on your death or on the sale of your property, so you can be sure that you won’t have to leave your home.
  • You will be able to benefit from any increases in the value of your property because you will continue to live in your home.
  • Many Lifetime Mortgage arrangements have a guarantee that means the total debt from your loan will not be permitted to exceed the value of your property. This means that there won’t be any nasty surprises when you sell your home or when your beneficiaries inherit your estate.
  • A Lifetime Mortgage is similar to other forms of equity release in that it enables you to reduce the amount of Inheritance Tax that will be paid when you die because the value of your estate will have reduced by the value of your loan.
  • When your home is eventually sold and your Lifetime Mortgage is paid off you may be able to provide some money to your beneficiaries or when you move into care. This will be subject to the amount and term of the loan you have taken out.
  • The equity released on your main property is free from tax because it is in the form of a loan. This compares favourably with a pension where you are permitted to take 25% of your pension pot as a tax free lump sum: the remainder is taxed at your marginal rate by the pension provider.
  • You have the option of using your Lifetime Mortgage to provide you with a large lump or a guaranteed monthly income.
  • A Lifetime Mortgage uses fixed rates of interest which enable you to know precisely how much you will be paying and avoid large interest accumulations.

Cons of Lifetime Mortgages

  • There are usually fees involved with setting up your Lifetime Mortgage, such as arrangement fees, a valuation on your property and legal fees.
  • Because you will still own and occupy your home, you will continue to be responsible for maintaining your property and paying utility bills, Council Tax, etc. Lenders will expect you to keep your home in good condition and you will also be required to have buildings insurance. You will therefore need to ensure that your income levels are sufficient to cover your monthly outgoings.
  • Taking out a Lifetime Mortgage might affect your entitlement to state benefits because you will be releasing the equity from your home and taking receiving it as a lump sum or as income.
  • You will need to obtain the provider’s permission to accommodate a change in your circumstances – eg, you need a carer or relative to move into your home to look after you.
  • Similarly, your options for moving to a smaller home (downsizing) are limited because the value of the home may not be sufficient to accommodate the debt.
  • The inheritance you will be able to pass on to your beneficiaries will be reduced because your Lifetime Mortgage will be repaid by the sale of your home. The amount of money that is left after the loan is repaid depends on the type, term and amount of Lifetime Mortgage that you take out.
  • If your home is sold soon after taking out a plan, your estate is likely to incur a loss because Lifetime Mortgages are designed to be medium-long term arrangements.

Bankruptcy FAQs

Bankruptcy FAQs

To help you decide the best course of action for you, we have compiled a list of your Frequently Asked Questions (FAQs) about bankruptcy.

What is Bankruptcy?

Bankruptcy is an option that you can consider if you feel that you are unable to pay off your debts. It is a formal procedure that involves applying to a court and using your assets (your house, your car, your savings, etc.) to pay off your creditors.

The bankruptcy can also be started by another party or person if you owe them more than £750.

What Is Bankruptcy Involve?

Bankruptcy involves you appointing a third party to sell your assets. The third party will then distribute the money receive from the sale to the people you own money.

How Do You Qualify For Bankruptcy?

Anyone who can make themselves bankrupt. However, only a court can declare you bankrupt, and you are formally bankrupt when a court issues a bankruptcy order against you.

What Assets Will Be Sold?

Your bankruptcy trustee will look to liquidate your assets in order to recover as much money as possible. The types of assets that the trustee will sell are:

  • Property – even if it is jointly owned
  • Tangible assets such as cars, vehicles, jewellery, etc.
  • Investments such as shares, bonds, savings, etc.
  • Any money that you hold in a bank or building society account
  • Lump sums that might come from pensions or other forms expert

You are entitled, however, to retain equipment that might be considered essential for your on-going employment such as a vehicle, books, tools, etc. You are also entitled to retain possession of equipment that might be needed to enable you to live and function at a reasonable level such as clothes, furniture, etc.

How Does Bankruptcy Affect Future Payments?

You may have to relinquish some of your future weekly or monthly salary. The bankruptcy trustee may also make a claim on your acquisition of future assets such as inheritance, lottery wins, etc.

How Long Does Bankruptcy Last?

Bankruptcy usually lasts 12 months. After this period has ended, you will be discharged from your bankruptcy debts and the people to whom you owe money cannot make any claims against you to recover their monies.

Does Bankruptcy Affect Your Credit Rating?

Bankruptcy is a formal legal procedure that is used as a last resort in many cases to recover money from an individual who has not been able to repay their debts. Your credit history will show the bankruptcy and this is likely to have a detrimental effect on your credit rating. This means that, in the future, potential lenders may be reluctant to provide you with credit.

Alternatives To Bankruptcy

There are alternatives to bankruptcy that you may wish to consider if you are struggling to pay off your debts. These include:

If you are in any doubt about the right course of action, you should speak to a qualified debt management professional who will be able to advise you.

Equity Release Reaches Record Level

Equity Release Reaches Record Level

Equity Release Reaches Record Level

Equity Release in the second quarter of 2015 reached its highest level since records began in 2002 according to a report in Mortgage Introducer.

The rise in lending, which surpassed a previous high of £375.4m in Q3 2014, was attributed to rising property values and new pensions freedom legislation that came into effect during April 2015.

10,000 Customers Take Out Equity Release Product

The first half of 2015 saw more than 10,000 customers use an equity release product, and the total value of the plans taken out was around £710m.

1 2 3 5