Do I qualify for a lifetime mortgage?

Equity release products have become more and more popular over recent years, allowing customers to release equity from their home for their retirement without the need for moving house or downsizing.

The most popular equity release product is a lifetime mortgage, but in a world full of credit scores and credit checks how do you know if you will even qualify for a lifetime mortgage? 

Your credit history is not a big factor, although if you do have County Court Judgements or have been bankrupt in the past, do inform your potential lenders of this at the beginning of the application process. Failure to disclose this information could result in your application being rejected. 

What is a lifetime mortgage? 

A lifetime mortgage is a way to release some of the equity tied up in your home by securing a loan against your property.

A traditional mortgage would have you paying a monthly repayment which over time will decrease your total loan value. However with a lifetime mortgage you make no repayments.

As the name suggests this is a lifetime product so payment is not due until you have passed away or entered into a long term care facility. At this point your property will be sold and the loan will be paid back using the proceeds from the sale.

Interest is added onto your total loan amount and depending on what type of lifetime mortgage you have will depend on how the interest is dealt with. 

Roll Up Lifetime Mortgage

With a roll-up mortgage the interest is added to your total loan amount, to be paid once your house is sold. This means that your loan amount will increase quickly. 

Interest-Only Lifetime Mortgage

With an interest only lifetime mortgage you will make monthly repayments to cover the amount of the interest. This ensures that your total loan value always stays the same. 

Most lifetime mortgages come with a fixed interest rate, the average being around 5%. 

How do I qualify for a lifetime mortgage? 

Unlike most other financial services, there are no credit checks and you do not have to prove your income and expenditure as there are no repayments due until the sale of your house.

There are three main points that have to be met to qualify for a lifetime mortgage. 

  • Age – You must be over fifty-five years old. If you are making a joint application then both applicants must be over fifty-five. Some lenders will agree to accepting you for a lifetime mortgage if one person is under this age, however they would then need to transfer their share of the equity to the older applicant. Typically the older you are the more you can borrow. 
  • Value of the property – The value of your property will also play a part in how much you can borrow. The higher the value of your home, the more lenders will be willing to lend. Most lenders require that your property is valued higher than £70,000. 
  • Main residence – The property that you are securing the loan against must be your main property. It cannot be a property that you own and rent out or a holiday home. 

What are the steps to obtaining a lifetime mortgage? 

There are many equity release calculators online. These can give you a guide as to what a lender may be willing to lend you based on your age and the current value of your home. 

  • Mortgage Broker – 

It is always advised to speak with a qualified mortgage broker. They will be able to go through all of the products on the market with you and give you a clear understanding on which ones would suit your own personal circumstances. 

  • Application Form – 

Once you have decided to go ahead with your lifetime mortgage you would then need to complete the application process. Your mortgage broker will be able to help you with this. Once your application has been made the whole process takes on average between 4-8 weeks. 

  • Completion – 

Your legal team will set the completion date. Upon completion the funds will be transferred into your nominated bank account. If you have an existing mortgage this would now need to be paid off. The money that you receive is tax free and is available for you to use as you wish. 

NOTE: There are several fees attached to obtaining a lifetime mortgage. These can include, an arrangement fee, valuation fees and legal fees. This will need to be paid at the time of taking your mortgage out and cannot be added to the total loan amount. 

As you can see, with a lifetime mortgage, the criteria is based around your age and the value of your property.

Your credit history is not a big factor, although if you do have County Court Judgements or have been bankrupt in the past, do inform your potential lenders of this at the beginning of the application process. Failure to disclose this information could result in your application being rejected. 

5 Shares:
Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like