If you are reading these pages then we can safely assume that you are a dedicated individual who has worked hard for his possessions. You have a responsibility to yourself and your family to make the best financial decisions for the continuation of a worry-free life. And precisely because you are a person who wants to make the best decisions, you may have come to wonder what lifetime mortgages are, and also to wonder how a remortgage to release equity may present a smart option for your finances.
What Can Lifetime Mortgages Represent for Me?
In the simplest terms possible, a lifetime mortgage is a simple and reliant way in which you to free up your equity, i.e. the money you have left over after we calculate the difference between the value of your home and the amount of the mortgage balance. Why can lifetime mortgages be advantageous for you? Because once equity is freed up it can help you finance your other passions.
Maybe you want the vacation you’ve always dreamt of, or you want to pursue a business venture alongside your friends, or even finance the college education of one of your children. The possibilities are endless, and after a lifetime of work, you deserve to reap the rewards. In the end, it is your money and you can use it as you wish. And who doesn’t need a little spending budget from time to time?
What are the Requirements for Lifetime Mortgages?
The only condition to be eligible for lifetime mortgages is that you must be over 55 years old and the value of your home must be estimated at over £70,000. You should also be aware that not all these types of mortgages are equal and they can be available in two different ways, namely through lump sum mortgages and drawdown mortgages. These work in a fairly similar way, the differences being that lump sum mortgages allow you to withdraw your capital sums in a single transaction where you pay no extra charges, whereas drawdown mortgages only release part of your capital at once, with the stipulation that you can draw down additional sums at a later date.
But are These Types of Mortgages Expensive?
Not necessarily, as with other mortgage loans, the fees and taxes you will have to cover, depend on various social and economic factors applicable to each individual. The value of your home, your age, the associated interest rates, plus the fees for mortgage brokers or for the legal staff you will have to work with, all add up to the total cost you will pay at the end of the whole operation.
But it must be said that these costs are no different from the expenses that would be incurred for a normal mortgage. Once the final owner passes away or enters long-term care, the property is usually sold and the proceeds are used to repay the loan. Everything left over after the finalization of this process is then distributed to your descendants. If your family can pay off the rest of the mortgage without resorting to selling the property then they have the freedom and opportunity to do so.
What if I Want a Remortgage to Release Equity?
Good question. A remortgage to release equity can be an ideal solution if you want to use the market value of your home to raise the necessary capital for future projects. With a remortgage to release equity, you free up a small part of your home that can be turned into funds. How you wish to use these funds is up to each individual, the only condition for the success of your remortgaging being the advantageous nature of your monthly payments and having enough capital to support such a financial venture.
Is All This Safe?
Yes, otherwise remortgages wouldn’t represent the largest share of mortgage borrowers in the UK. The popularity of these types of financial instruments has increased dramatically in recent years, with over eighty-six thousand mortgages being approved by the Bank of England in April of last year, an increase of over 81% since 2020. Why this dramatic increase in people wanting a mortgage and/or investing in a remortgage to release equity?
There are many reasons for this, but it is largely down to favorable lending conditions and people’s desire for increased flexibility. Perhaps the terms on which you took out your first mortgage are now not so advantageous and you want to tip the balance of these terms in your favor. Or maybe you are a young person who simply wants to obtain a mortgage to fulfill a dream of homeownership. And who can blame you? It’s a desire that each of us has at some point.
Think About Your Financial Goals
At the end of the day, whether we are talking about a remortgage to release equity or lifetime mortgages, they are after all simply financial instruments whose ultimate aim is to improve the quality of your life. What is the real purpose of such arrangements? You probably want, like all of us, to enjoy more time with your loved ones, to have the possibility to invest in your passions, to have the financial power to be able to think about any unexpected situation that life may throw your way.
These financial instruments are at the end of the day, options for you, and it is your responsibility to know if they fit with you and your family’s plans and aspirations. But sometimes it’s also good to think about what’s important in life. The years go by pretty quickly and it’s a shame to grow old with the regrets of not living our life the way we wanted. From planning your dream holidays to investing in the stock market or the businesses of loved ones, the options for freeing up equity can be a breath of fresh air in our rather complicated lives.