Lifetime mortgage FAQs
We've put together a list of frequently asked questions about lifetime mortgages.
Choose from the sales process or product related FAQs from Flexible (Flexible Lifetime Mortgage), OPLM (Optional Payment Lifetime Mortgage) or Income (Income Lifetime Mortgage).
What is Inheritance Protection?
Inheritance Protection can help secure a percentage of the net sale proceeds of your client's home for the beneficiaries of their estate when they die. They'll need to decide on the percentage that they would like to protect (the Protected Percentage) when they apply for the Lifetime Mortgage. If leaving an inheritance is important to your client, they should select this option. If your client chooses Inheritance Protection this will reduce the amount they can borrow.
Inheritance Protection cannot be added or the amount increased after completion of their lifetime mortgage but could be removed or reduced but only when the client takes additional borrowing or porting their mortgage to a new property.
Will my client still own their home?
Yes. With our Lifetime Mortgages, the property stays in your client's name and the loan is secured against their home. Our Lifetime Mortgages are designed to be repaid when the last remaining borrower dies or moves out of their home into long-term care.
Why do we apply an Early Repayment Charge?
The Early Repayment Charge recovers costs that we or our funding providers incur when setting up the lifetime mortgage. These costs include transactions costs incurred in reinvesting the money, or costs due to the changes in long term interest rates.
Will a lifetime mortgage affect any inheritance?
Yes. Interest is charged both on the loan amount and the interest that has already been added. This means the amount your client owes quickly increases overtime, reducing the equity left in their home and the value of any inheritance.
All of our Lifetime Mortgages offer the Inheritance Protection Option that can be chosen at the outset to protect a percentage of the value of your client's home for their beneficiaries. If your client includes the Inheritance Protection Option it will reduce the total amount your client can borrow.
What is Downsizing Protection?
Downsizing Protection allows customers to repay their lifetime mortgage without having to pay an Early Repayment Charge if they move home and their new property does not meet our lending criteria.
Client's must have had their lifetime mortgage for five years or more in order to qualify for Downsizing Protection.
If your client decides that they want to move home but they don’t want to transfer their lifetime mortgage or, if they choose to repay their lifetime mortgage for any other reason, they may still have to pay an Early Repayment Charge.
Downsizing Protection is available for new and existing customers.
Find out more in our PDF file: Downsizing Protection Leaflet Q0059449 PDF size: 43KB
How do we calculate an Early Repayment Charge?
The way we calculate an Early Repayment Charge is detailed in our PDF file: Flexible Lifetime Mortgages - All you need to know Q0054380 PDF size: 596KB , this will provide you with more information on when an Early Repayment Charge can apply and how we calculate the charge.
How is interest calculated?
Our Lifetime Mortgages have a fixed rate for life, which means it will not change for the duration of your client's loan. Interest is calculated daily and added to the loan each month. This means the amount owed grows quickly, reducing the equity in your client's home and the value of any inheritance. You should consider if there are cheaper ways for your client to borrow money.
What are the current interest rates for your Flexible Lifetime Mortgages
You can find a summary of the rates and loan to values in our product summary:
In the future could you make my client leave their home?
With our Lifetime Mortgages, your client can stay in their home until they die or move into long-term care, as long as they comply with the PDF file: Lifetime Mortgages Terms and Conditions Q0054072 PDF size: 98KB . Failure to comply with these could result in the forced sale of their property and the loss of the right to Inheritance Protection, if this has been chosen.
What is the No Negative Equity Guarantee?
Our No Negative Equity Guarantee means your client or their beneficiaries will never have to pay back more than the amount the property is sold for. This is provided it is sold for the best price reasonably obtainable and your client have met the Terms and Conditions of their lifetime mortgage.
Will my client have to make monthly payments?
No. With our Lifetime Mortgages your client won't have to make monthly payments. Instead the interest is added to the amount owed each month. We charge interest on the loan amount plus any interest already added, which means the amount your client owes will grow quickly. The lifetime mortgage is usually repaid from the sale of your client's home when they or the remaining borrower (if the mortgage is in joint names) dies or moves out of their home into long-term care.
However, your client could choose to make Optional Partial Repayments subject to our PDF file: Lifetime Mortgages Terms and Conditions Q0054072 PDF size: 98KB .
Can the lifetime mortgage be repaid early?
Yes. Our Optional Partial Repayment feature allows your client to reduce the amount they owe by making partial repayments without any Early Repayment Charge. This will reduce the total amount of interest that will accumulate on their lifetime mortgage.
Your client may have to pay an Early Repayment Charge if they decide to repay more than what’s allowed under Optional Partial Repayment feature, or decide to repay all of their Lifetime Mortgage. The Early Repayment Charge could be substantial.
The Early Repayment Charge only applies until the youngest borrower reaches age 88 or their tenth birthday following the date of the Offer of Loan, whichever occurs later.