Lifetime mortgage FAQ's
We've put together a list of frequently asked questions about lifetime mortgages.
Choose from the sales process or product related FAQ's from Flexible (Flexible Lifetime Mortgage), OPLM (Optional Payment Lifetime Mortgage) or Income (Income Lifetime Mortgage).
Who may an Income Lifetime Mortgage be suitable for?
This product is designed for clients that require the discipline of a regular monthly income for a fixed term rather than a lump sum or drawdowns that they must request as and when they need them.
How does it work?
Our Income Lifetime Mortgage allows your client to take an initial loan amount followed by a monthly income over a fixed income term. If their circumstances change, they can choose to stop taking the income at any time but once stopped, income cannot be restarted.
What are the benefits of an Income Lifetime Mortgage compared to a Flexible Lifetime Mortgage?
The Income Lifetime Mortgage provides the discipline of a regular monthly income paid over a fixed term into the client's bank account each month.
The effect of compound interest is reduced as funds are released in monthly amounts, rather than as a single upfront sum. The interest is added to the amount the client owes each month. This means the amount your client owes will increase quickly over time.
Once the fixed income term ends, the monthly income will stop but interest will continue to compound until the mortgage is repaid.
The Income Lifetime Mortgage also offers higher LTVs than those available on our Flexible and Optional Payment Lifetime Mortgage. This allows clients to maximise the amount of monthly income they can take.
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.
How much income can my client take?
At application, the client must choose a monthly income amount between a minimum of £200 up to the full monthly income available.
How long can my client take the income for?
We offer four fixed income terms of 10, 15, 20 and 25 years. The fixed income term must be chosen at application and can’t be changed once the mortgage has completed.
How much can my client take as an initial loan amount?
The minimum initial loan amount is £2,500 and the maximum is capped at 10% of the total facility.
Will this product impact my client's ability to claim means tested benefits?
Yes. As this product provides client's with a regular monthly income, your clients entitlement to means tested benefits may be impacted. The main benefits impacted are likely to be universal credit, guaranteed pension credit and council tax reduction. You should complete a full assessment of your client's benefits to determine whether they may be better suited to other lifetime mortgage products.
Is there a maximum age on the Income Lifetime Mortgage?
Your client won’t be able to take a fixed income term that exceeds the youngest applicant's 105th birthday. For example, the maximum term available to a client aged 85 would be 20 years.
Can my client change the amount of their fixed income or the fixed income term after the lifetime mortgage has completed?
The client won’t be able to change the amount of monthly income, or the fixed income term once the mortgage has completed. However, income can be stopped at any time. Once stopped, income cannot be restarted.
What happens if my client doesn’t take the full income available to them, can they take this at a later date?
No, the Income Lifetime Mortgage will not offer a Drawdown Facility or any additional borrowing.
If my client stops taking the monthly income, can they restart it later?
No, once the monthly income has been stopped it cannot be restarted.
What day will the monthly income be paid?
The monthly income will be paid on or around the first working day of each month depending on weekends and bank holidays.
What happens at the end of the fixed income term?
At the end of the fixed income term, the monthly income will stop and interest will continue to roll up until the mortgage is repaid either on death or move out of their home into long term care. We'll write to the client before the end of the fixed income term to let them know that their monthly income will stop.
How long is the interest rate fixed for?
The interest rate is fixed at the outset for the life of the mortgage.
Can my client make Optional Partial Repayments on their Income Lifetime Mortgage?
The Optional Partial Repayment feature enables your client to pay part of the mortgage off early with no Early Repayment Charge subject to our PDF file: Lifetime Mortgages Terms and Conditions Q0054072 PDF size: 98KB .
We'll only allow Optional Partial Repayments once the fixed income term has come to an end or the client has chosen to stop taking the monthly income. At that time, they can make up to four Optional Partial Repayments in any 12 month period starting on the completion of their lifetime mortgage and thereafter on each anniversary of the completion, subject to a minimum of £500 each.
What other product features does an Income Lifetime Mortgage have?
Our Income Lifetime Mortgage will continue to benefit from the same features as our Flexible Lifetime Mortgage and Optional Payment Lifetime Mortgage, including:
- 10% Optional Partial Repayments, but only once the fixed income term has ended or the client has chosen to stop taking the monthly income;
- Inheritance Protection to secure a proportion of the net sale proceeds for client's estate;
- a No Negative Equity Guarantee, meaning client or their beneficiaries will never have to pay back more than the amount their property is sold for;
- tenure for life, meaning your client can remain in their home for life;
- your client can move home and transfer (port) the lifetime mortgage to a new property;
- and Early Repayment Charges, if they decide to repay early.
All these features are subject to terms and conditions set out in the PDF file: Lifetime Mortgages Terms and Conditions Q0054072 PDF size: 98KB and the Offer of Loan.
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 can be removed or reduced.
What are the current interest rate for your Income Lifetime Mortgage?
You can find a summary of the rates and loan to values in our product summary:
PDF file: Income Lifetime Mortgage Product Summary PDF size: 157KB
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, 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.
Can the lifetime mortgage be repaid early?
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. However, it is important to note that Optional Partial Repayments can only be made once the monthly income has stopped or your client has chosen to stop taking the income.
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.
How do we calculate an Early Repayment Charge?
The way we calculate an Early Repayment Charge is detailed in our PDF file: Income Lifetime Mortgage - All you need to know PDF size: 10.3MB , where you can find more information on when an Early Repayment Charge can apply and how we calculate the charge.
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.
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.
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.
For existing customers
My client has applied for a Flexible Lifetime Mortgage which has not yet completed. Can they change to an Income Lifetime Mortgage?
If your client is suitable and wishes to switch to an Income Lifetime Mortgage, they'll need to complete a new application.
Can my client switch their existing Flexible Lifetime Mortgage to an Income Lifetime Mortgage?
No. Your client can’t switch an existing Flexible Lifetime Mortgage. They can only move to an Income Lifetime Mortgage by repaying their existing Flexible Lifetime Mortgage. We would require your client to take further financial and/or independent legal advice and they may have to pay an Early Repayment Charge, which could be substantial.