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).
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.
What are the current interest rates for your Optional Payment Lifetime Mortgages
You can find a summary of the rates and loan to values in our product summaries:
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 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.
Who may an Optional Payment Lifetime Mortgage be suitable for?
This product is designed for clients that have some monthly income and who wish to continue with the routine of making regular monthly interest payments, but do not have enough income to qualify under a residential mortgage affordability assessment.
How does it work?
With our Optional Payment Lifetime Mortgage, your client can choose to pay some, or all, of the monthly interest by Direct Debit. They can also stop making monthly interest payments at any time.
Does my client need to pass an affordability assessment to be eligible?
No, we do not require an affordability assessment, but you'll need to ask your client questions about their income and expenditure to make sure this is the right product for them and to agree a monthly interest payment that is suitable for them.
What is the benefit of making monthly interest payments?
Making monthly interest payments will reduce the amount of interest that will accumulate over the life of the lifetime mortgage.
Can my client choose how much they want to pay?
Yes, when they apply, your client can choose how much they want to pay, which can be any amount between £25 and the full monthly interest each month.
Does my client need to choose how long they would like to make monthly interest payments for?
Yes, when they apply, your client must tell us how long they wish to make monthly interest payments for. This is known as the payment term. They can choose to pay for any number of years, or if they prefer throughout the life of the lifetime mortgage. But remember, they can stop making monthly interest payments at any time.
What if my client wants to change the amount of their monthly interest payment, or their payment term after the lifetime mortgage has completed?
Your client won’t be able to change the amount of their monthly interest payment, or pay for longer than their selected payment term, but remember they can choose to stop making their monthly interest payments at any time.
What happens if my client doesn't pay the full interest amount, or stops making monthly interest payments altogether?
If your client's monthly interest payment is less than the full monthly interest, or they stop making their monthly interest payments, the unpaid interest is added to the amount they owe each month. This means that interest is charged on the loan plus any interest already added. The amount they owe will increase over time, reducing the equity left in their home.
If my client stops making monthly interest payments, can they restart them later?
No, if your client stops making their monthly interest payments and the lifetime mortgage converts to full interest roll-up, they'll not be able to restart making monthly interest payments.
Can anyone else make monthly interest payments on my client's behalf, for example family, friends, or from my business?
No, we'll only accept monthly interest payments by Direct Debit from a personal bank account in their name.
On what date each month will my client's monthly interest payments be collected?
When your client applies, they can choose between the 1st, 15th or 28th of each month to make monthly interest payments. After the lifetime mortgage completes, they'll not be able to change their payment date.
If my client takes additional borrowing, can they make monthly interest payments on the additional borrowing?
If your client takes additional borrowing, (and their lifetime mortgage has not already converted to full interest roll-up,) they can choose to pay some, or all, of the monthly interest on the additional borrowing. They'll be able to pay any amount up to the full monthly interest each month on the additional borrowing. Your client must tell us how much they wish to pay each time they apply for additional borrowing.
How and when do my client's make monthly interest payments on the additional borrowing, and how long for?
If your client chooses to make monthly interest payments on additional borrowing, a separate Direct Debit will be set up to collect the new payments, which will be on the same payment date as their initial loan. Also, the payment term for any additional borrowing must match the remaining payment term on their initial loan.
If my client takes additional borrowing, can they stop making monthly interest payments on the additional borrowing, or on any other loan?
Yes, but if your client stops making monthly interest payments on the initial loan, or on any additional borrowing they've received, the lifetime mortgage (including the initial loan and all additional borrowing) will convert to full interest roll-up at the same time and all outstanding and future interest will be added to the amount they owe each month.
When do my client's have to stop making monthly interest payments?
Your client must stop making monthly interest payments at the end of the selected payment term (unless they've chosen to pay throughout the life of the lifetime mortgage), or if they miss more than six monthly interest payments in total on the lifetime mortgage.
If my client misses a monthly interest payment can they pay it later?
If your client misses a monthly interest payment, they can still make this payment, but it will continue to count towards the six missed monthly interest payments detailed above.
Will the interest rate change if my client stops making monthly interest payments?
No, the interest rate is fixed for the life of your client's lifetime mortgage and there will be no change to the interest rate if they stop making monthly interest payments and the lifetime mortgage converts to full interest roll-up.
Can my client make Optional Partial Repayments in addition to their monthly interest payments?
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 they've stopped making monthly interest payments and the lifetime mortgage has converted to full interest roll-up. 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 Optional Payment Lifetime Mortgage have?
Our Optional Payment Lifetime Mortgage will continue to benefit from the same features as our Flexible Lifetime Mortgage, including:
- 10% Optional Partial Repayments, but only after conversion to full interest roll-up;
- a Drawdown Facility, if your client chooses to borrow less than the maximum amount they're eligible for;
- Inheritance Protection to secure a proportion of the net sale proceeds for their estate;
- a No Negative Equity Guarantee, meaning your 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, even if they stop making monthly interest payments;
- 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 Lifetime Mortgage Terms and Conditions and the Offer of Loan.
Can the lifetime mortgage be repaid early?
Optional Partial Repayment feature is only available if the client has stopped making monthly interest payments.
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.
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.
How do we calculate an Early Repayment Charge?
The way we calculate an Early Repayment Charge is detailed in our PDF file: Optional Payment Lifetime Mortgages - All you need to know Q0056890 PDF size: 9.6MB , where you can find 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, 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.
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 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 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.
For existing customers
Can my client switch their existing Flexible Lifetime Mortgage to an Optional Payment Lifetime Mortgage?
No. Your client can’t switch their existing Flexible Lifetime Mortgage. They can only move to an Optional Payment Lifetime Mortgage by repaying their existing Flexible Lifetime Mortgage. We would require them to take further financial and/or independent legal advice and they may have to pay an Early Repayment Charge, which could be substantial.