What if I want to fully repay my lifetime mortgage?

Our Lifetime Mortgages are designed to last for your lifetime and to be repaid when you (or, if borrowing jointly, both of you) die or move out of your home into long term care. However, we understand your circumstances may change and you may wish to repay your lifetime mortgage early, in which case an Early Repayment Charge may be payable.


Early Repayment Charges

You should think carefully before you decide to repay any of your lifetime mortgage early, as there could be a substantial Early Repayment Charge to pay. It’s important to understand when an Early Repayment Charge may apply and how much it will be.

The Early Repayment Charge is calculated to recover costs that we or our funding providers incur when setting up the lifetime mortgage. The costs include, transaction costs incurred in reinvesting the money, or due to changes in long term interest rates.

Early Repayment Charges only apply until the youngest borrower reaches age 88 or their tenth birthday following the date of the Offer of Loan, whichever occurs later.

An Early Repayment Charge is not payable if any of the following apply:

  1. 1

    If you repay after you (or if joint borrowers, the youngest of you) reach the age shown in your Offer of Loan.

  2. 2

    If the Index at the time you repay is higher than or equal to the Benchmark Rate shown in your lifetime mortgage Offer of Loan.

  3. 3

    On any Optional Partial Repayments you make within the permitted limits.

  4. 4

    If you move home and transfer your lifetime mortgage to a new property that is acceptable to us, and as a result of which you repay a part of the lifetime mortgage as required by us.

  5. 5

    If you repay after you (or if joint borrowers, the last surviving of you) dies or goes into long term care.

  6. 6

    If joint borrowers and the last surviving of you repays in the first three years after the first of you dies or moves into long term care.

How do we calculate an Early Repayment Charge?

Our Lifetime Mortgages have fixed interest rates for the duration of the mortgage, which means the way we calculate the Early Repayment Charge is quite detailed. We therefore suggest you speak to your adviser who will be able to tell you more about this. Alternatively, you can give us a call on 03330 048444 and we will be happy to help.

The Early Repayment Charge calculation is based on the movement in the level of long term interest rates on government borrowing, known as Gilts. We use the UK FTSE Actuaries Gilts 15 Year Yield Index (called the ‘Index’) as published daily in the Financial Times.

When we make an offer to lend we set a ‘Benchmark Rate’ and this will be shown in your Offer of Loan. This will be the Index at the time, plus 0.3% to cover the lifetime mortgage set up and transaction costs incurred in reinvesting the money.

If the Index when you repay is lower than your Benchmark Rate then an Early Repayment Charge will be payable based upon the calculation below:

  1. The amount that you repay including all interest and charges.

  2. The remainder of the Early Repayment Charge term of your lifetime mortgage (as shown in your Offer of Loan).

  3. The difference between your Benchmark Rate and the Index when you repay.

  4. Early Repayment Charge

  5. You will never have to pay an Early Repayment Charge of more than 25% of each amount we lend to you, plus the amount of the closing Administration Fee, which is payable whenever the lifetime mortgage is repaid in full. This fee is detailed in the Tariff of Charges.

Early Repayment Charge example

A couple take out a lifetime mortgage of £50,000 and ten years later want to repay the loan. The youngest borrower at the time the loan started was aged 70 and the Benchmark Rate was 3.30%. Based on interest rate of 5%, the Early Repayment Charge will be worked out as follows:

  1. The loan amount of £50,000 plus compounded interest charges of £31,444

    £81,444

  2. Youngest borrower was 70 at outset, now aged 80, and the Early Repayment Charge applies until age 88 

    eight years

  3. The Benchmark Rate is 3.30%, less the Index, which has fallen to 2.58%

    0.72%

  4. The Early Repayment Charge in this example is £4,691. As this is less than 25% of the loan amount (which would be £12,500) the Early Repayment Charge will be £4,691 plus the Closing Administration Fee of £125

    4,691