Thinking of lifetime mortgages, have you considered that…?

An equity release mortgage or more commonly known as "lifetime mortgage" is a package advertised by many financial institutions. It allows the person to liquidate a part of his assets, while still retaining the right of using them. Of course, something that sounds too good to be true is probably not true! The mortgage is to be repaid, with interest, of course. The repayment does not necessarily have to be made during the lifetime of that person. In the case of death, the company assumes full ownership of the assets and sells it to regain the money it lent.



You may think that equity mortgage is the right choice if you want to lead a comfortable and peaceful retirement. But every coin has two sides, so you must weigh the pros and cons before you make a final decision.



The fact spearheading the pros list is that you get lump sum cash or a regular income to support your lifestyle. More importantly, the equity whether in lump sum or monthly cheques, is completely tax-free. Of course, you have to pay the taxes if you decide to invest the equity instead of using it. You don’t have to sell your house or move out of it to be eligible for an equity mortgage. It can help you find a way around paying the inheritance taxes and give more to your legal heirs. In times of medical emergency, it can be used to foot those bills. You may return the equity in your lifetime, but you do not have to pay any interests as long as you are alive. Also the interest rates are fixed, so they do not sky-rocket as the years go by. And lastly, lifetime mortgage is available to people as young as 55 years of age.



The biggest uncertainty on the cons list is that you have no way of predicting how much your heirs will inherit once the borrowed money is returned to the company after your death. Some companies may charge a compound interest and what once seemed a reasonable amount maybe blown up so out of proportion that your family will end up with a very small portion of your home or even nothing at all. And if you are looking for a top-up loan later, you can wave goodbye to all hopes of ever getting that approved.



So before you sign the final contract, carefully look at the pros and cons on our list and decide which side seems fairer to you.





For information, help and independent financial advice on lifetime mortgages call our specialist team of advisers or visit http://www.retirementsolutions.co.uk/equity-release/lifetime-mortgages