Saturday, 23 September 2017

Let’s talk about the Flexible Mortgage!

Written by Posted On Friday, 04 November 2016 06:01

Flexibility is the key to stability. That’s why it’s necessary for this type of mortgages to jump in the list. So basically, we are going to talk about the Lifetime mortgage. Yes, it’s suitable to have the name- “Flexible Mortgage”

WHY?

Well, that’s what we’re going to talk about in this article. The pensioners pile up major stress regarding drastic fall in their regular income. They fear the absence of financial stability in their future years. But, what if this financial instability is cut down by the financial flexibility? Sweet!

So, the knife of financial stability is particularly termed as Lifetime Mortgage.

  •         What is it?

Lifetime mortgage. It’s a long-term loan that’s secured against the borrower’s property and is repaid when he/she dies or moves to the long-term care. During the loan term, the borrower continues to stay in that property and maintains it-

  •         How does it Work?

When you are at least 55 years old, you need some kind of financial stability to take care of your monthly expenses and other essentials. What you can do is… you can take out a loan against your home where you live. You’ll be using the money for whatever you need. You’ll still continue to live there and retain your ownership until you die or move to a long term care. That’s when this loan will be repaid.

After you die or move to a long term care, the property against which you took the loan will be sold. The amount fetched out will be used to repay the loan amount to the lender. The remaining amount will be passed on to your heirs.

  •         Flexibility is divided into further flexible branches! 

Drawdown Plans- At this age, regular income is what you’ll crave. But without a job, would that be possible? Yes! With the Drawdown Lifetime Mortgage, you can plan the loan amount into regular incomes for yourself.

So, you’ll still be complimenting your regular expenditure with stable income support. The advantage? The interest will be charged on only the amount you take out for your necessities. So, basically your interest is not going to roll-up and that’s a stress revealing thought!

Enhanced Plans- This is a kind of generous flexibility. It is preferably based on the borrower’s health and lifestyle. Any impairment or serious health issue of the borrower can result in lower life expectancy. This influences the lender to provide larger amount than normal mortgage deals. 

Protected Plans- You took the Lifetime Mortgage against your home. Now, when you’ll die, nothing will be left for your family. But you don’t want that, right? So, opt for protected lifetime mortgage plan.

According to this, you’re free to fix up some part or furniture of your home which will be excluded for the mortgage deal; that you can save up as inheritance for your family. It cannot be used to repay the mortgage loan.

 Interest Payment Plans- Interest payment mortgage plan is a way to periodically reduce the mortgage debt. If you wish to repay the monthly interest charged against your loan, you need to opt for this plan.

It will prevent the interest roll up. Reducing the compound interest, the final amount to be repaid at the end of the mortgage term will remain equal to the amount borrowed. This is an appreciable option for those mortgage borrowers who have reasonably good retirement income.

  •         Flexibility Comes with a Price

Being flexible is an advantage but for benefiting yourself with this financial boon, you need to pay some costs. It’s highly necessary that you are perfectly aware about that. So, the costs that’ll be involved in taking up this Lifetime mortgage deal are:

Arrangement Fee: You will have to pay this to the lender while arranging the preferred lifetime mortgage deal.

Legal Fee: When the lifetime mortgage plan is finalized, you will be required to pay some legal and valuation fee.

Advisor Fee: This kind of decisions need through discussions and advice from a learned financial advisor. So, you need to pay the fee for a wise advice.

  •         Some facts you don’t want to know but you should know!

Well, it needs courage to except the cons of something that shines out as an amazing option. But, like a quarter, everything has two sides. And it will be foolish to stay unaware about these not-so-welcoming facts.

- Curbed State Benefits: The benefits offered by the government like the council tax benefits and pension credits can be affected by this mortgage deal.

- Reduced Inheritance: The rolled-up compound interest can blow up the amount of mortgage to be repaid resulting in highly reduced inheritance for your family.

- Early Repayment: If you’re able to and wish to repay the whole amount prior to the mortgage term decided, you will have to pay an early repayment charge too.

- Equity Release is not highest: The Lifetime Mortgage Plan cannot offer as much as the Home reversion Plan.

 

Do contact your financial advisor. Explain your personal situation with every detail, discuss the pros and cons in much more detail, ask out all the questions jumping inside and get a customized perfect solution for yourself.

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