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Guide: Flexible Lifetime Mortgage

Lifetime mortgages are a type of equity release plan, secured against your current home. There are different types of lifetime mortgages, and each comes with its own benefits and pitfalls. Generally, the eligibility criteria for all types of lifetime mortgages state that you should be at least 55 years old, and the value of your property shouldn’t be lower than £70,000.

Residential property

The main feature of a Flexible Lifetime Mortgage is that it provides you with the flexibility to make repayments without having to worry about Early Repayment Charges (ERC). You can choose to make no repayments or up to 40% of the balance each year (this varies with each lender). The full remainder of the loan is then repaid when you move into care or pass away.

Key features of Flexible Lifetime Mortgage


Here are the key features of Flexible Lifetime Mortgage:

  • The voluntary repayment option starts from 10% and goes up to 40% of the loan value.

  • Some lenders may allow you to repay without facing any ERC as compared to other lifetime mortgages.

  • The cash you borrow in accordance with this facility is tax-free.

  • You can make voluntary repayments for the agreed term according to your feasibility.

  • You are not bound by any monthly repayments


Eligibility Criteria for Flexible Lifetime Mortgage


Check the list to see if you are eligible to apply for a Flexible Lifetime Mortgage.

  • You are at least 55 years old.

  • Your property value is not less than £70,000.


In addition to the eligibility conditions, keep in mind the following conditions as well:

The amount you can borrow is limited and is set by the lender. You’ll be given an amount you can borrow up to, expressed as a % of your properties value. This is known as the LTV (loan-to-value) and is typically 25% - 50% of the value of your home.

Advantages of Flexible Lifetime Mortgage



  • The cash released is tax-exempt

  • You can spend the borrowed cash in any way you like, be it home renovation or going for a holiday.

  • Compared to other lifetime mortgages, you have the option to make voluntary repayments without facing hefty ERC’s.

  • Voluntary repayments allow you to have an advantage over the final inheritance value that you will leave to your beneficiaries.

  • Flexible Lifetime Mortgages don’t come with a compounding interest rate like and Enhanced Lifetime Mortgage does


Disadvantages of Flexible Lifetime Mortgage



  • Following are some of the disadvantages of Flexible Lifetime Mortgage:

  • Your repayment value is limited to at least 10% of the complete value of Flexible Lifetime Mortgage.

  • You cannot repay more than 40% of the mortgage in a single year.

  • You can move into a different property only if its sale value is the same as your current home (and the lender allows you to move the mortgage, not all do)

  • Interest rates are generally higher compared to regular mortgages


Conclusion


To conclude, a Flexible Lifetime Mortgage allows you to make regular repayments whenever you have the resources to repay your mortgage. You are not bound by any kind of repayment plan like other types of lifetime mortgages.

For further information, consult a financial advisor to see if Flexible Lifetime Mortgage really suits your needs and aligns with your financial stability.

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