Lifetime Fixed Mortgages
Thinking about taking out a Lifetime Fixed Mortgage? Find out more here.
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Releasing some of the wealth tied up in your home through an equity release scheme can seem like a great solution for retirement – you get to stay in the family home you love, free up some cash to spend, and with no pressure to repay until later.
But what are the pros and cons of a fixed-rate lifetime mortgage as a way to release equity? In this article we’ll look at how fixed lifetime mortgages work, which lenders offer them and how a broker can help you get the best deal.
What is a fixed-rate lifetime mortgage and how do they work?
When you take out a standard mortgage, you choose between a fixed-rate or a variable rate mortgage. A fixed-rate stays the same, no matter how the Bank of England base rate behaves, whereas a variable rate can go up as well as down – good news if your lender lowers their rates, not so good if they increase them.
A lifetime mortgage works in just the same way – interest accumulates over the term of the loan, typically under an interest roll up model, and that interest will be determined by a rate agreed when you take out the mortgage. So, in this instance the rate you select will be fixed.
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Are lifetime mortgage rates always fixed?
Not always, but the vast majority of lifetime mortgages are based on a fixed interest rate. Unlike a standard mortgage, where you fix for a period, normally 2-5 years, and then remortgage, the rate on a fixed-rate lifetime mortgage is usually fixed for the entire period of the loan.
Because of the way that interest on a lifetime mortgage compounds over time, a variable interest rate could potentially be risky and end up being very expensive. Because you don’t have to worry about monthly repayments going up, it makes sense to stick to a fixed-rate for a lifetime mortgage.
Variable rate lifetime mortgages are available in some circumstances, but they are far less common. The Equity Release Council – the industry body for equity release – has a requirement that variable rates on lifetime mortgages are capped, which means they won’t ever exceed a predetermined level.
How a lifetime mortgage broker can help
Although choosing a fixed-rate lifetime mortgage might seem like a simple case of comparing rates and choosing the lowest, it’s not quite that straightforward. For a start, you might not have the time or the experience to be able to research all the available deals and access the right lenders. It’s not like researching a standard mortgage – this is a product offered only by specialist equity release lenders.
Secondly, even if you did have all the rates in front of you, this doesn’t give you the whole picture. You’ll find that each lender has slightly different terms, such as varying early repayment charges, set up costs, inheritance protection options and minimum and maximum borrowing amounts. This makes it hard to know which is the best deal for you as you’re not comparing like with like.
A broker who specialises in lifetime mortgages will be able to access the whole market and research the deals that are the best fit for you, looking not just at the rates but at the small print too. This saves you a huge amount of time and stress and potentially money as well.
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Which providers offer them?
You won’t find fixed lifetime mortgages being offered by your everyday high street bank – these are specialist mortgage products that you’ll only find by going to equity release lenders.
You could find lifetime mortgages available from a range of providers, including, but not limited to the following:
- Aviva’s fixed-rate lifetime mortgage is available to applicants aged 55 or over who own a UK home (not including the Isle of Man and the Channel Islands). Your property must be worth £75,000 or more and the minimum loan amount is £15,000.
- Legal & General’s lifetime mortgage products have a minimum property value of £70,000 or £100,000 depending on property type. You can take a lump sum as low as £10,000 and further sums of £2,000 or more over the course of the loan.
- Standard Life offers lifetime mortgages between £10,000 and £1.5 million on LTVs of 8-44%. They include fixed early repayment charges for the first 8 years and downsizing protection from day one.
The interest rate you’ll be offered on a fixed-rate lifetime mortgage depends on your individual circumstances and can be affected by your age, marital status, lifestyle factors, the percentage of equity you want to release, (your LTV), and specific features in your plan. This is why having a broker to compare rates for you is so important.
You can expect rates to be higher on a lifetime mortgage than on a standard residential mortgage.
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We work with a team of advisors, pre-vetted by us and regulated by the Financial Conduct Authority. Each has their own area of expertise and it’s our job to look at your circumstances and match you with the broker who is the best fit for you. You don’t have to trawl the internet looking for a suitable expert – we’ve got that covered.
Give us a call on 0808 189 2301 or make an online enquiry and we’ll assess your needs and arrange a free, no obligation chat with an advisor. Choosing a lifetime mortgage is a big decision but it’s not one you have to make alone.
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