Can You Pay Off a Lifetime Mortgage
A question that is often asked is, “Can You Pay Off a Lifetime Mortgage?” The short answer is yes. Its a mortgage just like any other mortgage. You are not required to make any payments or clear the balance until the last surviving mortgage holder passes away or goes into long term care. You may however want to pay it off early for a number of reasons such as selling your home or remortgaging it completely for a better interest rate. You may also be in receipt of a lump sum from an inheritance for example or a life insurance policy. These scenerios would also put you in a position where you may want to pay off a lifetime mortgage early.
Below you will find some information on the process of redeeming your Lifetime Mortgage and paying it off early.
Can You Pay Off a Lifetime Mortgage Early?
First thing you would need to do is check the original paperwork you have when you first took out the lifetime mortgage. This will tell you what early repayment charges are on the product you have. It will generally be either a fixed early repayment charge for a given number of years or a variable based charge based on the specific UK Gilts attached to the lifetime mortgage. Feel free to send us a copy of the paperwork if you would like us to review your current situation.
Next you would contact your current provider (or ask us to do it for you) and obtain a redemption statement. This will tell you your current balance including the rolled up interest, any fees and early repayment charges that are payable and the mortgage closure fee. One thing to bare in mind if you are paying a lifetime mortgage off early due to selling your property, is the balance and the amount you are selling your property for. You need to ensure that the sale proceeds cover the balance of the mortgage. If the selling price is less than the balance then you are responsible for the shortfall.
The balance will include the initial amount taken, any further drawdown amounts, the rolled up interest, any early repayment charges and the providers redemption / closure fee. Feel free to contact us if you would like us to look into your current lifetime mortgage and its closure fees and we can help you decide if you can off your lifetime mortgage.
All products that follow the Equity Release Council standards will have a “no negative equity guarantee” built in. This means that once the last surviving mortgage holder passes away or goes into long term care and the mortgage is due to be repaid the amount will not be more than the market value of the property. This is a safeguard to ensure the balance plus rolled up interest is never more than the market value of your house. Thus never leaving a debt to your estate and beneficiaries. Your mortgage terms and conditions will highlight this.
Paying Off a Lifetime Mortgage – When Early Repayment Charges Don’t Apply
- The final surviving mortgage holder passes away or goes into long term care
- Some plans will have downsizing protection allowing you to port it to another property (check terms and conditions)
- Some plans will have a 3 year penalty free period after first death
- If fixed early repayment charges then the date has passed the lenders timescale. Most products with fixed early repayment charges have them fixed for a period of between 8 – 15 years.
- If variable there are two factors. The timescale involved and the benchmark gilt rate. Again contact us if you would like us to review
- Payments you make within the allowable terms and conditions (see below)
Optional Partial Repayments
You will also have the option of making partial ad-hoc payments if you so desired. Most plans allow payments of around 10% of the amount borrowed per year penalty free. This is a great way of paying off a lifetime mortgage if you so required.
Hopefully this has helped answer the question, “Can You Pay Off a Lifetime Mortgage”