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What Is The Maximum I Can Borrow On A Lifetime Mortgage?



What Is The Maximum I Can Borrow On A Lifetime Mortgage?

When it comes to Lifetime Mortgages, one of the most common queries we get is; What is the maximum I can borrow on a Lifetime Mortgage? If you are looking at arranging a Lifetime Mortgage, understanding the maximum borrowing potential of a Lifetime Mortgage is important.


In this guide, we will consider this and also explore the intricacies of the process plus other considerations you may need to bear in mind.


How Does A Lifetime Mortgage work?

It is very similar to a standard interest-only mortgage, in that, it allows homeowners to borrow a portion of their property’s value. The main difference is that the interest accrues over time and is added to the debt, which is then repayable upon death or if you go into long-term care. Monthly payments are not mandatory.


So, What Is The Maximum I Can Borrow On A Lifetime Mortgage?

If you are 55, then the maximum you can borrow is 23% of your property value. The older you are, the more you can borrow (always based on the youngest applicant – if it’s a joint mortgage). Once you get up to age 90, the borrowing amount is 55% of the property value. If you have health conditions, this may increase the amount that you can borrow.


What Other Factors Are There To Consider?

If you are contemplating unlocking equity from your property, or buying a new property, using a Lifetime Mortgage, knowing the borrowing capabilities with a Lifetime Mortgage is crucial. However, it’s not just about the numbers; it’s about finding the best option for your individual circumstances. For instance, opting for a drawdown Lifetime Mortgage could offer a more financially savvy method compared to a lump sum plan as you would only being paying interest on the money that you have needed to borrow, up to that point. Also, some lenders offer voluntary overpayments, which can help to keep the interest down, thus protecting your estate from the effects of compounding interest.


Some Lifetime Mortgages come with large early repayment charges for many years, so always look at how flexible the mortgage will be if you decide to move or down-size at a later date. Consider reducing the loan amount slightly to see if you are eligible for better products as many of the providers that will lend you the maximum amount have higher priced products than others who will lend slightly less.


Unlocking The Equity - What Can It Be Used For?

The beauty of Lifetime Mortgages lies in their versatility. Whether it’s buying a new home, gifting some of your inheritance early, funding a dream holiday, modifications to your home, or paying off an existing mortgage. The possibilities are endless.


The journey To Unlocking Equity

Embarking on the journey of securing a Lifetime Mortgage involves a timeline typically spanning between 4 to 8 weeks. This process includes various steps, the advice process (if using an adviser), applying for the mortgage, supplying documents to the lender, property valuation, legal work (conducted by a solicitor who is registered to advise on Lifetime Mortgages specifically) and setting a completion date when the funds will be released.


Are There Any Other Alternatives?

It is important to know that there are lots of alternatives to Lifetime Mortgages and if you are working with a mortgage adviser, they should be looking at all of these in detail BEFORE recommending a Lifetime Mortgage. These might include down-sizing, a standard mortgage where the lender is willing to lend up to a higher maximum age and/or into retirement, Retirement Interest Only (RIO) mortgages, benefits, government grants and savings.


How Can An Adviser Help Me?

Understanding Lifetime Mortgages requires careful research and planning to find the right fit for your current and future goals. Working with experienced professionals can help you avoid problems in the future by looking at your overall situation and using their knowledge of the market options available.

An adviser will take the time to go through your full situation, goals, and objectives and if no other alternatives can be found, advise, and arrange a suitable Lifetime Mortgage for you. They will also guide you through the process, from initial meeting, right through to completion when the funds are released.


Make sure you check an adviser and their company on the FCA register to confirm that they are allowed to conduct regulated mortgages and specifically, Equity Release mortgages (Lifetime Mortgages are a type of Equity Release).


What Is The Maximum I Can Borrow On A Lifetime Mortgage?

The short answer is you can borrow between 23%-55% of the property value, based on the age of you or the youngest applicant.  This guide delves into the maximum borrowing potential of Lifetime Mortgages, their workings, and considerations like age-based borrowing limits and health conditions. It explores alternatives such as downsizing and Retirement Interest Only mortgages, highlighting the role of advisers in navigating options and ensuring regulatory compliance. Thorough research and planning are emphasised for informed decision-making in unlocking property equity.



 

At MRG Private Clients, we believe in providing our clients with personalised guidance and support when it comes to making important financial decisions. We are based in Medway, Kent but offer our specialist mortgage services nationwide. Learn more about our specialist mortgage services >

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