Is it wise to get a Lifetime Mortgage to cope with the rising cost of living?
Did you know that a fifth of equity release plans that are taken out are to cover the day-to-day cost of living? Using property wealth can help to supplement your income during the current cost of living crisis. If you’re retired and concerned about maintaining your current lifestyle or wish to support your children and grandchildren through this difficult time, then a lifetime mortgage could help you. But are there any drawbacks to doing this?
Lifetime Mortgages are for life
Releasing equity by means of a lifetime mortgage is not a financial decision that should be taken lightly. Whilst current cost of living pressures can be a significant source of worry, it is important to consider the long-term implications of a lifetime mortgage. Hence the name, lifetime mortgages are a long-term product where a loan is secured against your home until you die or move into long-term care.
Lifetime mortgages charge compound interest
Lifetime mortgages charge compound interest, meaning that if you choose not to make monthly repayments, the amount you owe will roll up. This reduces the amount of equity left in your home and can eventually add up to the total value of your home. This can have an impact on the amount of inheritance that you can leave behind for your loved ones.
Interest rates are rising
With the Bank of England raising the base rate, interest rates are continuing to rise. Lifetime Mortgage interest rates currently start over 6.50%, which is considerably higher than the rates this time last year. There are a number of factors that can contribute to lifetime mortgage interest rates, including the requested LTV, your credit history and your age.
Conclusion
It is important to consider all your options and speak to a qualified equity release adviser. From taking out a retirement interest-only mortgage to remortgaging and exploring local authority grants, there are many options to consider before taking the plunge with a lifetime mortgage.
We have your best interests at heart. Get in touch with our friendly adviser, Joanne and arrange a consultation to discuss your requirements.
