What is a Lifetime Mortgage in Durham?

A lifetime mortgage is a variation of a later life loan that you have secured on your home. It allows homeowners that meet the eligibility requirements to achieve equity release in Durham. Your loan will be repaid with the sale of your property, once you have either died or moved into long-term care.

When you take out a lifetime mortgage in Durham, you will be using equity that has been sitting within your home throughout your time as a homeowner in Durham.

Many will use this for things like home improvements, inheritance, to pay off their debts, to fund retirement & care costs, amongst other things.

How does a lifetime mortgage in Durham work?

You first need to be eligible for taking out a lifetime mortgage in Durham. This means that you need to be at least 55 years old and also own a property that is at least worth £70,000. There is no requirement for you to still have an active mortgage at this point, it just needs to be your main residence.

In order to make a start on the process of taking out a lifetime mortgage in Durham, you first need to get booked in and speak to a trusted and experienced later life mortgage advisor in Durham. It’s their job to look at your case and see if equity release in Durham or an alternative, is right for you.

Lifetime mortgages are typically found in two main forms. The first one that you will see is a lump sum lifetime mortgage, with the second of these being a drawdown lifetime mortgage.

A lump sum lifetime mortgage works pretty much as the name implies, as an all-in-one release of equity into a lump sum payment. This lets you access the amount you need, as soon as you need it, but will leave you with a much larger loan to pay back.

A drawdown allows you to access the equity in your home and withdraw amounts from it, as you need it. This means you won’t just be releasing all your equity in one go and are saving it for when you need it most. You also will owe less, as you only pay interest on what is released.

With all forms of lifetime mortgage, you are able to simply let your interest roll-up, though this will likely also impact how much inheritance that you can leave behind, once the sale of your home has been completed, with the money from the sale being used to repay your loan.

Thankfully, not only can an expert later life mortgage advisors help you to cordon off a specific amount of equity in advance, for covering any inheritance you wish to leave, but due to our membership in the Equity Release Council, you also get the benefit of having the “no negative equity guarantee”.

This guarantee is a lifeline for a lot of families, as it ensures that your estate never owes more than the value of the property. You can rest assured knowing that your family will never owe more than the property value and struggle financially after your death or you have moved into long-term care.

Pros and Cons of a Lifetime Mortgage in Durham

As is most often the case with any mortgage type, there are both ups and downs to having a lifetime mortgage. The importance of these are dependant on the person taking out the lifetime mortgage in Durham, as well as what their future plans are.

Of course a bigger positive is how flexible releasing equity from your home can be, in using either option, be it the drawdown and lump sum varieties of lifetime mortgage. You also benefit from having flexibility in your monthly mortgage payments.

You can simply let your interest roll-up, which will mean you have more cash to play with as you won’t be making any payments payments per month. The downside is that these will leave you with much less for leaving an inheritance or care when you die or move into long-term care.

The topic of inheritance can be a difficult one for many too, as a vast amount of homeowners look to take out equity release in Durham to make sure this is done. Thankfully, you have the choice to ring-fence some of this equity as well, as your later life mortgage advisor in Durham will help you plan this.

The upside is that, so long as you are able to maintain these payments, you will have a bigger amount to leave behind for your family when you are no longer here. Also, as mentioned, your family will benefit from the no negative equity guarantee, meaning no debt will exceed the home value.

Furthermore, there are now new safeguards in place for homeowners, thanks to the standards set by the Equity Release Council.

Is a lifetime mortgage in Durham right for me?

What this all comes down to, is what it is you are hoping to achieve, combined with your own personal situation. There are many different mortgage types available to homeowners in later life, with lifetime mortgages and equity release in Durham only being a small part of wider options.

As a team of dedicated and trusted later life mortgage advisors in Durham, it is our job to take a look at your case and decide whether equity release in Durham, or an alternative, would be a better option for you to take out.

In many different cases, an alternative is most likely going to be better suited for you. Your later life mortgage advisor in Durham will be able to go over these options with you, before they make a start on the process of equity release in Durham and subsequently, a lifetime mortgage in Durham.

Oftentimes, the more appropriate options can include taking out a personal loan, a conventional mortgages or a remortgage in Durham, retirement interest only, term interest only, to name a few. If a lifetime mortgage is right, your later life mortgage advisor will make sure that all of your needs are met.

This includes laying out a plan for what you wish to achieve in the future, how you predict your circumstances could possibly change, and any inheritance you wish to leave behind.

To gain a better understanding of how we can help with a lifetime mortgage, get in touch with our later life mortgage advice team in Durham today.

To understand the features and risks of equity release in Durham, ask for a personalised illustration.

A lifetime mortgage in Durham may impact the value of your estate and it could affect your entitlement to current and future means-tested benefits. The loan plus accrued interest will be repayable upon death or moving into long-term care.

What Different Types of Mortgages are Available in Durham?

Different Types of Mortgages Explained in Durham

For first time buyers in Durham, in today’s mortgage market, you’ve got lots of options to choose from. But don’t worry, we’re here to help you figure out which one is right for you.

All mortgages work in a similar way, but they can be a bit different when it comes to things like interest rates, how you pay back the money, and any extra fees. So, finding the most suitable deal isn’t just about picking the one with the lowest interest rate. It’s more about finding the mortgage that fits your situation the best.

To make things clearer, we’ve put together this guide to explain the different types of mortgages you can get in Durham. We’ll explain the difference between repayment and interest-only mortgages – these are the two main types you should know about. After that, we’ll move on to tracker and fixed-rate mortgages, which are both ways to pay back your mortgage.

What is a repayment mortgage?

A repayment mortgage is a type of home loan where you make regular monthly payments that cover both the interest on the loan and a portion of mortgage amount. With each payment, you’re gradually paying off the borrowed money along with the interest that the lender charges.

As time goes on, the balance of your loan decreases because you’re steadily repaying both the interest and the mortgage. This means that over the course of the mortgage term, you’ll eventually pay off the entire loan, assuming you keep up with your monthly repayments.

Repayment mortgages are designed to ensure that by the end of the mortgage term, usually 25 to 30 years, you’ll have fully paid off the loan and own the property outright. Because you’re consistently reducing the principal balance, the interest you owe also decreases over time.

Repayment mortgages provide the benefit of a clear and structured path to full homeownership. With each payment, you’re building equity in your property and working towards owning it outright.

What is an interest-only mortgage?

An interest-only mortgage is a type of home loan where your monthly payments cover only the interest charges on the loan, and you’re not required to repay the original amount borrowed during the initial phase of the mortgage. This means that while you’re making payments, the amount you owe doesn’t decrease, and the mortgage balance remains the same.

With an interest-only mortgage, your payments are generally lower than those of a repayment mortgage because you’re not paying off the principal. However, it’s important to note that this type of mortgage typically has a specific term during which you’re allowed to make interest-only payments. After this initial period, you’ll need to start repaying both the principal and the interest, often leading to higher monthly payments.

Interest-only mortgages might appeal to landlords who are looking for lower initial payments or who anticipate a significant increase in their income in the future like with a buy to let mortgage in Durham, which would allow them to start repaying the principal later.

Interest-only mortgages can be complex and come with potential financial risks. It’s crucial to thoroughly understand the terms, risks, and potential consequences before considering this type of mortgage and to have a clear plan for how you’ll eventually repay the principal.

What is a fixed-rate mortgage?

A fixed-rate mortgage is a type of mortgage where the interest rate remains constant, or “fixed,” for a predetermined period. This means that the interest rate you start with when you take out the mortgage will stay the same throughout that set timeframe, regardless of any changes in the Bank of England’s base interest rate.

The fixed-rate period can vary, typically lasting for 2, 3, 5, or even 10 years. Once this period ends, the mortgage usually switches to your lenders standard variable rate, unless you decide to remortgage in Durham beforehand.

The main advantage of a fixed-rate mortgage is stability. Since your interest rate remains constant, your monthly payments won’t change, making it easier to budget and plan for your housing expenses.

What is a tracker mortgage?

A tracker mortgage is a type of variable-rate mortgage that is linked to a specific financial index, typically the Bank of England’s base interest rate. The interest rate on a tracker mortgage “tracks” or mirrors the movements of the chosen index, meaning that when the index rate goes up or down, the interest rate on your mortgage will also adjust accordingly.

For example, if you have a tracker mortgage that is set at “Base Rate + 1%,” and the Bank of England’s base interest rate is 0.5%, your mortgage interest rate would be 1.5% (0.5% + 1%). If the base rate increases to 1%, your mortgage rate would then become 2% (1% + 1%).

Tracker mortgages usually come with certain conditions, such as a “tracker period” during which the interest rate follows the index closely. After this period, the mortgage might switch to a different interest rate structure, like the lender’s standard variable rate (SVR).

One advantage of a tracker mortgage is that it provides transparency and predictability since your rate changes are directly tied to a publicly available index. However, just like any variable-rate mortgage, there’s the potential for your payments to increase if the rate goes up.

What is an offset mortgage?

An offset mortgage is a type of home loan that allows you to link your mortgage account to your savings and/or current accounts. The balances in these linked accounts are “offset” against the outstanding balance of your mortgage. This means that the amount of money you have in your linked accounts is subtracted from the amount you owe on your mortgage, and you only pay interest on the difference.

For example, if you have a mortgage of £200,000 and you have £20,000 in your linked savings account, you would only be charged interest on £180,000 (£200,000 – £20,000). This can lead to potential interest savings over the life of the mortgage.

Offset mortgages often come with slightly higher interest rates compared to standard mortgages, so it’s important to weigh the potential interest savings against the higher interest rate.

They can be particularly advantageous for individuals with substantial savings or those who receive irregular income, like freelancers or business owners. They provide a way to use your savings to offset the cost of your mortgage while keeping your funds accessible. As with any mortgage type, it’s crucial to carefully read and understand the terms and conditions to ensure it aligns with your financial goals and circumstances.