How Does The Halifax Retirement Home Plan Mortgage Work In Practice?
In essence, the Halifax Retirement Home Plan is a conventional mortgage but with a twist.
Whereas, traditional mortgages finish once normal retirement age commences, the Halifax Retirement Home Plan comes to life.
This type of interest only lifetime mortgage is rare as only one other lender will offer lifetime mortgage deals on the following basis: –
1. NO repayment vehicle required e.g. ISA, endowment – therefore, you are safe in the knowledge that you can rely on the eventual sale of the property to repay the mortgage. Halifax does not insist on any savings plan or capital and repayment basis for this pensioner mortgage. The Halifax interest only mortgage is repaid on death, moving into long term care or even earlier sale of the property if downsizing. If either of the two former causes, then the Halifax Retirement Home Plan rules state the beneficiaries have 18 months in which to sell the property.
2. NO fixed term or end date: the Halifax Retirement Home Plan doesn’t have any rules over how long it can run. This makes it differ to a traditional mortgage as usually from onset they have a term of 25 years or below. Upon production of this Halifax retirement mortgage quote, mortality tables are used to estimate the term to repayment. If the current age of the applicant is already near to this then a term of 15 years is used. This is for guideline purposes only as the mortgage could last longer or shorter than this period.
3. Monthly payments required – as this is an interest only lifetime mortgage then monthly payments MUST be made in order to service the interest charged. The amount will depend on the interest rate charged and the cash lump sum borrowed. The effect of the monthly payments is that the mortgage balance will always remain level. This is in stark contrast to that of a roll-up equity release whereby the balance approximately doubles every 10 years. With the Halifax Retirement Home Plan balance remaining the same, beneficiaries are safe in the knowledge that their inheritance is thus protected and will know exactly how much is to be repaid back to Halifax mortgages.
4. Affordability based on income – while roll-up equity release calculators base the maximum release on property value and the age of the youngest applicant, the Halifax Retirement Home Plan uses an interest only mortgage calculation as its tool. Although Halifax doesn’t use a defined income multiple, their borrowing assessment is made on a series of questions using data such as type of income, existing debts, credit score and loan to value.
To establish qualifying criteria, always employ the services of a qualified lifetime mortgage adviser. They can advise on all the above and ensure that by withdrawing equity from your home does not affect any aspects of your finances such as means tested benefits.
Other Lifetime Mortgage Options
While it is nice to think about qualifying for the very loan that sounds perfect for you and your family, sometimes you may not. The interest only lifetime mortgage plan discussed above and the only other product on the market in the same category may not fit your needs. You may not have the monthly payment or the income that affords this plan. If that is the case, you can look at other lifetime mortgages. Lenders offering retirement products often have one or two options in order to help all consumers. Lifetime mortgages such as drawdown, roll up and enhanced are designed for specific consumers too.
Drawdown: a type of lifetime mortgage with a facility attached. In the beginning a small lump sum is taken and the rest of the equity is ready in an account to be withdrawn as necessary. If you only take the initial sum, interest accrues on that sum. If you take a little more interest accrues only on the money you actually remove from the account. In this way you have less interest compounding than roll up options.
Rollup: a roll up or lump sum lifetime mortgage gives a larger lump sum than drawdown and rolls up the interest onto the loan until it is repaid. Interest can accrue rather quickly with this mortgage and endanger any inheritance you might wish to leave behind with the sale of the house.
Enhanced: This mortgage is like a roll-up lifetime mortgage; however, the sum of money is larger. This is due to the expectation of illness taking you earlier than the average life expectancy.
The adviser should be FCA regulated and also hold the appropriate lifetime mortgage qualification so always check the credentials.
