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Lifetime Mortgages article series, written by Chris Almond our Lifetime mortgage specialist. This is the second article in a dedicated series.
What do I need to consider before I apply for a plan?
No one knows what the future holds. To ensure that all your needs are catered for, you need to look at your financial needs now and in the future. By talking to a Lifetime mortgage adviser you will be able to assess how you can finance your needs throughout your retirement.
When planning your retirement finances and looking at how much you want to raise from a lifetime mortgage, you should consider the following:
- Do you have enough income to sustain your lifestyle and will it last as long as you will?
- Could your income change over the next 10 years? e.g. by paying off your mortgage
- How will inflation affect your income and savings?
- What would happen if your partner died or became ill and your income was reduced?
- Would the state look after you if you needed long term care?
- Are you receiving means tested State Benefits? A lifetime mortgage may affect them.
It would also be wise for you to consider all the options that may be available to you:
- You could sell your home and move somewhere cheaper, (but it could be tough and expensive
to find somewhere attractive and affordable)
- You could move in with family, but maybe you’d like to retain your independence, (or maybe
your family live far away)
- You could ask your family for financial assistance
- You could decide to access your savings or investments
- You may decide that your best option is to do nothing
Is a lifetime mortgage safe?
The Financial Services Authority regulates lifetime mortgages, ensuring that sales and processes are closely monitored. This regulation provides protection, security and if need be, access to official compensation schemes.
The Treasury is also committed to bringing ‘home reversion’ plans under FSA control in order to regulate all products that release equity in the near future. The FSA regulations specify that when a plan is recommended to a client, they must be presented with full details of why this plan is a suitable option and the best solution for them.
This must also include all costs, early repayment charges and interest rates. All lifetime mortgage promotions must also be clear, fair and not misleading.
S.H.I.P.
As an extra safeguard, Safe Home Income Plans (SHIP) is a trade body supported by the leading providers, which has a code of conduct and minimum standards of practice for providers of lifetime mortgages and reversion plans.
All these guarantees ensure your safety and protection if the provider is a SHIP member. It is your right as a customer to ask your adviser whether they will offer all the above safeguards. This will give you the peace of mind to know that, should you go ahead with a lifetime mortgage, you have more protection than ever before.
SHIP approved plans guarantee:
- The right to remain in your home for as long as you choose
- The freedom to move to another property, subject to lender criteria
- A no-negative-equity guarantee
- The added protection of the SHIP code
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