Equity Release Schemes - Fixed Repayment Lifetime Mortgage
This fixed lifetime mortgage offers a pre-determined fixed charge against the property.
A fixed repayment lifetime mortgage offers the guarantee of knowing what percentage
of the property will be given up on final sale. This is a form of inheritance guarantee, not
commonly used. Fixed lifetime mortgages provide a cash facility which can be drawndown
either by a lump sum or regular fixed income. No monthly payments are required.
How Does a Fixed Lifetime Mortgage Work?
Initially, the fixed charge is decided by the lender based on age, valuation of property & medical questions. This
generates a cash facility which can then be taken as lump sum or regular income over a period of years. Unlike
an interest only lifetime mortgage no interest is repaid, nor any interest charged by the equity release lender.
The fixed lifetime mortgage is repaid upon death or moving into long term care. On death the agreed portion of
the sale proceeds are passed back to the lender, whilst on moving into long term care the scheme can present
two further options: -
- Provide an income upon repayment of the fixed charge. The lender provides an option to purchase
a lifetime annuity which guarantees an income for life and helps to cover care fees costs. - Rather than taking the lifetime annuity, a reduction in the fixed charge can be taken
Regulated equity release schemes
Fixed repayment lifetime mortgages are provided by equity release companies that are members of SHIP. As
such they have the in-built protection features such as a no-negative equity guarantee & right to remain in the
property for life. Additionally the applicant retains 100% ownership of the property & any escalation in its value.
Points to consider with fixed repayment schemes
Consideration should also be given to any alternatives that may be suitable such as an interest only lifetime
mortgage, roll-up equity release schemes or a home reversion plan. Attitude to risk should be discussed, as
- If you died in the early years, then a fixed repayment lifetime mortgage may offer poor value
- A further advance can be taken and will result in a new additional fixed charge being applied
- The maximum charge that can be arranged is upto 75% of the property value
- Fixed lifetime mortgage plans are currently only available in England and Wales
With an overlap of features between the fixed lifetime mortgage and other equity release schemes, it is
important that professional advice is received. Compare Equity Release advisers explain the implications
of fixed repayment lifetime mortgages and can provide advice and guidance as to their suitability.
How to obtain Fixed Lifetime Mortgage advice
For independent equity release advice call the Compare Equity Release helpline on 0800 678 5169 or
complete the online contact form where a local adviser will be in touch.
These are fixed lifetime mortgages and home reversion plans. To understand their features and risks, ask
for a personalised illustration.
