As clients start making retirement choices, deciding between downsizing or opting for a Lifetime Mortgage is a major consideration with lasting financial implications. In this article, we consider some of the key practical factors to think about – watch out for the next article for even more points for you to consider.
1. Ongoing Costs
Downsizing can reduce or even eliminate existing mortgage payments, potentially bringing financial relief and lowering utility and maintenance costs. While this frees up income, it also locks much of the family’s wealth into the property.
With a Lifetime Mortgage, the client remains in their home, and flexibility around interest payments is often available. However, any unpaid interest compounds, increasing the balance owed upon the homeowner’s passing or if they transition to long-term care.
2. Mortgage Fees
Without requiring a new mortgage, downsizing may incur no new mortgage fees. However, early repayment charges might apply if an existing mortgage is redeemed early.
Lifetime Mortgages generally have costs such as arrangement fees, advisor fees, and legal fees. Survey costs for property valuation are also common, which also need to be considered.
3. Valuations and Surveys
Even when purchasing without a mortgage, a property survey is advisable to validate the price and uncover potential issues but not obligatory (However, we would say that it can be dangerous or foolish not to have a survey of some sort when acquiring any property). For Lifetime Mortgages, the lender typically requires a property valuation, though some lenders cover this cost.
Penn Financial is here to provide the expert guidance clients need to navigate these costs and considerations. Reach out to us today.
Contact: Paul Smith
0333 34 44 34 8
The information provided in this article is not intended to constitute professional advice and you should take full and comprehensive legal, accountancy or financial advice as appropriate on your individual circumstances by a fully qualified Solicitor, Accountant or Financial Advisor/Mortgage Broker before you embark on any course of action.
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