Income Lifetime Mortgage
Please note that this is only one example of how these plans work, for information purposes. There are other methods which may suit you better. You should take professional financial advice in this area. A family meeting may be suggested. Surrey Financial Advice is here to help. Remember, with Surrey Financial Advice, any initial consultation is free of charge (apart from a cup of coffee, perhaps) and you are under no obligation to proceed. [Contact Us]
With a typical plan, a lifetime mortgage is secured by a legal charge on the property you own. The loan is used to buy an annuity, paid monthly in advance and guaranteed for life. The lifetime mortgage loan is repayable should you die or move out permanently from the property on which it is secured. Until then, interest is deducted monthly from your annuity at the rate agreed when you joined the plan. The interest is fixed for your lifetime.
The Income Lifetime Mortgage can be arranged for either one or two people. For joint applicants, the annuity will continue to be paid, and all other terms of the plan will continue to apply, to the last survivor.
Questions and Typical Answers: (The answers will vary depending on the lender)
Will this plan work for me?
This plan can be arranged for single or joint applicants.
The plan allows you to arrange an income for life (an annuity), paid for by means of a lifetime mortgage loan which is secured by a legal charge on your home. Your annuity is paid as a monthly income, in advance, direct to your bank or building society.
Please ask for a personal Key Facts Illustration for details of the lifetime mortgage
How will my annuity be affected by taxation?
The Inland Revenue will treat part of your annuity, the "capital amount", as being a return on your own capital, so this is non-taxable. If you are a taxpayer, you will only be liable to pay tax on the remainder, which is called the "taxable amount".
Where appropriate, tax is deducted at the rate applied to investment income. (See personal illustration/s). Higher rate taxpayers are assessed for any difference by the Inland Revenue.
If you remain a non-taxpayer despite the extra income from the plan, your annuity can be paid without a deduction of tax, once they have confirmation from the Inland Revenue.
Tax laws are subject to change.
Will I keep full title to the property and benefit from any increase in its value?
Yes - but the Title Deeds will be held as security by the Lenders’ Solicitors.
IMPORTANT - No-one else should live at the property except for the plan holder(s) but special consideration may be given in certain circumstances. You must advise the Lender in advance if you anticipate anyone moving in with you.
What happens if I move out permanently, into a nursing home or to live with relatives?
If the property on which the lifetime mortgage loan is secured is no longer the main residence of the annuitant(s), you will need to arrange for the loan to be repaid from the property sale proceeds. Your annuity will continue to be paid for your lifetime.
What happens when I die?
Your annuity will cease when you die, or on the death of the last surviving annuitant. Interest will continue to accumulate until the lifetime mortgage loan is repaid.
Once I have decided to go ahead, is my decision final?
Once you have talked things over with your financial and legal advisers, you will be asked to sign formal offer documents, based on the lifetime mortgage Key Facts Illustration and Personal Annuity Illustration, which set out the agreement between you and the lenders. When they receive the signed offers, they will provide you with Notice of your Right to Withdraw. This explains your right to withdraw your application within 14 days, without penalty, if you do not wish to go ahead. In practice, it often takes two to three months for the legal formalities to be completed.
