What Are the Constituent Parts of Lifetime Mortgage Charges?
Lifetime mortgages tend to be based on a fixed interest rate. While there are variable options offered by some providers, they can offer a lesser degree of certainty. Lifetime mortgages differ from conventional mortgages as the interest is charged differently. Conventional mortgages have interest charged for an amount which is decreasing over time. Since you are not making repayments on a lifetime mortgage, the interest is charged on an increasing amount. However, there is the assurance from the Equity Release Council that although the debt on this type of financial product can grow quite quickly, you will never be in a situation where you are repaying more than the value of your property. This makes this type of product very attractive for a number of home owners. However, it is important to consider that there are various lifetime mortgage application fees which should be factored into your costs.
Just as with any form of mortgage product, your property will need to have the value assessed. The valuation fee is usually based on the actual value of the property and is usually set on a scale. The general rule of thumb is that the higher the value of your property, the larger the valuation fee. If a property has a value of over £1 million a specialist surveyor may need to be appointed. The fees for this type of valuation would need to be requested from the specialist. However, top and reputable brokerage companies will sometimes offer a free valuation as a component of a special deal which are available with some of the lifetime mortgage lenders such as LV, Aviva, Just Retirement or Hodge Lifetime & Partnership.
Lifetime Mortgage Application Fees
The amount of lifetime mortgage application fees can vary greatly. This is because this type of application fee is charged by the individual lender in conjunction with the application for a specific financial product. The charge for the fee can be either added or deducted by the actual lender, depending on the specific lender used and their terms of business.
For this particular aspect of a lifetime mortgage application, fees can vary a great deal. This is because the home owner is free to shop around and find their own solicitor. However, many people opting for a local solicitor who may offer cheaper conveyancing, may find that they experience a delay in the duration of the application. It is far better to choose a solicitor who has significant experience in equity release, who can ensure that the application does not exceed beyond the standard six week application period. If you are unsure about locating a specialist equity release solicitor, you could check whether they are a member of the Equity Release Solicitors Alliance (ERSA). The ERSA members tend to work on a fixed fee basis with a contingent for no sale, no fee.
Generally you will require assistance from an advisor for all aspects of your lifetime mortgage application. Fees charged will cover the provision of advice, researching your options, requesting product information and Key Facts Illustrations, completion and submission of the application. Advisors will also act as a liaison with the solicitor and facilitate a smooth transition of the application all the way through to completion. They will also prepare a Suitability Report, which outlines the details of what recommendations were made and why.
Early Repayment Charges
Although this is not a direct charge associated with lifetime mortgage applications, fees can be applied to the mortgage account if early repayment is made outside the criteria specified by the lender. This could be a fixed fee, for example a percentage of the repaid amount, or a penalty which is linked to the base rate set by the Bank of England. This can be one of the most contentious fees associated with a lifetime mortgage application.
Fees and charges can be as much as 25% of the borrowed amount, so it is often contested. It is certainly worth confirming the actual fees which are applicable before you finalise your lifetime mortgage application. Fees such as the early repayment charges can be extremely costly should there be an unforeseen change in your circumstances.
A lifetime mortgage might be the financial product which is best suited to your circumstances. However, these fees are only the main constituent parts of a typical lifetime mortgage application. Fees can accumulate into a significant amount, so it is important that you understand the exact fees and charges which are applicable within your chosen financial product. Each lender will have a slightly different policy regarding the amount of fees, so you should confirm the details about your specific lender with your advisor before finalising your application. If you are concerned about the fees relating to your specific application, you should speak to your advisor for further details.