Re-mortgaging a lifetime mortgage to a more beneficial arrangement
- Client had existing lifetime mortgage in place, organised by another adviser many years ago
- Client worried about compounding interest due to existing high rate
- Wanted to explore options for remortgage as had heard that interest rates were lower.
- Due to inherit large cash lump sum that was in probate
- Recommendation for lifetime mortgage at a much lower interest rate which would preserve equity in the client’s property, even with additional early repayment charges
Client’s circumstances
A recently widowed man in his 80s.
Issues addressed
His existing lifetime mortgage had an interest rate above 6% and there was no facility to make fee-free repayments due to being an older product, which was far from an ideal arrangement.
He was also due to inherit a large cash lump sum and wanted to use some of this to reduce the debt secured against his property.
Tailored solution provided by John Lamb Hill Oldridge
After discussing several options with the client we found a balance between how much of the inheritance the client wished to retain for his own objectives/needs and how much he was happy to pay towards the existing debt.
Due to the reduced borrowing requested, the new lifetime mortgage had an interest rate of just 2.7%, fixed for life. We calculated that due to the lower rate of interest and the cash lump sum repayment from his late wife’s inheritance he would have more equity in his property after only two years. This also took into account the £55,000 early repayment charge.
As this was a modern lifetime mortgage, the new lender also allowed fee-free repayments of up to 10% each year, allowing the client and his family to control the roll-up of interest without the additional costs imposed by the previous arrangement.
This case illustrates how John Lamb Hill Oldridge advisers make recommendations that take account of clients’ changing circumstances. Remortgaging a lifetime mortgage can be beneficial and is something that should be explored.
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