There is a growing trend among the older generation of homeowners for what are called sell and rent back deals and ‘lifetime mortgages’. With sell and rent back deals senior homeowners take quick cash in return for their property, in which they become tenants. Lifetime mortgages are called this because it is the householder who gets the money from the bank rather than paying it to the bank as they have been doing for the majority of their house-owning lives.
More irreverently, people who take up this financial product are becoming known as the SKI generation. SKI is an acronym for ‘spending the kids’ inheritance’. And why shouldn’t they? They’ve worked hard all their lives to repay their home loans and they are nearing the end of the road with a small percentage of the original amount borrowed left to repay. Now it’s time to enjoy their sunset years with extra cash on hand for all their travel, pastimes and other dream fulfilling experiences.
This money idea is designed specifically for the older householder with small amounts of outstanding secured home debt. There are no other stipulations to be met before getting their hands on all that value tied up their ‘bricks and mortar’. So there are no medicals, no credit checks and no income verification. The new ‘silver years’ mortgage provides a life-enhancing cash flow regardless of the homeowners’ current cash circumstances.
It’s not really about the kids’ inheritance but rather a question of peace of mind at time of life when it is deserved. The homeowners that take up this cash opportunity can go ahead and make those improvements to their home, their standard of living, their healthcare or simply have a ‘just in case’ lump sum available for emergencies.
As long as the ‘lifetimers’ continue to live, in the main, in their property, it means the end of repayments. This aspect is what makes this turnaround home loan unique among the secured loan products. The ‘skiers’, with lifetime mortgages (not sell and rent back) continue to hold the title deeds of the property and not the bank or building society. If the householder survives beyond the mortgage term the lender can neither take further payments nor take possession. What is more the householder is limited to borrowing up to the value of the property. The obligation to repay the loan amount is held in abeyance until the house is sold on, the homeowner passes away or they take up a different primary residence.
The cash sum a homeowner can get from the turnaround home loan varies with individual circumstances but as a general rule of thumb it rises in line with both the age of the borrower and property value.
Council taxes and all utilities remain the responsibility of the borrower.
Bundled in with the loan amount that is repaid at the end of the term are all the costs of arranging this mortgage. There is always an arrangement fee, a one off opening fee, a termination fee (for the loan, not the homeowner), the ubiquitous insurance and finally a service charge, which is normally on a per month basis. The interest rates on lifetime mortgages are variable in line with the base rate.
As and when the homeowner sells the property in question, or indeed dies, then they, or the trustees of their estate, repay the outstanding promised amounts. Any remaining equity becomes part of the estate for the heirs or it remains in the hands of the borrower.
Sell and rent back, lifetime mortgages give quick cash for homes and are the perfect solution to financial worries of the older homeowner. They give freedom to people to do as they wish at a point in their lives where they have the time to enjoy life to the full..
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