Those studying the CeMAP syllabus will cover lifetime mortgages in CeMAP 1, 2 and 3.
A lifetime mortgage used to be more commonly known as a ‘Home Income Plan’. This sort of plan is ideal for a retired person who owns their own home outright and wishes to mortgage the property.
The lifetime mortgage is not repaid during the person’s lifetime. The mortgage lender will give the person a loan to value of somewhere between 25 and 55 per cent. Naturally, the younger the person is, the longer they will typically have the mortgage without repaying the lender and so the lower the LTV that will usually be approved.
Any interest on the loan is rolled up and added to the mortgage. Upon the death of the borrower, the property is sold and the money is used to repay the lender.
As this sort of mortgage is generally aimed at the retired and elderly population, lifetime mortgages should be approved under the Safe Home Income Plans (SHIP) scheme. If a mortgage lender is a member of the SHIP scheme, then they will:
- encourage the borrower to seek independent legal advice
- the borrower is entitled to stay in the home until their death so in the case of joint applicants, this is the death of the second applicant
- in the case of a negative equity situation, this is funded by the lender
- the lifetime mortgage has to be portable so can be moved to another property, although it is accepted that if the new property is insufficient security, then part of the mortgage may have to be repaid
Those on their CeMAP training course will cover all sorts of different mortgages types, of which this is just one of the many mortgages available.