Lifetime Mortgages  

Lifetime mortgages: your questions answered

Lifetime mortgages: your questions answered

Lifetime mortgages and equity release have proved popular subjects for discussion recently, especially during FTAdviser's latest webinar, in partnership with Legal & General.

In fact, the seminar proved so popular we did not have time to answer all of your questions then, so as promised, panellists who took part in the webinar have responded to some of the questions that were submitted by FTAdviser readers but which we could not answer on the day.

You can still view the seminar on-demand here: Thinking differently about property wealth

Question: When are we going to see proper equity release income plans with flexibility, such as the removal of commissions, or the creation of indexation on monthly payments as an alternative to defined benefit pensions?

From his personal perspective, panellist Rob Miles, head of intermediary sales for Legal & General, said: "As part of its 2021 portfolio strategy for both lifetime mortgage lending and intermediary firms, the Financial Conduct Authority has stated it will review whether customers are paying high fees and charges for the services they are receiving within the mortgage environment.

"There is not an outcome to this review yet but the reduction or removal of commission will no doubt be discussed."

He added: "All providers are continually looking to improve and develop the lifetime mortgage proposition to make it more flexible.

"The market is moving very quickly and it would not be surprising to see features such a more flexible form of drawdown, indexation etc being added."

Q: Currently there is only one lender in the second home space. Why is this and do you see this growing?

Miles said: "There is much debate about how large the second home market  is. A number of landlords will use the equity in one property to fund the next.

"This raises the question as to how much actual equity exists in the second home market. This is not to say there is not a market for second homes, but it is not as straightforward for a provider to move into as initially thought. 

"Having said that, taking out a lifetime mortgage on a second home removes a lot of the emotion that is linked to the main residence. Therefore, it is acknowledged that the market would be popular and is likely to grow providing the products are available."

Q: When looking to gift to the next generation is it most efficient to gift a large lump-sum rather than using a drawdown?

Another panellist, independent equity release specialist David Bowden, said: "To be effective as a gift for inheritance tax purposes there must be a transfer of value.

"Capital raised by equity release and then gifted would be such a transfer, but any drawdown facility cannot be assigned and is therefore inappropriate until such time as it is actually 'drawdown'."