Do Lifetime Mortgages Companies Take Ownership of Property and Keep My Deeds?September 25th, 2013
Lifetime mortgages are mortgages that have no fixed term, and can potentially go on until the end of life, or until early sale for some other reason. There are different types of lifetime mortgages, including interest only lifetime mortgages, roll up mortgages, and drawdown lifetime mortgages. Irrespective of the structure of repayment, a lifetime mortgage plan does not involve selling any part of your house to the loan provider.
Unlike home reversion plans, which involve full or part transfer of ownership of the property to the loan provider, a lifetime mortgage plan does not require transfer of ownership at all. Lifetime mortgages providers recover the loan amount when the property is sold, and the type of lifetime mortgage determines how the interest is charged and repaid.
Most people are uncomfortable with the thought of losing ownership of their property. Even though home reversion plans include a rent free lifetime tenancy agreement, the idea of losing legal ownership causes unease to many people. This is where lifetime mortgages have a distinct advantage over home reversion schemes.
In fact, this has been one of the major reasons why lifetime mortgages have proved to become so popular within the equity release sector. Most over 55’s choose lifetime mortgages as opposed to Home Reversions simply because of the aversion to losing ownership of their property.
A lifetime mortgage plan is essentially similar to a regular residential mortgage, wherein the ownership is maintained by the client, but the mortgage provider does place a first legal charge on the charges register at the Land Registry. The legal charge is not a transfer of ownership. It is simply a legal way the provider registers their legal right with the property.
Lenders are only allowed to lend if a first legal charge is placed on the property. Additional legal charges may be granted on the house, if additional loans have been secured against the property. A first legal charge ensures that if the client should default on payment or break specific loan terms, then the provider can take possession of the house. Property titles can be registered, which offers guaranteed ownership by the Land Registry, and unregistered, where ownership is proved by a copy of the title deeds and documentation. Old deed bundles become redundant once a property has been re-mortgaged or if you move house.
To sum it up, unlike home reversion schemes, a lifetime mortgage plan will not involve losing ownership of your property. The lender merely needs to register first legal charge of the property at the Land Registry as with any regular residential mortgage, but you maintain full legal ownership of your property.