A modern approach to Equity Release.
Unlock some of your property’s value, as a tax-free lump sum or additional income, while retaining ownership of your property.
We are both Independent Financial Advisers and Mortgage Brokers and are always happy to chat and see if a Lifetime Mortgage or Equity Release is right for you.
A lifetime mortgage is a type of equity release where a loan is secured against your home. The loan does not need to be repaid until you die or go into long-term care. If there are 2 of you, then it is when the last one dies or goes into long term care.
You don’t need to make any payments but can choose to do so if you wish. The cash from a lifetime mortgage can be taken as a lump sum or drawn down gradually and is tax free.
It frees up some of the wealth you have tied up in your home and you can still continue to live there for as long as you would like and retain full ownership of your home. The money can be used for almost anything you wish.
Equity release refers to a way of getting at the cash value of the equity in your home. Releasing this equity into cash so you can use and enjoy it now.
A lifetime mortgage (sometimes called an equity release mortgage) is a type of equity release. At the moment it is the most popular type of equity release and has largely replaced the original type of equity release, called a Home Reversion Plan. Unlike a Home Reversion Plan (where you effectively sell your home in advance and live there as tenants) a lifetime mortgage allows you to retain ownership of your property, along with lots of other benefits that give you a lot more control and flexibility (such as being able to move home, repay the mortgage if needed, using inheritance protection and many more features).
Lifetime mortgages are available to anyone over the age of 55 who owns their own property in the UK. If there are 2 applicant then the youngest must be at least 55. Your home must be worth at least £70,000 and you must be resident within the UK for at least six months of the year. Security for the mortgage will only be taken against your main residence.
The amount of money you can release from your house is measured by the value of your home and how old you are (sometimes health is also assessed). This is because the Lifetime Mortgage providers need to work out and make an estimate of how you will pay them and after how long. The older you are, the more money you can get.
This is different from a standard mortgage where your income is assessed in determining how much you can afford.
You can generally borrow around 20% to 60% of the value of your home with a lifetime mortgage. With equity release plans available to people from 55 and over, you will typically be eligible to borrow a smaller amount if you are closer to 55 with the amount (as a percentage of the property value) rising as you get older.
Please note that the amounts that you can get from a Lifetime Mortgage or Home Reversion scheme differ.
Most Lifetime Mortgages have an interest rate that is fixed for life, and although there are variable rate options, most people do choose fixed rates. The big advantage is that you can see exactly how the sum you owe changes over time and you are protected from potential rate rises.
Variable rate plans may offer an initial lower rate but rise over time. With lifetime mortgages from lenders approved by the Equity Release Council however, any product with a variable interest rate will have an upper rate limit that it can’t go above.
There are different types of lifetime mortgages. Lifetime mortgages are usually categorised according to how the equity that you release will be released (lump sum, drawdown etc) and repaid (rolled up, or part/full interest repayment).
As the name suggests, this type of lifetime mortgage will pay you a lump sum. You can use the money for whatever purpose you wish – for example, to cover medical or care expenses, home improvements or to pay off debt. Typically, interest on a lump sum lifetime mortgage will roll up to be paid off with your loan when you die or move into care and your home is sold. This can also be combined with a drawdown version, allowing you more flexibility.
A lifetime mortgage can be a great way to release equity from your home.
The main advantage is clear – it allows you to release cash that you can spend now, rather than leaving it tied up in your property. Many UK homeowners are “asset rich & cash poor”, living in valuable properties but without the cash in their pocket to enjoy life as they would like. A lifetime mortgage can be used to turn this equity into cash to enjoy it now, is tax free and can be used for almost anything.
However, there are quite a few things to consider with a Lifetime Mortgage to make sure you not only get the best deal and the right one for you, but that you understand any risks and if there are any more suitable alternatives.
We are Bristol Independent Financial Advisers and Mortgage Brokers and are always happy to discuss Lifetime/Equity Release Mortgages or anything financial. Please get in touch if you have any questions you would like us to help with.
We answer some of our most commonly asked questions below. But if you would like to know more then please get in touch and we will be happy to answer any query you may have on Lifetime Mortgages or Equity Release.
Yes, you can sell your house if you have a lifetime mortgage.
Like all equity release schemes, a lifetime mortgage is typically repaid with the sale of the property when the homeowners enter long-term care or pass away. However, you can sell the house and use the funds released to repay the lifetime mortgage. Alternatively you can move to a different property, as long as it still meets the lendets criteria.
It is possible to select a Lifetime mortgage where you make payments each month. You can choose the amount, from nothing up to the full monthly interest payment.
Yes, a lifetime mortgage can be repaid at any point and by any means.
Although a lifetime mortgage is typically repaid with the sale of the property when the homeowners enter long-term care or pass away, if you suddenly inherit a cash lump sum or sell an asset or win the lottery, you can repay the loan amount, plus the interest charges and end the equity release agreement. Be aware though that an early repayment charge may apply and these can be substantial.
Like with a standard Residential Mortgage, with a Lifetime Mortgage you will be required to keep the property in a good state of repair and have buildings insurance in place.
All equity release lenders will require that you have buildings insurance in place. The sum insured needs to sufficiently cover loss or damage by fire and all normal risks associated with a residential property. You also need to confirm that you will maintain buildings insurance until the end of the equity release plan. You will not have to take out home insurance with your equity release lender or with your broker, if you have used one.
You must also agree to maintain the property in a good state of repair. The mortgage is secured against the property value, and the lender will want to make sure it is retains it’s value.