Lifetime Mortgages

With a Lifetime Mortgage, as with a conventional mortgage, you borrow money secured against your home. This type of equity release mortgage may be:

• A Fixed Repayment Lifetime Mortgage. You get a lump sum, but don't have to pay any interest. Instead, when the home is sold, you have to pay the lender a higher amount than you borrowed. That amount is agreed in advance. The lender uses this higher sum to repay the mortgage when your home is sold.
• A Home Income Plan. The money you borrow is used to buy a regular fixed income for life (an annuity). This income is used to pay the interest on the mortgage and the rest is yours. The amount you originally borrowed is repaid when your home is eventually sold.
• A Roll-up Mortgage (rolled up means interest is added to the loan – for example, each year). You get a lump sum or regular income and are charged a monthly or yearly interest which is added to the loan. The amount you originally borrowed, including the rolled-up interest, is repaid when your home is eventually sold.
• An Interest-only Mortgage. You get a lump sum, and pay a monthly interest on the loan, which can be fixed or variable. The amount you originally borrowed is repaid when your home is eventually sold.

Some lifetime mortgages include a shared appreciation element. This means the lender has a share in the value of your home.

 Click here for our Quick Equity Release Calculator and Enquiry Form

 A Lifetime Mortgage can provide:

• one-off cash lump sum
• further cash lump sum drawdowns (whereby you withdraw small lump sums in stages)
• a guaranteed income for life via an annuity
• a combination of lump sum and income                                 

Although you don’t have to make any monthly mortgage repayments, you remain responsible for the repair and maintenance of the property and all household-related bills, such as council tax and service charges.

Some equity release providers offer a drawdown facility, whereby you can choose to take an initial advance (from the total amount you are allowed to borrow - called the "cash facility") and draw on this, as and when required. A new fixed rate of interest is agreed for each fresh advance.

This enables you to hold down the cost of borrowing because you only pay interest on the funds you have actually drawn down, rather than having to pay compound interest on a large initial lump sum, which may be bigger than you really need.

If you need to move into residential care, most equity release providers will insist that the house is sold and the mortgage redeemed (unless there is a spouse or another individual registered on the mortgage still living at the property, in which case the mortgage is redeemed on second death).

However, a few equity release providers will allow an individual or a couple to rent  their property while in a nursing home.

If you wish to move house, this is possible, providing the new home meets your lender’s mortgage criteria and there is sufficient equity remaining in the existing property. However, you are responsible for all the costs of moving.

The youngest member of your household must normally be over 60 years old to be eligible for equity release (although a few providers will accept people over age 55), and there is no upper age limit.

Cash released is tax free on receipt, but once you invest this cash, it may become liable to income or capital gains tax, depending on where you invest it. If the mortgage is repaid early (for instance if you  move into care), there may be an early repayment charge.

It is essential that you consider the effect of equity release on any state benefits you are receiving or might be eligible to receive in the future, such as pension credit, council tax rebate and some care allowances.

Is it right for you?

It depends on your age and circumstances. For example:

• A Fixed Repayment Mortgage becomes a better deal if you live much longer than the lender thinks you will. But if the home is sold much earlier than you planned, you will get a worse deal.
• An Interest-only Mortgage with variable interest rates may not be suitable, because the interest rate may rise faster than your income.
• With a Roll-up Mortgage the interest you owe can grow quickly. Eventually this might mean that you owe more than the value of your home, unless you have a no-negative-equity guarantee.
• A Home Income Plan only results in a small income after paying interest. It is only suitable if you are older, perhaps around 80.

 Click here for our Quick Equity Release Calculator and Enquiry Form