Lifetime Mortgages (Equity Release)

What is a lifetime mortgage?

Put simply, a lifetime mortgage is a way to unlock the cash tied up in your home. It is a form of equity release available to, generally, the over 60s, which enables you to benefit from the money invested in your property whilst still continuing to live there.

Essentially, a lifetime mortgage (equity release) is a loan that is taken out and secured on your property. The amount that you can release is dependant on the value of your property, your age, and that of your partner, if appropriate and your state of health.

A lifetime mortgage (equity release) works like any other mortgage in that interest is accrued and added to the loan over your lifetime. However, unlike a conventional mortgage or loan, no monthly repayments are required. Instead, the full amount of the loan plus the compounded interest is paid off in full from the sale of the property either on death, or if you should have to move into residential care or sheltered accommodation.

Depending on how you want to use the money, the loan can either be taken in the form of a single lump sum or smaller withdrawals over the course of several years. The former being ideal for a significant one-off purchase, such as home improvements, but the latter is usually better if you are looking to supplement your income over a period of many years. If you are looking to raise as much money as possible to undertake a major project then lifetime mortgages (equity release) allow you to take more equity out of your property than other schemes.

Releasing the maximum available money must be weighed up against the fact that the longer you live, the more of your properties available equity you use. That said all plans now have negative equity protection such that you can never owe more than the value of your property. There is also an option on some products where you can fix the repayment amount at the outset of the contract, so, if you are looking to guarantee an inheritance for friends or family, this option may be the best one for you.

Other considerations include your current state of health, as it may be possible to receive a preferential deal if you are in poor health. Your adviser will be pleased to help you with this and any other questions that you may have.