A lifetime mortgage is a later life loan that will be secured on your home, allowing eligible homeowners to achieve equity release. This loan does not need to be repaid until you have either died or have moved into long-term care, at which point the property would be sold, repaying the balance.
In taking out a lifetime mortgage, you are freeing up some of the wealth that you have built up within your home over your duration as a homeowner, to use for things like home improvements, inheritance, paying off debts, to fund a lavish retirement, for care costs, and more.
First of all, you will need to be eligible to take out a lifetime mortgage. To do this, you will need to be at least 55 years old and own a property that is worth at least £70,000. You do not need to be a mortgage holder to do this, you just need to own a property and it be your main residence.
To get started on the lifetime mortgage process, you will need to speak with a qualified and professional later life mortgage advisor. They will review your situation to see if equity release or an alternative, is right for you.
Lifetime mortgages typically come in two main varieties. The first is a lump sum lifetime mortgage, the second is a drawdown lifetime mortgage.
A lump sum lifetime mortgage is as you would expect from the name, an all-in-one release of funds in a lump sum. This gives you as much as you need, as soon as you need it, but results in a much bigger loan.
A drawdown allows you to gain access to your equity and draw upon it as and when you need it. This means you aren’t releasing everything in one go and are only using what is necessary for you at that time. You also only pay interest on what you release, which means you don’t owe as much back.
With any type of lifetime mortgage, you have the option to allow interest to roll-up, though this will also impact the amount of inheritance that is left once the sale has been completed and the loan repaid.
Thankfully, not only can a later life mortgage advisor help you to ring-fence a portion of equity ahead of time, to use for that purpose, but due to our membership in the Equity Release Council, you will benefit from the “no negative equity guarantee”.
This guarantee means that even if your debt increases, your estate will never owe more than the value of the property, so you can rest easy knowing that your family won’t be struggling after you have died or moved into long-term care.
As with any mortgage type, there are both pros and cons to taking out a lifetime mortgage. The importance of these vary from person to person, depending on what it is you are looking to achieve.
Of course the biggest positives to look at, are the flexible means of how you are able to release equity from within your home, with the drawdown and lump sum variances of a lifetime mortgage. Speaking on flexible, there is also flexibility in how you make back your payments.
You are able to allow your interest to roll-up, giving you more cash to play with as you won’t be making monthly payments. The downside to this, is that letting interest roll-up will leave you with less equity to use for care costs or inheritance, when you die or move into long-term care and the property is sold.
The topic of inheritance can be a deal breaker for a lot of people as well, as many homeowners look to take out equity release as a means of doing this. Luckily, you are able to ring-fence some of your equity for this purpose, as your later life mortgage advisor will help you to plan for the future.
Thankfully, if you are able to maintain these payments, you will have more to leave behind for your family when you are gone. Also, as we said, there is the “no negative equity guarantee”, which means your family won’t owe anymore than the value of your home.
In addition to these positives, there are new safeguards that have been put in place in recent years, thanks to the standards set by the Equity Release Council. You can read more about the pros and cons of lifetime mortgages in our article about the Pros and Cons of Equity Release.
This always come down to what you are looking to do and your personal circumstances. There are all different types of options available to later life homeowners, with lifetime mortgages and equity release being only one of many.
It is the job of an experienced, qualified and professional later life mortgage advisor to review your situation and determine whether or not equity release, and subsequently a lifetime mortgage, is the best route for you to take.
In many instances, an alternative will be better suited. This is something your later life mortgage advisor will check for first, before embarking on the process of equity release and a lifetime mortgage.
More suitable routes may include a personal loan, a conventional mortgage or remortgage, retirement interest only (RIO), term interest only (TIO) or something else entirely. If a lifetime mortgage is the best route for you to take, your later life mortgage advisor will make sure all your needs are met.
This includes laying out a plan for what you would like to achieve in the future, how you predict your circumstances to change, and any inheritance you wish to leave behind. To look more at how we can help with a lifetime mortgage, get in touch today with a member of our later life mortgage advice team.
To understand the features and risks, ask for a personalised illustration.
A lifetime mortgage may impact the value of your estate and it could affect your entitlement to current and future means-tested benefits. The loan plus accrued interest will be repayable upon death or moving into long-term care.