What is a Lifetime Mortgage?

To put it simply ‘equity’ is how much your home is worth once you have deducted any loans secured against it, such as a mortgage. If you have no mortgage, the full value of your home is its ‘equity’.

Equity Release

‘Equity Release’ allows you to turn equity from the value of your home in to cash, whilst allowing you to remain living in the property. Lifetime Mortgages are named this way as they are designed to last for your entire lifetime, with the balance of the loan, plus interest, only becoming due when you (and your partner, if jointly owned) either pass away or move in to long term care. The cash you release can either be paid to you as a one-off lump-sum or can be taken in stages as and when you need it. The interest on a Lifetime Mortgage can either be paid monthly, rolled up and added to the final balance, or it can be a combination of the two.

Home Reversion Plan

The other type of equity release product available is a Home Reversion Plan. This is where you sell all or part of your home in exchange for a lump sum or a monthly income. You are no longer the sole owner of your home, and you typically get less than the true market value for the part of the home you sell.

A Lifetime Mortgage will reduce the value of your estate and may affect your entitlement to means-tested benefits and tax status.

The impact of not servicing monthly interest payments on a Lifetime Mortgage is that the outstanding debt can grow rapidly, thus reducing the value of your estate. 

For example, if the interest rate was 7% a year, a £50,000 loan would double to £100,000 after 10 years assuming no repayments are made.

This is an example for illustrative purposes only and personalised advice and recommendations should be sought from a qualified professional.

You are strongly advised to register a lasting power of atorney. This will allow your affairs to be managed by somebody else if your mental abilities significantly decline.