Equity Release Mortgages - Lifetime Mortgage Rates | moneyfacts.co.uk

Equity release mortgage rates

  - Equity release schemes can be used to unlock some of the money - or equity - you have in your home. The money you unlock is tax-free and can be spent on almost anything. If you are 55 or over and own your own home, you could use equity release to help bolster your retirement income.

Compare Lifetime Mortgages

Provider APR Fixed/VariableMin ageMin property valueMin loanMax loan 
Legal & General Home Finance
Flexible Lifetime Mortgage
Flexible Lifetime Mortgage
4.0%
Fixed
55£100k£10k£4m Speak to an Advisor
Product Fee: No Fee 
LV=
Lifetime Mortgage – Lump Sum+
Lifetime Mortgage – Lump Sum+
4.2%
Fixed
60£70k£10k£500k Speak to an Advisor
Product Fee: £595 
Hodge Lifetime
Lump Sum Lifetime Mortgage
Lump Sum Lifetime Mortgage
4.4%
Fixed
60£100k£20k£500k Speak to an Advisor
Product Fee: Application £595
Aviva
Lifetime Flexible Option
Lifetime Flexible Option
4.2%*
Fixed
55£75k£15k£600k Speak to an Advisor
Product Fee: Arrangement £5
More 2 Life
Capital Choice
Capital Choice
4.8%
Fixed
55£70k£15k£1.5m Speak to an Advisor
Product Fee: No Fee 
Just
Drawdown Lifetime Mortgage
Drawdown Lifetime Mortgage
5.5%
Fixed
60£70k£10k£600k Speak to an Advisor
Product Fee: Application £500

Notes:
Where different fees apply according to location, the fee for England and Wales is shown.
* Example rate. The rate offered is based on your personal circumstances.

The Moneyfacts.co.uk Lifetime Mortgages comparison shows a selection of products chosen by our independent experts. Where we have been able to we have also provided a link for you to apply via Moneyfacts.co.uk today, or to speak to a specialist equity release adviser.

 

On this page:

  1. What is equity release?
  2. What can I use equity release for?
  3. Am I eligible?
  4. How does equity release work?
  5. Things to consider
  6. What is a lifetime mortgage?
  7. The Moneyfacts Equity Release Advice Service

What is equity release?

Equity release allows you to use the equity in your home (i.e. the amount you own outright, the value of which includes your original deposit and the amount you’ve managed to accumulate by paying off a repayment mortgage over the years) to get a special loan that won’t need to be paid back until you die or move into long-term care. As such, you’ll be able to take advantage of the money in your property without having to downsize.

The benefits of releasing equity are that you can unlock money from your home while:

  • Continuing to live in it
  • Continuing to own it (unless you choose a home reversion scheme, as you’d be selling all or part of your property)
  • Still leaving an inheritance for your loved ones by ring-fencing some of the value in your home (provided you get an Inheritance Protection Guarantee)
  • Never owing more than the value of your home (provided you get a No Negative Equity Guarantee; our preferred supplier MCB Financial only advises on products that come with this)
  • Not having to worry about taxes (the cash you unlock is tax-free, and can be released as a lump sum or in stages. However, if you invest the money or put it in a savings account, you may be taxed on its growth; speak to your adviser about this for more information)

There are, of course, some disadvantages as well. For one, releasing equity will certainly have an impact on the inheritance that you are able to leave your loved ones. That’s why you should discuss it with those who will be affected before making a decision.

If you decide to release some of the equity in your home and take out the policy in your name only then your partner may be affected. If you don’t include them in the contract, or get a new partner after you release equity, they might be forced to move out if you pass away first, or move into long-term care. To minimise any discomfort – or worse – for the people you care about, make sure they are sufficiently taken care of before signing on any dotted line.

As far as your own situation is concerned, beware that taking out any loan secured on your property could make it more difficult for you to move home, should you decide to do so in the future (unless moving into fulltime residential care). It could also affect any state benefits you are currently receiving or may have received in the future (had you not released funds from your home in this way). Similarly, there may be some upfront costs associated with arranging equity release, and remember that you’ll still be charged interest on your loan, which can accumulate rather substantially over the years. A qualified equity release adviser should be able to tell you more about this, and be able to give you a personalised picture.

What can I use equity release for?

With equity release you can stay living in the home you love and at the same time access the extra cash you need for your retirement. You can spend this on almost anything you want.

We've found popular uses to be:

  • Give family members financial help or gifts
  • Improve or repair your home
  • Go on the holiday of a lifetime or buy a new car
  • Remortgage (if you have an existing mortgage but do not want to continue making monthly payments)
  • Clear any current borrowing such as loans and credit cards (though note that consolidating existing debt using equity release could end up costing more in the long term)

Am I eligible?

If you:

  • Are at least 55 years old (or the youngest applicant is, if you’re planning to apply as a couple),
  • Own your own home of standard construction in the UK, and
  • Have a house worth at least £70,000

…Then you may very well be eligible for equity release. Of course, each lender will have their own criteria, so this may vary, but your adviser will be able to guide you towards the best equity release product for your circumstances based on the information you supply to them. What’s important is that you’re near or in retirement and own your own house which is worth enough to be of interest to a lender.

That said, the older you are, the more you may be able to borrow. For example, at 65 you may be able to borrow between 25% and 30% of the value of your home, while older applicants may be able to borrow as much as 50% or 60%. It’s therefore safer to use these eligibility criteria only as a guide and consult a provider or independent adviser before jumping in.

Equity Release

How does equity release work?

Equity release is in some ways a unique type of secured loan on your property. You will accrue interest, as with any loan, but you won’t need to repay it in your lifetime – unless you choose to (and your lender allows early repayments). Instead, the loan is repaid through the sale of your home after you die or move into long-term care.

There are two types of equity release schemes:

  • Home reversion, where you sell part or all of your home at less than the market value in exchange for a tax-free lump sum or regular payment, while still being able to live in your own home.
  • Lifetime mortgages (also known as equity release mortgages), which like regular mortgages allow homeowners to take out a loan using their home as security. This is the more common type of equity release scheme.

The best plan for you will depend on your personal circumstances, so always seek professional advice based on your own situation. Note that the advice service provided by our preferred broker, MCB Financial Services, does not include advice on home reversion plans.

As mentioned, there are likely to be some charges associated with taking out equity from your home. These include adviser fees, as it is very hard to do without an adviser on your side making sure you get a deal that is right for you as well as your beneficiaries. You will also likely have to get a valuation done to set the exact value of your property, which can be quite costly, and then there are application and solicitor fees to take into account as well.

Overall, think of the cost of moving house, minus the removal vans, and you’ll have an idea of the charges that you may need to pay. Depending on the product, you may be able to add these charges to the loan.

Equity release interest rates, which can be charged daily or monthly, tend to be higher than other loans due to their unique nature. There are both fixed and variable rate plans available, although fixed rates are more common. While fixed rate deals allow you to know exactly what you are getting yourself into, this also means there’s no room for flexibility.

Things to consider

  • You can choose to release equity as a lump sum or in stages. Taking it in stages, i.e. as drawdown, will generally be cheaper, as you won’t start accruing interest until the money is actually released. This is compared with lump sum mortgages, where you release the full amount in one go and will therefore be charged interest on that higher amount from the outset. Speak to an expert to see which option is best for you.
  • In many ways, equity release is for life. That’s why it is vitally important that you understand the ramifications of releasing equity from your home. While there are many advantages, there are also some considerable drawbacks, as discussed above.
  • Releasing equity will reduce the value of your estate. Consider an Inheritance Protection Guarantee to ring-fence some of your estate for your heirs.
  • Most lifetime mortgages do not require repayments during your lifetime (or until you go into full-time residential care) so interest can build up rapidly.
  • If you do decide to repay your lifetime mortgage before the term ends, you might have to pay an early repayment charge.
  • Your entitlement to means-tested state benefits might be affected.

So, as you want to be thorough, don’t forget to ask your equity release adviser about lump sum versus drawdown, inheritance protection, what kind of loan flexibility might be best for you, a no negative equity guarantee, and the general effects of releasing cash from your home on the rest of your life and your family.

What is a lifetime mortgage?

A lifetime mortgage is a loan secured against your home and is the most common type of equity release plan. With an equity release mortgage, you retain ownership of your home, while freeing up some of the cash tied within it.

There are several different types of lifetime mortgage. Each offers something slightly different, and the one that is right for you will depend on your personal circumstances.

Roll-up lifetime mortgages

With a roll-up lifetime mortgage, you borrow money against the value of your home. Unless you go into full-time care, you won't need to repay anything during your lifetime as your estate pays off the debt upon the sale of your home. Equally, if you do go into full-time care, the sale of your home will pay off the lifetime mortgage.

Drawdown lifetime mortgages

A drawdown lifetime mortgage gives you more freedom to release the money when you like. Your lender agrees to an overall sum of money you can borrow, which is set aside for you. You can take an initial lump sum and then withdraw smaller amounts when you need it (subject to minimum amounts).

Interest-only lifetime mortgages

An interest-only lifetime mortgage could be a useful option for you if you have a regular income from other means. They work in the same way as regular lifetime mortgages, except that instead of allowing the interest to 'roll-up' you will be required to pay it off each month. The main advantage of this method is that you or your estate will only have to pay back the amount you borrowed initially as you will have kept up the interest repayments. If circumstances change and you no longer want to make monthly repayments, there are schemes where you can revert to an interest roll-up.

Enhanced lifetime mortgages

If you qualify for an enhanced lifetime mortgage, it could enable you to access better rates and/or borrow more money. These equity release mortgages are for people with specific medical conditions and/or lifestyle choices. You will need to disclose your medical history and lifestyle choices in a specially designed questionnaire to be assessed for eligibility for these products. If you think you may qualify for this type of lifetime mortgage, then discuss this with your equity release adviser as you could get a better deal. It is worth noting that lifetime mortgage providers all offer different options, and some might not offer enhanced deals. These schemes are available on a roll-up or drawdown basis.

The Moneyfacts Equity Release Advice Service

The Moneyfacts Equity Release Advice Service is provided by MCB Financial Services, who can help you decide which one of these schemes, if any, is right for you.

MCB Financial Services offers:

TickA friendly service

TickNo obligation advice – fees are paid only on completion of your loan and with money raised from releasing equity

TickYour appointment can be held at your convenience at a time comfortable to you

TickMCB encourage you to involve your family and beneficiaries

TickYour adviser will explain how releasing equity from your property may affect your entitlement to state benefits

TickMCB offer whole of market advice for lifetime mortgages from the following equity release providers:

  • Aviva
  • L&G
  • LV=
  • More 2 Life
  • Pure Retirement
  • Hodge Lifetime
  • Just
  • Retirement Advantage
  • One Family

MCB Financial Services will be delighted to discuss your requirements with you and offer whole of market advice on lifetime mortgages. Simply fill in the form here and MCB will call you back for a no-obligation chat.

Helping you make the right choice

During your appointment, a specialist adviser will talk you through all the advantages and disadvantages, based on your own personal circumstances, so you can make an informed decision. You will be under no obligation to go ahead with anything, and as fees are only paid upon completion you have nothing to lose by having that discussion.

The expert advisers at MCB Financial Services will let you know whether equity release is right for you and if not, will aim to help you find another way to get the money you need.

They'll take the time to understand your needs and concerns. You can relax knowing that the product you're recommended is provided by a member of the Equity Release Council, an industry body that helps ensure all products are safe and accessible for consumers.

There's no obligation or pressure to buy and you're encouraged to involve family or close friends in the discussion. If leaving inheritance is important to you, tell your adviser as it's possible to do both.

What next?

Call the Moneyfacts Equity Release Advice Service provided by MCB Financial Services on 0800 193 0036 (lines open 9-5, Monday - Friday) or fill in the short form here to arrange a no obligation call back. A fee of £999 is payable should you proceed to take out a plan that MCB recommends.

MCB Financial Services Ltd, Unit 13/14 Beech Avenue Business Park, Taverham, Norwich, NR8 6HW. MCB is authorised and regulated by the Financial Conduct Authority.

Further information on equity release

Equity Release FAQs

Equity Release Jargon Buster

Equity Release Council

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