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+
4.3%
Fixed
60£70k£10k£1m 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
4.6%
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.

 

Equity Release Explained

Equity release is a product designed to help older people borrow against the value of their home, while continuing to live in it. It is worth considering if you are worried about a shortfall in income to sustain your retirement. Find out more about releasing equity from your home here.

On this page:

  1. What is equity release?
  2. Am I eligible for equity release?
  3. The Moneyfacts Equity Release Advice Service
  4. Lifetime mortgages explained
  5. Types of lifetime mortgage
  6. What’s the cost of releasing equity?
  7. Disadvantages of releasing equity from your home
  8. Things to consider

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.

What are the benefits of releasing equity?

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)

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, for example to help grandchildren get on that first rung of the property ladder
  • Improve or repair your home
  • Go on the holiday of a lifetime or buy a new car/li>
  • 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)
  • Clear interest-only mortgage debt, where customers have been unable to secure a traditional remortgage with their current lender

Types of equity release

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.

Am I eligible for equity release?

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 55%. It’s therefore safer to use these eligibility criteria only as a guide and consult a provider or independent adviser before jumping in.

The Moneyfacts Equity Release Advice Service

The Moneyfacts Equity Release Advice Service is provided by MCB Financial Services, who can help you decide which type of equity release, 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

TickFully qualified to advise on the most suitable solution for you

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. The advisers at MCB are qualified to advise on the most suitable solution for you, whether that is a lifetime mortgage or a traditional mortgage.

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 an inheritance is important to you, tell your adviser as it's possible to do both.

Lifetime mortgages explained

It’s a big decision to make use of the equity in your house to take out a lump sum of money (or a series of smaller payments). While there’s no substitute for personal, independent advice, we’ve gathered the basic information you will likely need before talking to an adviser or broker about taking out a lifetime mortgage.

Note that we have chosen not to discuss home reversion schemes (the other type of equity release) in more detail here as they make up only a small percentage of the market compared to lifetime mortgages, and because MCB Financial Services does not offer them.

What is a lifetime mortgage?

A lifetime mortgage, also known as an equity release 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 into it. The cash you receive is tax-free and you can spend it on almost anything you like. Unlike with most other mortgage products, the older you are, the more you are likely able to borrow and the more benefit a lifetime loan might therefore hold.

Advantages and disadvantages of lifetime mortgages

Lifetime Mortgages
Advantages Disadvantages

  • You continue to own your home.

  • If the value of your property increases, you continue to benefit from it.

  • You can choose between a tax-free lump-sum or a regular income.

  • Alternatively, with a drawdown product you can access the tax-free cash as and when you need it. This means that you're only charged interest on the actual amount you use (remember, you're charged interest on the loan amount and any interest gained during that period).

  • You have the option to leave an inheritance (with an Inheritance Protection Guarantee).

  • You don't have to make any regular repayments but if you wish, you can choose a plan that allows you to make regular or ad hoc repayments.

  • The lifetime mortgage is repaid at the end of the plan. This is usually when the last plan holder living in the property passes away or moves permanently into long-term care.

  • You can move house after releasing equity, provided the new property meets your equity release provider's lending criteria.

  • The amount you owe increases during your lifetime as interest accumulates and is added to the loan. This reduces the value of your estate and possibly erodes any inheritance you could leave behind.

  • Equity release could affect your entitlement to means-tested state benefits.

  • If you decide to repay early there may be a substantial early repayment charge.

  • Depending on property prices and how long you live, you could owe as much as 100% of your home's value to the lifetime mortgage provider.

  • The interest may be higher than the interest on a standard mortgage.

  • Charges for equity release advice, valuation fees and solicitors' fees may apply, as well as admin fees.

  • Younger borrowers can't borrow as much.


How do lifetime mortgages work?

The interest that is charged when you take out a lifetime mortgage rolls up, gradually increasing the amount you owe throughout your lifetime. You don’t need to worry about repayments, though, unless you want to. Instead, when the last person named on the lifetime mortgage and living in the property passes away or moves into permanent long-term care, the property will be sold and the lifetime mortgage will be repaid through that sale.

Some plans will allow you to make regular or ad hoc repayments, should you wish to try and keep the decrease in your equity contained. There are also other ways through which you can make sure you can still leave behind a legacy for your loved ones, just remember that no matter what, releasing equity will reduce the value of your estate. To make sure you’re fully aware of the risks, it's best to speak with a specialist adviser, as well as anyone who stands to inherit, before taking out an equity release plan.

Types of lifetime mortgage

There are several different types of lifetime mortgage. The best product for you will depend on your personal circumstances, which is why it’s so important to seek professional, personalised advice from an expert.

With all equity release mortgage products, you borrow money against the value of your home. What does differ between plan types is how you repay the equity release loan. It’s important to weigh up the pros and cons of each type before you go ahead.

Roll-up

With this type of lifetime mortgage, you will not be required to pay anything back until the end of the term, which will be either when you die or go into long-term care. This is a clear advantage if you do not have a regular income. However, the interest can be eye-wateringly expensive, which could be a problem if you plan on leaving a legacy for your loved ones. The good news is that a lot of products now come with an Inheritance Protection Guarantee, which means you can ring-fence some of the value in your home for your loved ones.

Interest-only

If you do have a regular income, then an interest-only lifetime mortgage might be a good option for you to consider. You will be required to pay the interest portion of your loan each month, thus ensuring that you or your estate is only required to pay back the original amount you borrowed (so long as you keep up with the repayments). The disadvantage of this type of lifetime mortgage is that you must have a regular income, and you will need to be sure that this will continue until you die or go into long-term care. However, if your circumstances change and you no longer want to make monthly repayments, there may be schemes where you can revert to an interest roll-up.

Drawdown

This type of lifetime mortgage might be considered a best-of-both-worlds option (though whether it is best for you will depend on your personal circumstances, so always seek personalised advice). With a drawdown lifetime mortgage, a lump sum will be released into a cash reserve. You can take an initial lump sum, and then withdraw smaller amounts from this reserve (subject to minimum amounts). The advantage of this approach is that you will only pay interest on the amount you withdraw from the cash reserve. This means the interest repayment at the end of the term could potentially be lower than if you took out a roll-up lifetime mortgage.

Enhanced

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.

What’s the cost of releasing equity?

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.

Lifetime mortgage rates

An important consideration when looking to release equity from your home will be the lifetime mortgage interest rate and whether to opt for a fixed rate or a variable rate lifetime mortgage.

A fixed rate lifetime mortgage may suit someone looking for the peace of mind of knowing exactly what the product will cost them (or their estate).

A variable rate lifetime mortgage may initially have a lower interest rate than a fixed rate lifetime mortgage, but you will need to be comfortable with the possibility that it could increase in the future. As with regular mortgages, variable rates can be impacted by wider economic events, so it would be good to look at the economic and political climate before deciding on a variable lifetime mortgage.

Equity release interest rates are generally higher than conventional mortgage interest rates and it is important to be aware of how quickly interest can roll-up on an equity release loan. If you are worried about the build-up of lifetime mortgage rates over time, especially if you want to leave an inheritance, don’t hesitate to ask an independent adviser to explain to you exactly what you’re getting yourself into. It’s better to ask lots of questions and have lifetime mortgages explained thoroughly to you than it is to sign onto an equity release mortgage without knowing all the facts, as it’s a decision that can have a huge impact on the rest of your life as well as the inheritance you may want to leave to loved ones.

Lifetime mortgage provider charges and fees

Aside from the interest rate, it is important to consider the charges and fees that lifetime mortgage providers may require. A provider that offers low lifetime mortgage rates but with a high fee and unfavourable charges may turn out to be a worse choice compared with a provider that offers a somewhat higher equity release interest rate, but without fees or overly complicated charges.

One charge to pay particular attention to is the Early Repayment Charge (ERC). If you want at least the option of being able to repay your lifetime loan early, you will need to keep an eye on the ERCs that providers charge. Considering that some are linked to government gilt prices or the Bank of England base rate, you will need to do your homework to see if such a product could be worth the risk.

Of course, there are some products that simply charge a fixed ERC, but if gilt prices have fallen by the time you’re ready to repay your loan early, this might then turn out to be less advantageous. That said, you should be able to downsize or move without triggering the ERC or accruing other charges from your lifetime mortgage provider. Just remember to always check the small print to make sure.

All these complications an independent broker such as MCB should be able to advise you on, which is why their services could be well worth the fee they have to charge to be able to help you. After all, if an upfront cost can save you a lot of money down the line, isn’t that a worthwhile trade-off?

Disadvantages of releasing equity from your home

There are, of course, some disadvantages of releasing equity. For one, it 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. If your house is owned by both you and your partner, then the equity release mortgage will have to be in joint names.

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.

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 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 up to £999 is payable should you proceed to take out a plan that MCB recommends, and only payable upon completion.

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

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