Should borrowers use a high street lender or a specialist for a lifetime mortgage?

Lifetime mortgages are becoming increasingly common as more consumers look to release the cash locked up in the value of their home. A lifetime mortgage is a type of equity release only available to homeowners aged 55 and over. It has become increasingly popular way for retirees to access tax-free cash to boost pensions, fund home improvements or for holidays with no need to pay the money back until after the borrower goes into long term care or passes away. The money borrowed does accrue interest and the amount of interest borrowers owe can quickly build up.

Over the years more lenders have started to offer lifetime mortgages and the average fixed interest rates have also reduced. The traditional equity release lenders such as Canada Life and Legal and General have been joined by high street names such as Nationwide Building Society, Santander, TSB and Lloyds Bank. We’ve compared equity release providers below to help borrowers decide if they prefer to use a high street name or a specialist lender.

Nationwide Building Society launched its range of lifetime mortgages in 2019. It started by offering these to its existing members and then expanded this to all members of the public. Nationwide Building Society has a dedicated Later Life Lending Team covering retirement interest only mortgages and equity release.

• No valuation fees, product fees or advice fees
• Legal advice is mandatory
• £1,000 cashback on initial completion
• Maximum borrowing amount depends on the borrower’s age and property value
• Up 10% of the loan amount each year can be repaid without incurring an early repayment charge
• Fixed interest rate for the life of the mortgage
• Downsizing protection allows borrowers to move home after five years with the option to repay the lifetime mortgage without penalty if the new property does not meet their lending criteria

Santander appointed Legal & General Home Finance to offer lifetime mortgages to Santander customers in 2016. While Legal & General is the lender the advice that Santander customers receive is from a separate firm called Key Retirement.
Santander decided to offer lifetime mortgages to their interest-only mortgage borrowers that faced a shortfall at the end of their mortgage term and to those customers that needed to release equity to help fund their retirement.

Lloyds Bank and TSB both refer customers to Scottish Widows (a part of Lloyds Banking Group) for lifetime mortgages.

In 2020 Moneyfacts has awarded more than 30 lifetime mortgages from Canada Life with a top five- or four-star rating for these products. The lender has five different options for their lifetime mortgages:

• Capital Select – this allows borrowers to pay back up to 10% each year, repayments can be made at any time plus options for 3% cashback and access to a cash reserve to access money later.
• Interest Select – this allows borrowers to pay more than 50% of their interest each month and includes a cash reserve to access money at a late date.
• Lifestyle Options – no monthly repayments required, an inheritance guarantee to protect how much of the property’s value is passed on to beneficiaries and fixed early repayment charges.
• Second Home Options – free valuations, option to borrow more money later and choice of voluntary payments.
• Prestige – borrow up to £2m with no monthly payments and optional cash reserve.

Canada Life is also offering no completion fees up to 31 March 2021 on its Capital and Interest Select lifetime mortgages. Borrowers need to find an equity release adviser to discuss lifetime mortgages from Canada Life. The equity release council has a list of advisers in the UK.

Moneyfacts has awarded more than 50 lifetime mortgages from Legal and General Home Finance with a five and four-star rating. This lender was established in 1836 and has over £1.2 trillion of assets under management.  In our review of the best lifetime mortgage rates in November 2020 products from Legal and General Home Finance featured in the top ten best rates more frequently than any other lifetime mortgage provider.