Lifetime Mortgage - Equity Release | moneyfacts.co.uk

Equity Release - Lifetime Mortgages

  - Compare lifetime mortgage rates using the table below. When you are ready to speak with an adviser, our preferred Equity Release broker, MCB Financial Services, will be delighted to advise you. Simply click the green buttons to arrange a call at your convenience or call now on 0800 193 0036 (Monday – Friday).

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 
Aviva
Lifetime Flexible Option
Lifetime Flexible Option
4.0%*
Fixed
55£75k£15k£600k Speak to an Advisor
Product Fee: Arrangement £5
LV=
Lifetime Mortgage – Lump Sum+
Lifetime Mortgage – Lump Sum+
4.3%
Fixed
60£70k£10k£500k Speak to an Advisor
Product Fee: £595 
Hodge Lifetime
Lump Sum Lifetime Mortgage
Lump Sum Lifetime Mortgage
4.3%
Fixed
60£100k£20k£500k Speak to an Advisor
Product Fee: Application £595
More 2 Life
Capital Choice
Capital Choice
4.9%
Fixed
55£70k£15k£1m 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
Figures as at 9th October 2017

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.

 

LTV or loan-to-value is the maximum percentage of the value of your home that the equity release provider is willing to loan you. Although the money released to you is a loan, the amount owed (the original loan plus interest accrued) may not need to be repaid until your home is sold either when you die or move into permanent long-term care. Some plans require some or all of the interest due to be paid monthly. Equity release LTVs tend to be much lower than for conventional mortgages and will often vary according to age - the older the applicant, the higher the LTV available.

 

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), for instance to help fund your retirement, make home improvements, help your loved ones or go on a life-changing holiday. 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.

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 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.

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.

Lifetime Mortgage Eligibility Criteria

Each lender will have their own criteria, which may vary. However, most equity release lifetime mortgages have a minimum age requirement - the youngest person named on the application must be at least 55 years old. 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%.

Most lenders will also require your home to meet a minimum value, normally £70,000 to £100,000, and some lenders will set a minimum loan amount.

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.


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 some products come with an option called 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.

  • 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.

Lifetime Mortgage Rates

Another 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 lifetime mortgage 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.

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 your inheritance.

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?

Lifetime Mortgage Providers

There are many lifetime mortgage providers offering an array of products. These are the ones our preferred equity release broker, MCB Financial Services, works with on a regular basis:

Aviva

L&G

LV=

More 2 Life

Pure Retirement

Hodge

Just Retirement

Retirement Advantage

One Family

What next?

Call the Moneyfacts Equity Release Advice Service provided by MCB Financial Services on 0800 193 0036 or fill in the form on 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's advice is always quality checked and you'll only be recommended a product where neither you nor your loved ones will ever owe more than the value of your home. Their expert team can answer your questions, guide you through the process and help you make the right decision for your circumstances.

As releasing equity can affect your entitlement to means-tested state benefits, your adviser will assess the impact on any state benefits you receive.

Further information on Equity Release


Equity release home
Equity release FAQs
Equity release jargon buster
Equity Release Council

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.

 
 
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