There are two equity release options:
Lifetime mortgage: you take out a mortgage secured on your property provided it is your main residence, while retaining ownership. You can choose to ring-fence some of the value of your property as an inheritance for your family. You can choose to make repayments or let the interest roll-up. The loan amount and any accrued interest is paid back when you die or when you move into long-term care.
Home reversion: you sell part or all of your home to a home reversion provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die, rent free, but you have to agree to maintain and insure it. You can ring-fence a percentage of your property for later use, possibly for inheritance. The percentage you retain will always remain the same regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold and the sale proceeds are shared according to the remaining proportions of ownership.
Most people who take out equity release use a lifetime mortgage
Usually you don’t have to make any repayments while you’re alive, interest ‘rolls up’ (unpaid interest is added to the loan).
This means the debt can increase quite quickly over a period of time.
However, some lifetime mortgages do now offer you the option to pay all or some of the interest, and some let you pay off the interest and capital.
In the same way ordinary mortgages vary from lender to lender, so do lifetime mortgages.
How we can help you
We do this by enabling eligible homeowners to take out a lifetime mortgage. That’s a loan secured against your home which, typically, won’t be repaid until after you’ve passed away or moved into long-term care.
Our lifetime mortgages allow you to:
- Maintain 100% home ownership
- Release a tax-free lump sum of money
- Continue to live in your property
- Make no monthly payments
- Guarantee to have no negative equity in the future
- Have the right to move home in the future (subject to criteria)
- Additional features to protect your home and loved ones
- We know how important your home and family are to you, so our lifetime mortgages are packed full of features that make it possible to protect the things that matter. You can choose a plan which enables you to:
- Guarantee an inheritance
- Take advantage of flexible repayment options
- Get early repayment charge exemptions
- Release additional cash in small lumps, after an initial lump sum
- Possibly release more money with certain health conditions/ lifestyle choices
A lifetime mortgage is a loan secured against your property. You should always think carefully before securing a loan against your property. We recommend that anybody thinking about going ahead reads ‘things to consider’ carefully first.
Thing to consider
Always speak to a qualified, specialist adviser before you go any further to see if a lifetime mortgage is right for you.
Your adviser will run through all of the benefits and risks of a lifetime mortgage before making any recommendations to you. Some of the key things to consider are:
- A lifetime mortgage, which is secured against your home, charges interest on the total amount of the loan including the interest that has already accumulated, so the total amount you owe will quickly increase, unless you choose to make payments.
- Taking equity from your home can affect your entitlement to means-tested State benefits.
- Although any cash you take from your home through a lifetime mortgage is free of tax, it may affect your personal tax position. Tax depends on personal circumstances and is subject to change.
- As the name suggests, a lifetime mortgage is a life-long commitment, which is only expected to be repaid upon your death or entry into long-term care.There may be substantial charges incurred if you decide to repay some or all of the loan early.
- Taking out a lifetime mortgage will reduce the value of your estate and therefore the amount of inheritance you are able to leave.
- If you have an existing mortgage on your home, you would have to use the money you release to pay off the existing mortgage first.
- Age and lending restrictions apply – some types of property are not eligible for a lifetime mortgage and more 2 life have our own underwriting criteria on which we base lending decisions.
- You should always think carefully before securing a loan against your property.
- A lifetime mortgage is not always right for everyone.
To find out if you qualify for a lifetime mortgage and whether it is right for you, you’ll need to meet with a specialist adviser. Getting tailored advice from a qualified expert is important; they’ll be able to:
- Explain the different options in more detail.
- Show you what a plan is likely to cost.
- Carry out the application process.
Involve your family
We recommend involving your family or friends in the advice process, as they’ll be able to ask questions and make sure you get all of the important details. If you have children then it’s important to discuss your options with them, as a lifetime mortgage will reduce the value of your estate and therefore affect their potential inheritance.
Getting expert advice
At FinanceMe, we believe passionately in the value of specialist, independent advice. We work closely with a number of trusted partners who offer professional advice across the whole range of equity release plans available on the market, including lifetime mortgages.
How long does the equity release process take?
An equity release application usually takes somewhere between 4 to 6 weeks for alifetime mortgage scheme and 6 to 8 weeks for a home reversion plan, assuming the title on the house is clear.
There is no maximum age limit for equity release, although applications are not usually granted for anyone under the age of sixty.
Yes, equity release can affect certain state benefits. Only means tested benefits can be affected by taking a lifetime mortgage or home reversion plan. Those potentially affected benefits would include pension and savings credit, income support and council tax reduction (formerly council tax benefit).
You are not required to repay your Lifetime mortgage during your lifetime, unless the last surviving Lifetime mortgage holder moves into long-term care. However, you may want to pay it off early because you are looking to sell your property or you wish to remortgage elsewhere for a better deal.
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