Equity Release: What is a Lifetime Mortgage?

Reader's Digest Editors

If you own a property then certain words and phrases might grab your attention such as interest rates, house price growth and stamp duty. One term that you may have heard, but may not have realised is applicable to you, is a Lifetime Mortgage. Although it sounds like something you may already have as a homeowner, a Lifetime Mortgage is actually a type of equity release which allows you to access some of your property value in the form of a tax-free cash lump sum.

So, what is a Lifetime Mortgage?

Your property is likely your biggest asset and, as house prices have been on the rise for years, will continue to grow in value over time. This means that the equity in your home (the difference between your home’s value and any secured debts such as a mortgage) will be growing too.

A Lifetime Mortgage is a financial tool that enables homeowners aged 55 and over to release this equity from their homes, tax-free, to spend as they wish. Releasing equity with a Lifetime Mortgage enables you to make the most of your home’s value now, without downsizing and with no chance of losing your home whilst it remains your primary residence.

It’s a valuable tool on a homeowner’s belt as accessing your equity could provide the financial supplement or cash boost you need in later life, whilst maintaining full ownership of your property and without having to move or make monthly payments.

What can a Lifetime Mortgage be used for?

As house prices rise, so do the costs of living. It is widely considered that our homes will become a major factor in our financial planning for later life and property wealth could be the key to enjoying a comfortable retirement. Reasons to release equity vary widely depending on the individual's circumstances and needs. Some of the most popular uses for equity release are to clear an existing mortgage, making home improvements or renovations, supplementing income (including poorly performing pensions) or gifting an early inheritance. Other reasons include to:

  • Help family plan for a wedding or a new family member
  • Mitigate inheritance tax
  • Realise your ambitious travel plans
  • Enhance your lifestyle
  • Help loved ones onto the property ladder
  • Or boost your business with some capital

As a flexible financial tool, a Lifetime Mortgage can lend itself to fulfil many needs with new reasons to release equity found regularly.

How does a Lifetime Mortgage work?

The Reader’s Digest’s Equity Release Service can expertly guide you through the process in detail and help you to decide if releasing equity could be an option for you. To take the first step and find out if you are eligible to release equity, you can call us on free phone 0808 231 1968, or use our specially designed equity release calculator above.

From your initial enquiry, an advice process follows in which all alternatives are explored, and the features and risks are researched, including any effect releasing equity could have on your means-tested benefits. You are also informed that in using funds from your property now you may reduce the value of your estate later, however, this can be balanced with the option to guarantee an inheritance and other additional features which can be put in place to safeguard your financial interests. Our advisors will not recommend you proceed with a Lifetime Mortgage product should it not be the right option for you.

Should you decide to proceed, the money you unlock will be received as a cash lump sum with the option to place a designated amount in a reserve account to withdraw from when needed. A Lifetime Mortgage requires no monthly repayments so your monthly income can be freed up for other things, especially if you release equity to repay an existing mortgage. You may choose to make optional payments, usually of up to 10% of the mortgage value per year, which can help to reduce the amount of interest that rolls up over time.

The interest on the plan rolls up if not paid monthly and is repayable upon the passing of the last remaining homeowner, or when the homeowners go into full-time care, hence the name Lifetime Mortgage.

Whether you're curious as to how much you can release, or you want to take the initial steps towards releasing equity, our handy calculator will give you the information you require.

You can also contact us on 0800 029 1233 to discuss your needs with a view to arranging a no-obligation appointment with one of our equity release specialists.

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A Lifetime Mortgage may impact the value of your estate and could affect your entitlement to means-tested benefits. Think carefully before securing other debts against your home. To understand the features and risks ask for a personalised illustration. Reader's Digest Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (https://register.fca.org.uk/) under reference 610205. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,490. Our adviser will talk through the setting up costs of a Lifetime Mortgage before you make any decision to proceed.

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