10 Facts that will answer all your equity release questions
Designed for people aged 55 and over, the Lifetime Mortgage is the UK’s most popular form of equity release and it can enable you to access your property wealth whilst maintaining 100% home ownership. It is ideal if you own your property, are asset-rich and want to access this wealth in a flexible way without having to sell your property and move.
The facts about Lifetime Mortgages
1. With a Lifetime Mortgage, you can take as little as £10,000, tax-free, and leave more funds in reserve for when you need them with the use of a drawdown facility.
By choosing a Drawdown Lifetime Mortgage, you can set aside funds to access your interest-free reserve at a later date which can be incredibly beneficial if you have a big project in mind, such as renovating your home, or if you would like to make additional large purchases in the future.
The equity in a drawdown facility will only accrue interest once it has been drawn down and you can access this facility multiple times over the course of the loan.
To find out how much you could release, fill out this handy calculator:
2. With a Lifetime Mortgage, you can choose a Flexible Lifetime Mortgage which gives you the choice of making optional repayments. This can be a great way to minimise the overall amount you will owe as less interest is then rolled up into the loan year on year. These repayments consist of up to 10% per year of the amount you borrowed.
If you would like to compare how much you will owe with and without making repayments, our advisers can provide you with an accurate personal illustration showing how much you will owe over time.
If you don’t want to make monthly repayments, you don’t have to. Like any other type of borrowing, an interest rate is charged on the loan and any interest you choose not to pay is simply rolled up into the total and paid when you or your heirs eventually sell the property.
3. With a Lifetime Mortgage, you retain 100% home ownership. Unlike a traditional mortgage, you will never face any risk of repossession.
4. It is advisable to be conscious of any means-tested benefits you are in receipt of when considering a Lifetime Mortgage. If you are in receipt of these, having money in the bank may affect them, so you should be aware of this before proceeding. Also, by taking money out of your property, you may reduce the value of your estate over time, and there will be less to pass on to your heirs as an inheritance. Try to find a balance between what you want now and what you want to leave.
Our advisers will thoroughly check your benefits entitlement and personal interests when assessing your individual financial circumstances to make sure a Lifetime Mortgage is right for you before any recommendation that you proceed.
5. No matter how much you take with this plan, you will never owe more than the value of your property and can never pass on any Lifetime Mortgage debt to your children or estate. This is because of a customer safeguard called the ‘no negative equity guarantee,' which is required on all plans from lenders approved by the Equity Release Council (ERC), the industry body for equity release.
Reader’s Digest Equity Release has chosen to partner with leading equity release provider Aviva to help our customers take advantage of their property wealth from a brand they can trust. Aviva is one of the most established and trusted equity release lenders in the UK, with over 20 years of experience.
6. The interest rate can be fixed for life so you can be sure of what you are being charged. An adviser can provide you with a personalised illustration of how much you will owe over time, allowing you to make the most informed decision before you choose a Lifetime Mortgage plan. As the interest rate can be fixed for life, the illustration can accurately show this over the entire lifetime of the loan. Aviva also provides personalized interest rates which you can fix based on your personal circumstances.
7. Lifetime Mortgages from Equity Release Council approved lenders are portable, meaning if you want to move and don’t want to repay the money, you can transfer the plan to another suitable property. This will be subject to certain criteria from the lender, but as you still maintain full homeownership, you have the freedom to move if you choose.
8. The loan is typically repaid through the sale of the property when you either pass away or move into long-term care and so, as the name suggests, is intended to last a lifetime. However, if you want to repay the full amount, you can do so. If you come into unexpected funds or decide you would rather make an alternative decision, you can repay the loan in full before the end of its term, should you choose. It is important to be aware that there may be an additional charge for doing so, so the decision to take out a Lifetime Mortgage should be one that is carefully considered. Alternatively, you can repay up to 10% each year with no additional charge.
9. A solicitor of your choosing will talk you through the terms and conditions in detail before you commit to anything or incur any costs. Independent legal advice is a requirement on all Lifetime Mortgage plans and so not only will you receive advice from our specialists, but will also receive legal advice from a solicitor of your choice.
Reader’s Digest Equity Release also performs 100% file review on all our cases, meaning every case will be checked by our file review team before proceeding to application.
10. The equity release industry is fully regulated by an independent body called the Financial Conduct Authority.
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 financial advisers.
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 £1,690. Our adviser will talk through the setting up costs of a Lifetime Mortgage before you make any decision to proceed.
Read more: A Guide to UK Equity Release Calculators
Read more: Equity Release Rescues Pension Prisoners
Keep up with the top stories from Reader’s Digest by subscribing to our weekly newsletter.