Equity Release

What is a lifetime mortgage?

Lifetime mortgages are a popular means for homeowners over 55 to unlock some of the value in their homes. Thousands of people in the UK already choose this method to supplement their retirement income.

A lifetime mortgage is a way of borrowing a set amount of money against the value of your home, in the form of a long-term loan, and without the need to move.

You continue to own your own home, for the duration of the plan and as long as you are living in it – you’ll also be responsible for keeping your home in good repair.

The loan is paid back using the proceeds from the eventual sale of your property. This is usually when you die or have moved into permanent long-term care.

You are eligible if:

Z

You are a homeowner aged 55 to 84

Z

The property you own is valued at over £99,000

Equity Release Schemes may affect your eligibility to means tested benefits. Equity release products involve borrowing against or selling all or part of your home. There may be more suitable methods of raising the funds you need.
Equity release schemes may work out more expensive in the long term than downsizing to a smaller property.

Things to consider

Before you think about equity release, you should also consider your other options:

Downsizing

Moving to a smaller property will give you the maximum value for your home.

Savings

You may also have other savings and assets that could help fund your retirement.

Is equity release right for you?

The money released can be used for whatever you wish (so long as any outstanding mortgage has been paid off). You should be aware that taking out a lifetime mortgage could reduce your eligibility to means-tested benefits and could affect your tax position.

Also, as the interest is added to the loan, there may be no value left in your home at the end of the plan. Taking out a lifetime mortgage may also reduce the options that you have for moving or selling your home.

You should talk to your Financial Adviser and/or solicitor about this if you’re at all unsure.

A lifetime mortgage is not suitable for everyone and may affect your entitlement to means tested benefits, so it is important to seek financial advice before taking any action. If you are considering releasing equity from your home, you should consider all options available before equity release.

The interest that may be accrued over the long term with a Lifetime Mortgage, may mean it is not the cheapest solution. As interest is charged on both the original loan and the interest that has been added, the amount you owe will increase over time, reducing the equity left in your home and the value of any inheritance, potentially to nothing.

Although the final decision is yours, you are encouraged to discuss your plans with your family and beneficiaries, as a Lifetime Mortgage could have an impact on any potential inheritance. We would also encourage you to invite them to join any meetings with your Financial Adviser so they can ask questions and join in the decision, as we believe it is better to discuss your decision with them before you go ahead. This is a referral service.

Important information

This article (Equity Release) is intended to provide a general appreciation of the topic and it is not advice.

For more information please contact Centrad Limited on 01922 745400 or email enquiries@centradltd.com and we will be happy to assist you.

Article expiry: 06 April 2023