Equity Release – What is a lifetime mortgage?

Equity Release - what is a lifetime mortgage?

Are you property rich but want or need more than you have saved?

Equity release allows UK homeowners over the age of 55 to unlock part of the financial value in their home for various reasons, usually to help manage finances in later life. This can provide money to spend while the homeowners are still fit and healthy, or to help fund a particular purchase like a holiday home, or to give a living inheritance for loved ones.

How does Equity Release work?

Equity release allows homeowners aged over 55 year to release equity locked up in their home and turn this into tax-free cash without the need to sell or downsize their home.

There are two main ways to take the money, either as a lump sum or as a draw down. A lump sum is where you take a payment of equity in one go, whilst drawdown allows you to take a set amount as and when you need it or in regular amounts.

What are my options?

Lifetime mortgage

With a lifetime mortgage you take out a mortgage secured on your property provided it is your main residence, whilst you retain ownership. This option allows you to ring fence some of the value of the 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 move into long term care.

Home Reversion Plan

This option allows you to sell part of 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. You are responsible for insuring and maintaining the property during this time. You can ring fence a percentage of your property for later use for inheritance and this percentage remains the same regardless of the change in property values unless you decide to take further cash releases. At the end of the plan the property is sold and the proceeds are shared according to the remaining proportions of ownership.

Why would I use equity release?

The reasons for using equity release are many and varied and include:

  • Boosting retirement income
  • Helping children and grandchildren financially
  • Undertaking home improvements
  • Paying off an interest only mortgage
  • Lifestyle

Is releasing equity the right option for me?

This very much depends on your personal circumstances, such as:

  • Your age
  • Your income
  • How much money you want to release
  • Your plans for the future

You may wish to read our blog Unlocking Property Wealth.

Want to find out more?

If you think that equity release might be for you then please speak with one of our independent advisers.

Both options have advantages and disadvantages and whilst it is tempting, it’s important not to focus solely on the immediate boost you will get from the money you release, you also need to look at how it will affect your future choices and financial situation in later life.

It is therefore important to take impartial independent financial advice from an equity release approved adviser. At TFA we have a number of advisers who will be able to advise you and who have access to the whole of the market to ensure they source the correct product for your needs. To understand the risks and features please ask for a personalised illustration.

To get a personalised illustration please arrange an appointment with one of our advisers either face to face or on the phone or by a video call via the details below.

This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.