Where this fits
The written advice sets out the alternatives, the cost over twenty years and the effect on your benefits and your estate.
Mike Chan
Mortgage Adviser
For some people. It lets you take tax-free cash out of your home without moving, and the cost is that the interest rolls up and reduces what is left behind.
On a standard lifetime mortgage you pay nothing each month. The interest is added to what you owe, and next year's interest is charged on the bigger number. Left alone for long enough the debt roughly doubles every fourteen years at 5%.
Ask for the illustration that shows the projected balance at five, ten, fifteen and twenty years alongside a projection of the property value. Any adviser has to give you these figures.
Paying the interest monthly, or making the voluntary partial repayments many plans allow, stops or slows the roll-up entirely. Taking the money in stages through a drawdown facility means interest only runs on what you have taken.
Equity release reduces the value of your estate and may affect your entitlement to means-tested benefits. A lifetime mortgage is a loan secured against your home. It is not right for everybody.
Interest rolls up on the loan and reduces what is left behind.
With a lifetime mortgage, yes. It is a loan secured against the property and you remain the owner. A home reversion plan is different — you sell a share of the property — and it is much less common.
Yes, and some plans let you ring-fence a percentage of the value as guaranteed inheritance. It reduces how much you can borrow.
It can. Releasing capital may take you over the savings thresholds for means-tested benefits such as Pension Credit and council tax support, so the gain can be partly offset. It has to be checked beforehand.
Most Equity Release Council plans are portable to another suitable property, subject to the lender's criteria. Some property types are not acceptable, so raise it early if a move is likely.
Repaying early usually triggers an early repayment charge, which on some plans is substantial. Compare the terms between plans.
The written advice sets out the alternatives, the cost over twenty years and the effect on your benefits and your estate.
Mortgage Adviser
Your first call is with an Account Manager and is at no cost to you. Tell us what is on your mind: a pension you have lost track of, a fixed rate ending, a will you keep meaning to write.