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Equity Release: Lifetime Mortgage Plans
Sometimes called "roll-up mortgage plans", these plans allow home owners aged at least 55 (with most lenders, 60 is the younger limit) to raise cash against their homes by way of loan. The cash may be taken in the form of a lump sum, a regular income, or a combination of both.
Although the loan is secured on your property, there are no monthly payments required and you retain ownership of your home throughout. The loan is repaid after death or going into care.
You should note that the rolling-up effect of interest on a lifetime mortgage can significantly reduce the amount of equity in your home, and it is potentially possible for the loan and accumulated interest to reduce the equity to zero, leaving nothing for your family to inherit. If leaving something behind to your family is important to you, it is vital that you take professional advice to understand all your options.
The amount you may borrow is dependent upon your age (the youngest if you are a couple). The (approximate) range of loans allowed by lenders (expressed as a percentage of the value of your home) is shown below:
The table deals with raising lump sums only, and is drawn from several lenders' tables. The lump sums which may be borrowed are subject to a minimum, e.g. £25,000.
Age of Youngest borrower |
Maximum % of Home's Value |
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60-65 |
20-25% |
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66-70 |
25-35% |
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71-75 |
30-40% |
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76-80 |
35-45% |
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81-85 |
40-50% |
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85-88 |
45-50% |
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89 and over |
50-55% |
If you are interested in a plan in order to supplement your income, some Lifetime Mortgage plans are designed to generate a regular (e.g. monthly) income. Note that it is important to check the effect of releasing money from such a plan against your entitlement to any State benefits. These could be affected if it is determined that the funds raised from an Equity Release scheme supplement your savings or income to such an extent that your entitlement to State benefits is reduced or lost.
The main features are:
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The borrower(s) retain(s) ownership of the home throughout. |
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The Lender takes a legal charge over the property |
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No repayments need be made during your lifetime. |
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You will be able to live in your own home as long as you wish. |
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The interest rate may be fixed or capped for the full term of the loan |
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Interest rolls up indefinitely, and can add up to a significant amount over time. This interest eventually has to be repaid. |
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The Lender guarantees that you can will never owe more than the value of your home |
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The borrower need not have an income. |
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There are no restrictions on how you spend the money. |
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There is no maximum age limit |
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The loan is normally repayable by the estate on death (second death if joint borrowers), or upon the (second) borrower permanently moving into a care home. |
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A valuation of the property is necessary and a fee for this is payable, together with solicitors costs |
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There will be a fee for mortgage advice. The precise amount depends upon your circumstances but we estimate it will be £500. |
The equity release products may involve lifetime mortgages or home reversion plans. If so, to understand their features and risks, ask for a personalised illustration.
Financial Elite Limited- 2009
All advisers recommended by us are Independent, fully qualified and regulated by the Financial Services Authority. They will also have the specific equity release qualifications as required by members of SHIP (Safe Home Income Plans), the industry association which was set up to help ensure fair plans for consumers, with members subscribing to a common code of ethics and clear literature.
"There has never been a more important time for independent financial advice in equity release."
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