A lifetime mortgage is not exactly the same as equity release, but rather the most popular type of equity release (accounting for over 99% of plans). Equity release is the overall category, which includes both lifetime mortgages (borrowing against the home) and home reversion plans (selling part of the home).
If you do not feel downsizing is practical for health or other reasons, Martin Lewis thinks a lifetime mortgage is an option to consider, if you seek expert advice on all your options, including any other alternatives, such as entitlement to means tested benefits and taking a lodger to provide extra income, for example ...
Well, you can usually release between 20% and 60% of your property's value. Lifetime mortgages are a loan secured against your home and the most popular kind of equity release, so we're going to focus on them in this article.
Lifetime mortgage - Another term for equity release and a form of mortgage (a loan secured against your home), in which you retain full ownership of your property. It is designed to be repaid when the plan holder(s) pass away or move into long-term care.
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 loan is paid back by selling the property when the last borrower dies or goes into long-term care. Any money left after paying the loan goes to your beneficiaries (friends and family), unless it is needed for your long-term care.
The lowest Equity Release interest rate is currently 6.24% (MER) fixed for life. The highest interest rate in the market is 9.56% (MER). In the 2024 Q3 market data, the Equity Release Council stated that average advertised lifetime mortgage rate was 6.89% in October 2024.
You may continue to benefit from any rise in the value of your property. You can still move to a different property in the future, as long as it's acceptable to the equity release provider. With a lifetime mortgage, you continue to live in and keep ownership of your home.
Lifetime Mortgages
What are the age limits for a lifetime mortgage? Lifetime mortgages are available to borrowers aged 55 and above. There are no upper age limits for lifetime mortgages. At age 55 you can release up to 28.65% of your property value, increasing each year you age.
The top 10 lifetime mortgage providers include Aviva, Royal London, Liverpool Victoria, Legal & General, More 2 Life, Canada Life, Just (formerly Just Retirement), Livemore & Pure Retirement. These are a list of the best providers.
The cheapest way to get equity out of a house is often a Home Equity Line of Credit (HELOC), due to lower upfront costs and paying interest only on what you use, but a Home Equity Loan (fixed rate, lump sum) or Cash-Out Refinance (if rates are lower) can be cheaper depending on market rates, while Sale-Leasebacks or Reverse Mortgages (for seniors) offer payment-free options with different trade-offs. Always compare lender fees, interest rates (variable vs. fixed), and your financial goals before choosing, as the "cheapest" option varies.
There are many alternatives to Equity Release, which I always explore with clients. These include: Selling assets, remortgaging, asking for help from family and friends, grants, moving to a cheaper home, state benefits, renting a room, budgeting, changing employment, or simply doing nothing.
Typically, you must be over 55 to apply for a lifetime mortgage. The property will need to be your main home and there may be other rules, such as the residence will need to be reasonably maintained. Providers usually also state that the property must be insured.
A lifetime mortgage is a type of equity release, a loan secured against your home that allows you to release tax-free cash without needing to move out.
Explain the seven year rule? If you give a lump sum gift, it will not be considered part of your estate as long as you live for a further seven years. That means the gift has been made from your estate tax free and that money no longer counts towards your Inheritance Tax liability.
Dave Ramsey strongly opposes reverse mortgages, calling them "scams" and "rip-offs" due to high fees, high interest rates that build up, and the risk of seniors owing more than their home's value, leading to potential foreclosure if taxes or insurance aren't paid, despite the lack of monthly payments. He views them as predatory products that erode home equity and trap seniors in debt, advising against them as a retirement strategy.
The disadvantages of equity release
With a lifetime mortgage, the amount you can borrow is typically a percentage of your home's value, generally ranging from around 29.6% to 58.4%. This percentage varies based on your age and the specific terms offered by the lender. Ready to explore your options further?