Is lifetime mortgage same as equity release?

Asked by: Eldora Corwin  |  Last update: February 9, 2022
Score: 4.6/5 (32 votes)

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. Lifetime mortgages are available to homeowners aged 55 or over. You can take the money as a lump sum or as series of lump sums.

What's the difference between a lifetime mortgage and equity release?

What's the difference between equity release and a lifetime mortgage? Equity release enables homeowners to retain the use of their home while obtaining an income or funds from it. A lifetime mortgage is one of the two main types of equity release products, the other being a home reversion plan.

What are the pitfalls of a lifetime mortgage?

The pitfalls of equity release

With a lifetime mortgage, you are charged interest on the money you borrow, even if you are not making monthly repayments. Therefore if you take excess money out of your property, you will be paying more, than you will earn interest on it in a savings account.

What does a lifetime mortgage mean?

A lifetime mortgage is when you borrow money secured against your home, provided it's your main residence, while retaining ownership. ... When the last borrower dies or moves into long-term care, the home is sold and the money from the sale is used to pay off the loan.

Is there a better alternative to equity release?

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.

Equity Release Mortgage (Lifetime Mortgage UK)

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Can you buy a house with a lifetime mortgage?

Equity Release or a lifetime mortgage can be used to buy a property to live in. This means the equity you already have from any property you have sold, or other existing savings, can be the deposit, with a lifetime mortgage making up the rest of the purchase price.

Can you pay back a lifetime mortgage?

A lifetime mortgage is designed to be repaid in full once you (and your partner for joint lifetime mortgages), have died or moved into long-term care.

What is a lifetime mortgages for over 60s?

What is a lifetime mortgage for over 60s? Equity release is a form of mortgaging or remortgaging that allows homeowners aged over 55 to release equity from their homes by taking out a tax-free cash lump sum. An equity release mortgage can help you put aside funds for retirement or buy a second home.

How is interest calculated on a lifetime mortgage?

Interest on our Lifetime Mortgages is calculated daily and added to the amount you owe each month. This means that the amount you owe will quickly increase over time, reducing the equity left in your home, especially if the loan continues for a longer period. There may be cheaper ways to borrow money.

Can you borrow more on a lifetime mortgage?

A lifetime mortgage is a long-term loan designed to last until you die or move into long-term care. ... Any additional borrowing increases the likelihood of the loan plus interest being more than the value of the property, so we must allow for this in the interest rates that we offer you.

Does HSBC do lifetime mortgages?

2.89% APRC HSBC Lifetime Mortgage Offers For UK Property Owners. How much money can I borrow? You can get 70% of your property's valuation. As an example, if your house is valued at £310000 you can borrow £217000.

What is the best way to release equity from your house?

There are two equity release options.
  1. Lifetime mortgage: you take out a mortgage secured on your property provided it's your main residence, while retaining ownership. ...
  2. Home reversion: you sell part or all of your home to a home reversion provider in return for a lump sum or regular payments.

Can a 60 year old get a 30 year mortgage?

Can you get a 30–year home loan as a senior? First, if you have the means, no age is too old to buy or refinance a house. The Equal Credit Opportunity Act prohibits lenders from blocking or discouraging anyone from a mortgage based on age.

Can a 50 year old get a 25 year mortgage?

Borrowing options when you're aged 50+ As you get closer to retirement getting a mortgage can become more difficult as a lot of lenders have upper age limits meaning that the end of your mortgage terms won't be able to go beyond this. ... A 25 year mortgage at 50 may not be off the cards!

Do both parties have to be over 55 for equity release?

The simple answer is yes, you do. Equity release schemes based around lifetime mortgages require the youngest applicant to be over 55, while those based around home reversion plans require you to be at least 60. This is because equity release is designed essentially to provide extra money in retirement.

Can equity release be repaid before death?

Can I pay back my equity release plan before I die? Nothing requires you to stick with your plan until the completion date. However, if you do decide to repay the borrowed amount earlier than agreed, there will often be an early repayment charge. This can be expensive, though it varies between lenders.

Do you pay monthly for equity release?

With equity release, you don't have to make monthly repayments. That's because a lifetime mortgage, the most popular form of equity release, is a loan secured against your home which, alongside the roll-up interest, is typically paid back when your plan comes to an end.

What is the downside of equity release?

The main disadvantage of equity release is that it does not pay you the full market value for your home. You will receive far less money than you would from selling the property on the open market – although of course in that situation you would still have to find somewhere else to live.

What is a typical interest rate for equity release?

The lowest Equity Release interest rate is currently 2.90% (AER) fixed for life. The highest interest rate in the market is 6.80% (AER). In the Spring 2021 Market Report, the Equity Release Council stated that average interest rates for Equity Release were 3.95%.

Do you need an income for equity release?

One of the great advantages of equity release above traditional mortgages or retirement interest-only (RIO) or retirement mortgages is that the lender doesn't consider your income or expenditure.

What percentage of equity can I release from my house?

If you're eligible, the amount of equity you can release is usually between 20% and 60% of the value of your home. This is different for everyone and depends on different factors including the value of your home and your age.

Does HSBC release equity?

Please note – HSBC doesn't provide equity release products. Releasing equity requires careful thought. As the sale of your home is used to pay back the amount borrowed – this reduces the value of your estate, and how much you leave your loved ones when you die.

Does NatWest do equity release?

NatWest does not currently offer 'equity release mortgages', 'lifetime mortgages' or 'home reversion' products.