We’ve seen the terms Equity Release and Lifetime Mortgage used interchangeably a lot recently. So we put this article together to clear things up for you.
Put simply, Lifetime Mortgages are a particular type of Equity Release.
Equity Release refers to a range of products available that let you access equity (cash) that’s tied up in your home, if you’re over the age of 55.
There are two main types of Equity Release:
You take out a mortgage against your main residence while retaining ownership. You can choose to protect some of the value of your property as an inheritance for your beneficiaries and you can choose to make repayments or let the interest accrue. The amount you borrowed, and any accrued interest, is paid back when you die or when you move into long-term care.
Early repayment charges could apply if you choose to pay back the mortgage early.
You sell all or part of your home to a home reversion provider for a lump sump or regular payments. You can continue living in the property until you die, rent free, but you have to agree to maintain and insure it. At the end of the plan your property is sold and the sale proceeds are shared according to the remaining proportions of ownership.
If you choose to buy back the share of the property you sold to the provider, you’d have to do so at the full market value.
Is there anything else I should know?
Equity release products reduce the total amount you leave behind in your estate when you die which means less will be left for beneficiaries. Equity Release products could also affect your entitlement to state benefits and your tax position.
We would always suggest speaking with an advisor before buying into any Equity Release products.
We have helped many people heading into retirement figure out what the best options are. Each situation is unique and it’s important to weigh up all options while keeping the future in mind.