28 September 2020

Frequently asked questions about Lifetime Mortgages

7 min read

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If you’re aged 55+ and have always wondered how to release money from your home, here are answers to frequently asked questions about how to do that with a Lifetime Mortgage.

What is a Lifetime Mortgage?

A Lifetime Mortgage is a long-term loan that allows you to release some of the value of your property as a tax-free lump sum.

How do they work?

With a Lifetime Mortgage:

  • There are no required payments to make each month, but you can choose to make payments if you wish
  • The balance, including interest, is usually repaid through the sale of the property
  • There are guarantees in place to ensure you will never owe more than the value of your home
  • The amount you can release is linked to the age of the youngest homeowner and the property value
  • There are typically fixed interest rates for life.

Do bear in mind that a Lifetime Mortgage could reduce the value of your estate and affect your entitlement to means-tested benefits.

Find out how much you can release from your home

Who is eligible?

Releasing equity with a Lifetime Mortgage could be the right choice for you if you:

  • are over 55
  • want to borrow at least £10,000
  • own your home and it’s worth at least £70,000
  • are able to clear any existing mortgage on the property, either using the equity released or additional funds. Clearing an existing mortgage is one of the most common reasons to release equity

To get an estimate of how much you could release, check out the equity release calculator. You get an estimate in minutes, plus a free guide to equity release.

Royal London have chosen Responsible Life to provide our customers with advice on Later Life Lending products. They are specialists who help customers aged 55+ release money from their homes.

More information about Responsible Life and how the information you provide in the calculator is processed is available in their privacy policy.

Why release equity with a Lifetime Mortgage?

A Lifetime Mortgage allows homeowners over 55 to release equity in their home for a number of different reasons including:

  • Clear an existing mortgage
  • Improve your home
  • Boost your disposable income
  • Or even to give an early inheritance to your loved ones

Find out how much you can release

What are the different types?

Lifetime Mortgages can largely be grouped into two:

  • Lump Sum Lifetime Mortgages – allow you to release equity from your home in one lump sum of money. As you don’t need to make any payments, the interest will be added to the mortgage monthly and 'roll-up' over time
  • Drawdown Mortgages - allow you to release an initial amount of money, while also creating a reserve account of further funds. Interest is only added to the amount you accessed, and the reserve is interest-free until you draw down from it.

Both types of Lifetime Mortgage come with flexible features

If you wanted to, some will allow you to make optional payments towards the mortgage. Most often, these are allowed up to 10% of the mortgage amount per year. Your equity release adviser will be able to explain all of the features that are available to you.

The importance of equity release advice

As the decision to release equity with a Lifetime Mortgage is a big one, it’s a regulatory requirement to receive financial advice. Particularly as a Lifetime Mortgage could reduce the value of your estate and affect your entitlement to means-tested benefits. Your Responsible Life adviser will provide a personalised illustration to help explain the features and risks. 

If you already have a financial adviser, you may wish to speak to them about this first. They are also welcome to attend any appointments with you.

Prefer to find out how much you could release from your home first?

Try the equity release calculator

 

Got a question about Lifetime Mortgages? The Responsible Life team are here to help

0800 023 9313

Free from UK landlines and mobiles

Mon to Fri: 9am-8pm. Sat: 9am-5pm.

Royal London have chosen Responsible Life to provide our customers with advice on Later Life Lending products. Responsible Life are not part of the Royal London Group.

Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (https://register.fca.org.uk/) under reference 610205.

If you choose a mortgage with required repayments during your lifetime then your home may be repossessed if you do not keep up with the payments. A Lifetime Mortgage may impact the value of your estate and could affect your entitlement to means tested benefits. Think carefully before securing other debts against your home.

To understand the features and risks, ask for a Personalised Illustration. Responsible Life’s adviser will talk through the setting up costs of a mortgage before you make any decision to proceed. Only if you choose to proceed and your case completes will Responsible Life charge an advice fee, currently not exceeding £1,490.

If you take out a product recommended by Responsible Life, Royal London Marketing Limited will receive a fee, for this introduction. If you would like further details about this fee, Responsible Life will be able to provide you with this. More information about Responsible Life and how your information is processed is available on their privacy notice. Find out how Royal London manages your personal data.

Royal London Marketing Limited is authorised and regulated by the Financial Conduct Authority, registration number 302391. Registered in England and Wales number 4414137.

Responsible Life's registered office is: Unit 8, ABC Killinghall Stone Quarry, Ripon Road, Harrogate, HG3 2BA. Registered in England & Wales. Company number 7162252.