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What are lifetime mortgage interest rates?

The two main ways you can release the equity in your home.You can either borrow money against the value of your house with a lifetime mortgage or receive cash in return for selling part or all of your home through a home reversion scheme.

Lifetime mortgage interest rates determine the amount of interest that is added to your lifetime mortgage Equity Release loan.

Unlike Mortgage interest rates, Equity Release interest rates are fixed for the lifetime of a loan and are ‘rolled up’ and ‘compound’ every month or year.

Dependent on the type of plan you have, at the end of the first month or year, the amount of interest charged is added to the original loan.

The following month or year the interest is calculated on the sum of the original loan, plus the interest charged previously.

This process is repeated throughout the lifetime of the Equity Release loan – the amount you owe will depend on the length of the loan.

What is the average lifetime mortgage interest rate?

The actual rate you secure will depend on your individual circumstances, requirements and product selected.

In their Spring 2019 report, the Equity Release Council suggests that the average product rate in January 2019 was 5.21%.*

To give you an indication of how much different rates could affect the amount you owe, the tables below show how much you might owe over a period of five, ten and fifteen years with example compound interest rates of 4%, 5% and 6%.

Based on an annually rolled up lifetime mortgage loan of £50,000 with a compound interest rate of 4%.

Year Loan Interest at 4% Total Owed
1 £50,000 £2,000 £52,000
2 £52,000 £2,080 £54,080
3 £54,080 £2,163 £56,243
4 £56,243 £2,250 £58,493
5 £58,493 £2,340 £60,833
10 £71,166 £2,847 £74,013
15 £89,830 £3,593 £93,423

 

Based on an annually rolled up lifetime mortgage loan of £50,000 with a compound interest rate of 5%.

Year Loan Interest at 5% Total Owed
1 £50,000 £2,500 £52,500
2 £52,500 £2,625 £55,125
3 £55,125 £2,756 £57,881
4 £57,881 £2,894 £60,775
5 £60,775 £3,039 £63,814
10 £77,640 £3,882 £81,522
15 £99,091 £4,955 £104,046

 

Based on an annually rolled up lifetime mortgage loan of £50,000 with a compound interest rate of 6%

Year Loan Interest at 6% Total Owed
1 £50,000 £3,000 £53,000
2 £53,000 £3,180 £56,180
3 £56,180 £3,371 £59,551
4 £59,551 £3,573 £63,124
5 £63,124 £3,787 £66,911
10 £84,475 £5,069 £89,544
15 £113,048 £6,783 £119,831

 

Please bear in mind these figures are presented as examples only. Your individual circumstances, the product selected and your lifespan will affect the amount you pay.

How the SunLife Over 55 Equity Release Service works

When you call the SunLife Equity Release Service, we’ll refer you to an equity release expert adviser. They’ll assess your needs and help you decide whether equity release is right for you.

We’ve chosen Age Partnership to offer independent expert advice – as one of the market leaders, we believe they’re the best people to help you go through the nitty gritty.

And they’re not tied to any particular equity release provider, so can look at every offer available and make sure you get the best deal for you.

And if you have a better equity release quote from another provider, we’ll match it and give you £500.

What does ‘whole of market’ mean?

When it comes to equity release and other mortgages ‘Whole of Market’, means a range of lenders that represent each sector of the market, not every single potential provider. You could ask your broker or adviser for a list of their lender panel to check how many potential providers they reviewed on your behalf.

SunLife’s Over 55 Equity Release service provides expert advice from Age Partnership, who get a quote for you from the whole of the market in order to provide you with the best equity release quote to suit your individual circumstances. 

How to find your best equity release deal

Before you start talking to an advisor, take time to consider your current and future circumstances and wishes.

Whichever route you choose, take time to get the right advice and review all the types of products, their features as well as lifetime mortgage interest rates.

It’s also important to consider the provider’s reputation — is it a member of the Equity Release Council? 

What does that mean?

The Jargon buster below will explain some of the terms you’ll see when looking at equity release loans. If you have any questions or want to find out if equity release is right for you, please do contact our team, we’ll be more than happy to help you — call us on 0800 633 5566.

AER (Annual Equivalent Rate)

The annual equivalent rate (AER) is the actual interest rate you pay when taking into account the compound effect on repayments.

APR (Annual Percentage Rate) 

The annual rate charged for borrowing, including any upfront fees and charges, without taking into account the compound effect. 

Arrangement fee  

This is the amount you pay to the lender when your equity release plan is completed 

Compound interest

Interest accrued on a lifetime mortgage that is added to the loan amount and then future interest is charged on top. In other words, interest paid on interest. See also Lifetime Mortgage.

Drawdown

An equity release mortgage with the facility to draw money out as and when you need it, up to an agreed limit. Interest is only charged on the loan when money is released to you.

Early Repayment Charge

If you repay the loan amount before you die or move into residential care you may have to pay an Early Repayment Charge.

Equity Release

A financial arrangement that allows you to benefit from the value of your home whilst continuing to live in it, either by borrowing against it or selling all or part of it, for a cash lump sum or a regular income. See also Home Reversion Plan and Lifetime Mortgage.

Inheritance Protection

With some equity release loans, you can protect a percentage of your property value, which can be added to your estate when you die ensuring you leave a little extra for your loved ones.

LTV

This is short for Loan To Value, which is the ratio between the value of the loan you take out and the value of the property as a whole, expressed as a percentage.

For example, if you needed to borrow £50,000 from a house valued at £200,000, to calculate the LTV you would divide 50,000 by 200,000 and then, multiply it by 100:

50,000 / 200,000 = 0.25 x 100 = 25

So your Loan to Value is 25%.

For more jargon busting, read our A-Z of equity release.

Important things to consider

Equity Release is a big decision, and it isn’t the right option for everyone.

You should consider all your options carefully – and you’ll need to seek specialist advice from an independent expert adviser and involve your family to make sure an equity release plan is the best option for you.

A lifetime mortgage means that you take out a loan secured against your property. You continue to own your home – and you can choose to make no repayments during your lifetime. The loan and interest are paid off through the sale of your home – this is usually when you die or move into long-term care.

If your family can afford to pay off the loan and interest without selling your home that’s often ok too, but check this with your provider first

Bear in mind that unlocking cash from your home will reduce the value of your estate and could affect your entitlement to state benefits – such as pension credit, savings credit or even council tax benefit.

All outstanding lending secured on the property must be repaid.

And remember, while you can choose not to make repayments in your lifetime, interest will build up on your lifetime mortgage over the years.

If you’d like a personalised equity release quote contact the SunLife Over 55 Equity Release team or use our equity release calculator.

*ERC Spring Market Report 2019

Download ERC Spring Market Report 2019.

Here's the information that you need to know about who we are and the other companies that we work with in order to provide our products and services.

Who are SunLife?

Phoenix Life Limited trades as SunLife and is the provider of the Guaranteed Over 50 Plan, SunLife Insurance and the life insurance policy payment option for Funeral Plans. Phoenix Life Limited’s registered office is at 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 1016269). 

SunLife Limited distributes financial products and services and is a company limited by shares, registered office: 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 05460862). SunLife Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (registration no. 769427).

You can contact us by post at SunLife, PO Box 1395, Peterborough, PE2 2TR or by phone on 0800 008 6060.

If you choose to add Funeral Benefit Option to your Guaranteed Over 50 Plan, Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

Who provides the Funeral Plans?

Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals is not authorised or regulated for this activity by either the Financial Conduct Authority or the Prudential Regulation Authority. Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

The life insurance policy that pays for your funeral will be provided by Phoenix Life Limited, trading as SunLife.

Who provides My Smarter (ISA)?

My Smarter (ISA) is provided by Scottish Friendly Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority. Details can be found on the Financial Services register, registration No. 188832. Member of The Investment Association. Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ.

Who provides the Will writing services?

Hugh James is authorised and regulated by the Solicitors Regulation Authority (SRA Number:303202).

The information contained on this website is based on Hugh James' understanding of the law of intestacy in England and Wales only as at April 2014. The law in Scotland and Northern Ireland is significantly different. This is for information purposes and is not intended to be legal advice.

Who provides SunLife Pet Insurance

SunLife Pet Insurance is arranged and administered by BDML Connect Limited. BDML Connect Limited is authorised and regulated by the Financial Conduct Authority (No. 309140). Registered in England and Wales Number 02785540. Registered Office: 45 Westerham Road, Bessels Green, Sevenoaks, Kent, TN13 2QB.

Who provides SunLife Home Insurance

SunLife Home Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.

Who provides SunLife Car Insurance

SunLife Car Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.