A lifetime mortgage is a popular type of equity release scheme that gives you tax-free cash to enjoy in retirement – while letting you keep 100% ownership of your home. But how exactly does a lifetime mortgage work? And is it the right option for you?
How does a lifetime mortgage work?
- If you’re 55 or over and own your house, a lifetime mortgage lets you unlock cash for a more comfortable retirement in the form of a loan secured against your home
- You still own your home and you can choose to make no repayments during your lifetime
- The loan, plus any interest accumulated, gets paid off after you die or move into long-term care, from the sale of your home. (If your family can pay off the loan and interest without selling your home, that’s OK too)
Don’t worry, it’s regulated
You may have been wary of equity release schemes in the past, but equity release is now fully regulated by the Financial Conduct Authority (FCA) – providing peace of mind for all lifetime mortgage customers.
Because our preferred partner, Age Partnership, are members of the Equity Release Council, our customers have the reassurance we’re protecting them every step of the way.
We can also offer plans with a ‘no negative equity guarantee’, to make sure you never owe more than the value of your home.
The different kinds of lifetime mortgage explained
Roll-up lifetime mortgage
You get a cash sum with no monthly payments. The cash sum is paid off, along with the interest built up on it, by the sale of your home when you die or move into long-term care.
Drawdown lifetime mortgage
Just like a roll-up lifetime mortgage, but you have the flexibility to release your cash over time rather than just taking one lump sum. The benefit is you can access your cash as and when you need it and interest is only charged on the amount you have taken. This could be suitable if you think you might need more money in the future as it helps you not to build up interest on money you’ve released but haven’t spent.
Flexible lifetime mortgage
You can choose to make voluntary payments to bring down your mortgage loan amount. Like any equity release lifetime mortgage, you still get a cash sum and keep ownership of your home.
Enhanced lifetime mortgage
Only for those with certain specified medical conditions, these let you unlock even more cash from your home, and you may qualify for better lifetime mortgage rates.
Interest only lifetime mortgage
This type of scheme lets you access a cash lump from your home, but rather than rolling up interest over the years, you pay off a certain amount of interest monthly. Essentially, this helps to reduce the amount needed to pay back from the sale of your home when you pass away.
Not sure which plan to choose? Your equity release adviser can talk through and explain the best options for you.
Why choose a lifetime mortgage?
- Stay in control of your debt – However much cash you choose to unlock, with a ‘no negative equity’ plan, you’ll never owe more than the value of your home
- Pick a plan to suit you – You can unlock as little as £10,000 tax-free, with more in reserve for when you need it. Choose from variable or fixed lifetime mortgage rates depending on the lifetime mortgage provider
- Keep your home – You still own your home. You’re just borrowing against it. You may even be able to move, as long as the new house meets the conditions laid out by your provider – your lifetime mortgage will move with you
- Get a tax-free lump sum – The cash you unlock is yours to spend any way you like (once you have repaid any outstanding mortgage or secured debt). Releasing equity may affect your entitlement to state benefits, but we’ll put you in touch with friendly lifetime mortgage advice to explain exactly what this means for you
- Just think of the possibilities! How could a tax-free cash sum help transform your retirement?
What could you do with a cash lump sum?
Many people using equity release schemes spend their unlocked cash on getting mortgage and debt free or on home improvements*. Not a bad idea if you want to live a more comfortable retirement, with less out-goings and a nicer home to spend time in.
Or maybe you’d prefer to make the most of your retirement by taking those unforgettable holidays you’ve always dreamed of? It’s your money. Spend it your way.
Just remember, if you release equity, you are required to pay-off any existing mortgage and/or secured debt first.
*Age Partnership, 2017
How much cash could you unlock?
Are you 55 or over with a home worth at least £70,000? See how much tax-free cash you could unlock with a lifetime mortgage to boost your retirement income with our online Equity Release Calculator. Based on your age and property value, we’ll give you an answer in seconds.
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 – so think carefully before taking a lifetime mortgage. And remember, while you can choose not to make repayments in your lifetime, interest will build up on your loan over the years.
SunLife offers a range of straightforward and affordable products including over 50s life insurance, funeral plans, life insurance, equity release, pet insurance, home insurance, car insurance, ISAs and Will writing services