Introduction to lifetime mortgages

A lifetime mortgage can help you get more out of your retirement years, from helping family, to home improvements or enjoying day to day life more.

What is a lifetime mortgage?

It's a type of equity release, which secures a loan against your home. It lets you release some of the money tied up in your home, without having to move, as tax-free cash. 

You can choose to take the maximum money available to you in one go or in smaller amounts as and when you need it. 

If you take smaller amounts later, a different interest rate may apply to each amount you take, depending on the interest rates available at the time. 

You should consider using savings and investments before taking a lifetime mortgage and there may be more cost effective ways for you to borrow money.

Are there other types of equity release?

As well as lifetime mortgages, there's another type of equity release, called a home reversion plan. Although it may be the type of equity release commonly thought of, it actually accounts for less than 1% of the market.

With this type of plan, you sell some or all of your home in exchange for a tax-free cash lump sum and a guaranteed lifetime lease with no monthly repayments to meet. You can stay in your home rent free for as long as you choose. If you’ve not exchanged 100% of the value of your home, then you share with the home reversion plan company any increase in the value of your property. 

What do we offer?

We offer two Lifetime Mortgages: 

Our Lifetime Mortgages
Flexible Lifetime Mortgage Optional Payment Lifetime Mortgage
With our Flexible Lifetime Mortgage, you won't have to make any monthly payments. With our Optional Payment Lifetime Mortgage, you can choose to pay some, or all, of the monthly interest by Direct Debit. If you choose this product, it could help you reduce the overall cost of the loan. You can stop making monthly payments at any time.

With both our Lifetime Mortgages, any unpaid interest is added to the loan each month. Interest is charged on the loan plus any interest already added. This means the amount you owe will go up quickly over time.

Our Lifetime Mortgages are usually repaid from the sale of your home when the last surviving borrower dies, or moves out of their home and into long-term care. Of course, any money left over would be available to you or your beneficiaries.

How is a lifetime mortgage different to a residential mortgage?

A lifetime mortgage is a type of equity release on an existing property, whereas a residential mortgage is usually to buy a new property. A lifetime mortgage is secured against your current main residence, giving you tax-free cash.

ltm vs residential
Lifetime mortgage Residential mortgage
Loan term The duration of the lifetime mortgage isn't fixed. The loan lasts until the last remaining borrower dies or moves out of their home and into long term care. The length of the mortgage is set when you first take it out.
Interest charges Any unpaid interest charged is added to the amount you owe each month. This is sometimes called compound interest or rolled up interest. There are two types of residential mortgage: repayment (capital and interest) and interest only. Interest is charged on the mortgage monthly.
Monthly payments

If you take out our Flexible Lifetime Mortgage, you won't have to make monthly payments.

With our Optional Payment Lifetime Mortgage, you can choose to pay some, or all, of the monthly interest, but you can also stop making monthly interest payments at any time.

.

A monthly payment is required until the end of the loan.

Affordability The amount you can borrow depends on your age, the value and suitability of your home and whether you're applying jointly or as an individual. Income and expenditure is taken into account to ensure you can afford the mortgage.
Interest rates The interest rate is fixed for the length of the lifetime mortgage. There are a variety of interest rates to choose from. The most common are variable or fixed rate.

How can a lifetime mortgage work?

What are they and how do they work? video

Transcript: What are they and how do they work?

Lifetime mortgages: What are they and how do they work?

You and your home have been on quite a journey

But it’s not over yet. So how can your home help you now?

Well, with a lifetime mortgage that’s secured against your home, you could unlock some of the cash tied up in your property, as either

A larger single amount, or several smaller amounts, that you can apply to take when you need them.

Interest is only owed when you take the money. You won’t make any monthly repayments.

Instead, interest is charged on both the loan and any interest already owed, and added to the total amount that’s secured against your home.

That means the total you owe can grow quickly, reducing the equity in your home and the value of any inheritance you may leave.

The loan and the interest are only repaid when you die or enter long term care.

The money you release could be the savings you never knew you had, helping you in your retirement.

It’s a big decision, and there are many factors to consider. That’s why you can only get a lifetime mortgage through a qualified adviser.

They’ll ensure that you’re eligible for the product, and can check if it’s the best solution for you.

What are the benefits and risks of a lifetime mortgage?

Before deciding whether to go ahead, an adviser can help you weigh up the benefits and risks of a lifetime mortgage, as well as the other options available to you. Below is a list of some things to think about.
 
bandr
Benefits Risks

With our Flexible Lifetime Mortgage, you won’t have to make any monthly payments.

With our Optional Payment Lifetime Mortgage, you can choose to pay some or all, of the monthly interest by Direct Debit. This could help you reduce the overall cost of the loan.

Unpaid interest is added to the amount you owe each month. This means we charge interest on the loan plus any interest already added. The amount you owe will go up quickly over time, reducing the equity left in your home.
The lifetime mortgage is usually repaid from the sale of your home when the last surviving borrower dies or goes into long-term care. A lifetime mortgage will reduce any inheritance and may affect entitlements to state benefits.
You can take a tax-fee cash lump sum, or smaller amounts as and when you need them. If you take smaller amounts later, a different interest rate may apply to each amount you take, depending on the interest rates available at the time.

What difference could a lifetime mortgage make? 

uses

Family 

You could give family members their inheritance earlier, which could help with the deposit on their first home, for example. Doing this would reduce the value of any future inheritance. If you give the money away, the recipient may have to pay inheritance tax in the future.

A holiday

The holiday of a lifetime for you, with friends or for the whole family. 

Interest-only mortgage 

A lifetime mortgage could be used to repay the balance of an interest-only mortgage. You may have to pay an early repayment charge to your existing lender.

Income

It could supplement your pension income and improve your general standard of living.

Debt

You could relieve the pressure of monthly repayments and pay off any outstanding debts, although it’s important to think carefully about securing a debt against your home.

Home improvements

Many people use a lifetime mortgage to improve their home or make it more manageable so they can stay in it for longer.

How can I take out a lifetime mortgage?

A lifetime mortgage is a big decision, and there are many factors to consider. That’s why you can only get a lifetime mortgage through a lifetime mortgage adviser.

If you already have a financial adviser, you can talk to them and see if they can advise you about lifetime mortgages.

We can put you in touch with The Retirement Lending Advisers (TRLA) on 0808 231 6853. The TRLA aren’t part of Legal & General, they’re a separate company of specialists that only advise on our Lifetime Mortgages. Calls are free. Monday to Friday 9.00am to 5.30pm. TRLA may record and monitor calls

Or you can search for qualified advisers in your area at www.equityreleasecouncil.com