If you're thinking about moving home, you can normally transfer your lifetime mortgage to your new property. This is known as 'porting'.
The home still belongs to you and you're responsible for maintaining it. Interest is charged on what you have borrowed, which can be repaid or added on to the total loan amount. When the last borrower dies or moves into long-term care, the home is sold and the money from the sale is used to pay off the loan.
A lifetime mortgage is a type of equity release, a loan secured against your home that allows you to release tax-free cash without needing to move out. Lifetime mortgages are available to homeowners aged 55 or over. You can take the money as a lump sum or as series of lump sums.
If you want to pay off your existing mortgage early then equity release is the solution that you need. Whether you plan to use this money for other purposes, want to avoid repossession or have insufficient funds to pay off your mortgage monthly instalments, lifetime mortgages can help.
Summary: maximum age limits for mortgages
Many lenders impose an age cap at 65 - 70, but will allow the mortgage to continue into retirement if affordability is sufficient. Lender choices become more limited, but some will cap at age 75 and a handful up to 80 if eligibility criteria are met.
If you have a lifetime mortgage, you may transfer it to your new home. However, if you have a home reversion plan, you will not own all of your property. You may not therefore have enough equity to purchase a new home.
Lifetime mortgages are available to borrowers aged 55 and above. There are no upper age limits for lifetime mortgages. At age 55 you can release up to 27% of your property value, increasing each year you age. The maximum percentage that you can release from your home is capped at 58% from age 82.
The best type of equity release will depend on your own needs and circumstances. A lump-sum lifetime mortgage might be a good way to clear an existing mortgage, for example, while the drawdown version could help top up your income without running up hefty interest costs.
What's the Average Interest Rate on a Lifetime Mortgage? The current average interest rate on lifetime mortgages can be expected to be roughly between 5.68% and 7%*. The rate you're offered will depend on different factors, such as your loan-to-value ratio and the features included in your plan.
Lifetime mortgages are a popular type of equity release plan, with lump sum loans up to 60% of home value and fixed interest rates. Top lifetime mortgage providers include Pure Retirement, More 2 Life, LV, One Family, Aviva, and Nationwide Bank.
There are two main types of plans for a Lifetime Mortgage; lump sum and drawdown.
To calculate the total interest you will pay over the life of your loan multiply the principal amount by the interest rate and the lending term in years.
The main advantage of a lifetime mortgage is that you get to release equity without having to move house, a huge benefit if you've spent your working life paying off the mortgage on a beloved family home. Being able to stay put is a big benefit.
Downsizing. The most obvious alternative to equity release is to downsize – i.e. sell your current home and move into a smaller property (or at least one that is less expensive).
Disadvantages of equity release
For home reversion schemes, home reversion companies will usually pay a lot less than the full market value of their share of your property. Also, you will no longer be the sole owner. If you die or sell your home shortly after taking out an equity release scheme, you could lose money.
Pros: Large lump sum, no monthly repayments, continue living in your home, tax-free cash, and can be used for any purpose. Cons: Can be expensive to repay, affects inheritance, and may impact means-tested benefits. Equity release is not a con when using legal, regulated lenders and seeking independent financial advice.
Equity release plans provide you with a cash lump sum or regular income. The "catch" is that the money released will need to be repaid when you pass away or move into long term care. With a Lifetime Mortgage, you will owe the capital borrowed and the loan interest accrued.
Another reason to remortgage is to release some of the equity in your home. You're essentially borrowing more against your property in order to free up cash. This means your mortgage will increase and your monthly payments are likely to go up.
Equity release is traditionally aimed at pension-age homeowners. Many equity release lenders insist upon all applicants being aged 60+, but Age Partnership have access to plans for everyone aged 55 and above.
How is a lifetime mortgage calculated? Lifetime mortgages are calculated by adding a compounding interest rate to the current total debt. This means that the interest which is added to the debt each month will be added to the total loan amount and any interest already accumulated.
You can take equity release more than once. There may be additional funds from your existing lender, which you can release with a drawdown plan or by a further advance. Alternatively, you can replace your existing equity release plan with a new one that repays your current lender and provides you with additional funds.
You'll normally get between 20% and 60% of the market value of your home (or of the part you sell). When considering a home reversion plan, you should check: Whether or not you can release equity in several payments or in one lump sum. The minimum age at which you can take out a home reversion plan.
A lifetime mortgage (the most common type of equity release plan) takes 4–6 weeks to complete, whereas a home reversion scheme takes 6–8 weeks to complete, assuming the title is clear. The length of time it takes to complete your equity release is determined by the efficiency and experience of your solicitor.
Equity release lets homeowners aged 55 and over release tax-free cash from the value of their home. The amount you can release is based on your age and how much your home is worth. Depending on the equity release product you choose, you can claim your money as one big lump sum or as a series of smaller lump sums.