Equity release mortgages – or lifetime mortgages, as we’ll be referring to them here – are big at the moment. In fact, data released by the Equity Release Council (the industry voice for equity release in the UK) highlights that over £700m in equity was converted into cash via this type of mortgage in Q3 of 2023 alone.
So, what is a lifetime mortgage, what are the benefits of lifetime mortgages, and what are the alternatives to lifetime mortgages?
Cash is king
And if you’re 55 and over, then it’s quite likely that you’ll have a lot of it… but stored in bricks and mortar.
Faced with the possibility of less money coming in if you’re reducing the amount of time you work, or if you’ve decided to retire altogether, then you might be thinking of ways to unlock the property wealth that you’ve accrued over the years.
Of course, downsizing is an option. But what if you don’t want to leave the property you’ve called home for years? With lifetime mortgages, there is a way in which to effectively have your cake and eat it.
Lifetime mortgages explained
Lifetime mortgages are a type of equity release mortgage that enable homeowners aged 55 and over to release equity – in the form of tax-free money. And without moving out, too.
The money can be taken as a lump sum or through a series of payments. And it only needs to be repaid when you die or move into long-term care. Similar to fixed rate mortgages, lifetime mortgage holders can make overpayments of up to 10 per cent a year. Additional overpayments are likely to incur charges.
As a Maidenhead mortgage broker and lifetime mortgage specialist, we’ve arranged countless lifetime mortgages for our clients, many of whom have used the money they’ve freed up to fund travel and home improvements, or simply pass on to their children (and even grandchildren) in order to help them buy a property.
There are downsides to lifetime mortgages, too. For example, interest on the loan can accrue quickly if you decide not to pay anything back until you die. Early repayment charges can also be quite hefty. And if you receive any state benefits, they can be impacted following what might be a significant cash injection.
However, a good mortgage broker will guide you through these. And it’s also worth noting that lifetime mortgages will only be discussed once other alternatives have been explored.
Lifetime mortgage alternatives
Whilst lifetime mortgages do provide a good way to unlock property wealth, there are two more options.
Firstly, remortgaging could allow you to release equity from your property. However, this is likely to result in you lengthening your loan term, which may cost you heavily in the long-term (and possibly even increase your monthly payments in the short term).
Secondly, retirement interest-only mortgages allow those over 50 to borrow against their property and just pay back the interest – and not the loan – each month. You repay the loan after reaching a defined period or once you’ve hit a certain age.
If you are 50 and over, there are a number of ways to release money from your property. The good news is that our team of Maidenhead mortgage brokers can help with all of them.
Over 50 and considering exploring your options when it comes to mortgages? If so, contact our team of Maidenhead mortgage advisers on 01628 560820 or by emailing enquiries@altonmortgages.co.uk.