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What types of Lifetime Mortgage plans are available?

A Lifetime Mortgage is an equity release product that allows homeowners to access their property wealth as a tax-free cash lump sum. It has been increasing in popularity in the UK, with billions of pounds of equity released each year*.

* Source: Equity Release Council 2021 Spring Report

There are some similarities between a Lifetime Mortgage and the more traditional forms of mortgage, but it's the differences that really set the product apart. While you're borrowing a tax-free sum against the value of your home, with a Lifetime Mortgage there is no requirement for you to make any monthly payments. Instead, the interest rate can be fixed for life, with the interest added to the original amount borrowed. Full repayment is not then due until you have died or entered permanent long-term care.

There are now hundreds of Lifetime Mortgages available in the market, many with features such as the ability to structure your release in stages or to make voluntary payments to reduce the build up of interest. These features can help customers to mitigate some of the impacts that releasing equity will have on the value of your estate and entitlement to means-tested benefits.

All the Lifetime Mortgages we recommend meet the Equity Release Council's product standards.

The no-negative-equity guarantee

At Responsible Equity Release, you will benefit from what is known as the no-negative equity guarantee. This is a guarantee given by all lenders who are members of the Equity Release Council. It ensures that if the amount you owe after you die or enter long-term care is more than your home's value, the excess will be completely written off.

The two main types of Lifetime Mortgage:

Lump Sum Lifetime Mortgage

A Lump Sum Lifetime Mortgage is the basic type of product that you can expect, allowing you to borrow money secured against the value of your home. This will be as a tax-free cash lump sum, without the requirement to make any payments.

Should you choose not to make any voluntary payments, then the interest will be rolled up and added to the amount borrowed and build up over time. Repayment would then usually be achieved with the sale of the home, either after you die or enter permanent long-term care.

Drawdown Lifetime Mortgage

In the same way as a Lump Sum Lifetime Mortgage, a drawdown product will allow you to release a tax-free cash lump sum. It differs in that you can release a smaller initial amount and create a further reserve amount of equity that you can access at a later date. This can give you increased flexibility and choice when it comes to making the most of your property wealth and planning for your future.

The amount held in your reserve will be completely interest-free until you access it, meaning that this type of Lifetime Mortgage can be valuable for those who want to control the impact of interest build up.

Flexible Features

There are many flexible features available with a Lifetime Mortgage, so it is likely that there will be a product suitable for your personal circumstances. These features can include:

  • The option to make voluntary payments towards the interest, whether partial or in full.
  • Inheritance guarantees - ringfence a portion of your home's value as a guaranteed inheritance.
  • The choice to receive your released equity as a defined income over a period of time.

With hundreds of plans available from a variety of different lenders, you can tailor your release to suit you and help towards your goals in later life.

Ready to start your Responsible journey?

To find out more about a Lifetime Mortgage, and the various features available, why not book a no-obligation appointment with one of our fully qualified advisers? The Information Team can help with this on 0800 048 5384.

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