A Lifetime Mortgage is like any other residential mortgage. The provider lends the money providing the application fits their criteria, for the benefit of the applicant who can take the money in either in a lump sum or increments. The money can be used for any legal purpose. Some of the most popular reasons people release equity from their home include:

• Clear an existing debt

• Clear an existing mortgage

• Take a holiday

• Help your family – providing deposits for children and grandchildren to help them get in the property ladder is one of the main reasons people consider Equity release

• Home Improvements

• Purchase a house or a new holiday home

The amount of money available depends on your age (of the youngest applicant when applying jointly) and the value of your property. The way it works – the lender agrees an overall amount at the outset. You may require a lump sum or the ability to take cash when you need it, or both. A drawdown facility is a ‘reserve’ which can be taken at any time as the need arises, generally in minimum tranches of £2,000 at any time. It is important that the applicant understands that whilst the rate for the initial drawdown is set at outset for the term of the loan, this is based on current market conditions (normally Gilt Rates). Any subsequent drawdowns will also attract an interest rate relative to market conditions. This could be higher or lower than the previous drawdown and is also fixed for the term. You only pay interest on the total amount released which can save a considerable amount over the term of the mortgage. You should be aware that the rate offered will reflect the prevalent interest rates at the time the draw down is taken, this could be at a higher or lower rate of interest, often the rate is set in line with the 15 year government gilts index.

We offer a range of retirement mortgages for our older customers: most are on an interest only basis and can extend into your retirement years. As repayments are obligatory, the lender will apply underwriting checks to ensure you can afford the repayments when you reach the end of your working life. Your retirement income would dictate the availability of these loans. As such they do not generally offer the more flexible options of a lifetime mortgage where further funds can sometimes be made available (subject to age and property value) with no restrictions based upon the applicants income.

There are no restrictions on moving to another property and the mortgage will generally be repaid from the sale proceeds of your existing house. If you are moving, it may be possible to transfer all or part of the mortgage to the new property. The mortgage would also be repaid when certain events occur, for example, moving into long-term care or within 12 months of the death of the last borrower. With a joint mortgage this would only apply to the surviving partner - at this point the mortgage will be repaid, usually through the sale of the property. After the mortgage has been repaid, any surplus funds from the sale would pass into your estate.

Many schemes allow regular monthly payments. These options include:

Monthly interest payment for the full amount. This will ensure your outstanding mortgage will not increase, that none of the equity within your home will be eroded by accruing interest.

Monthly interest payments for a lower amount (selected by you) to reduce the accrual of interest. This means the equity within your home would reduce at a slower rate.

In both cases payments can be stopped or reduced at any time.

Ad Hoc Payments. Most schemes allow lump sum payments of up to 10% of the outstanding debt at any time within a 12 month period. Anything above this amount may incur early repayment charges..

Interest roll up. Most Lifetime Mortgages are arranged on a roll up of interest basis. At the end of the mortgage, the loan is generally repaid from the sale proceeds. As a result of the interest roll up (if no payments are made) the debt will increase over the years. We will supply illustrations that will clearly show the impact of interest roll up (compound interest) on the initial debt.

Whilst house prices can always rise or fall, all of our providers offer a NO NEGATIVE GUARANTEE, ensuring you will never lose your family with a deficit or debt. Any surplus monies from the sale after the Lifetime Mortgage has been repaid will go to your beneficiaries.

If you don’t have any pressing need for a significant lump sum but are looking to increase your retirement income, one option could be a Lifetime Mortgage. The right plan could give you a regular monthly amount (established at outset) for a chosen term (established at outset). Your age and property value will dictate the amounts and corresponding terms that are available but if it is an increase in your day to day living income that you require, this may be a suitable option.

This can vary between lenders - some providers are happy to lend from age 55, others from age 60. With a joint application, the youngest applicant’s age is used to calculate the available loan. The older the applicant, the higher the available lump sum. An impaired life history can impact the application; ie. if you have any adverse medical history, enhanced rates can apply.

Below is a typical example of how much might be available. This guide is for illustration only, as sometimes much higher levels can be achieved:

Age of youngest applicant vs percentage of property value available:

55 years - 20%
60 years - 25%
65 years - 30%
70 years - 36%
75 years - 41%
80 years - 47%

E.g. a 70 year old with a property worth £300,000 would be able to borrow £108,000

You can repay your Lifetime Mortgage at any time, however, you should be aware that in some cases, early repayments charges may be incurred. These can be fixed at outset or dependent on the gilt rates at the time. Yet another reason why expert advice should be sought at the outset to ensure the most appropriate provider is chosen to suit your own circumstances, goals and attitude to risk.

No penalties apply in the event of death or the applicants going into long term care.

Absolutely. Equity Release can be used to help buy the home of your dreams, without having to provide all of the funds from your own resources. For example, if you are downsizing, using a Lifetime Mortgage to help buy your new house could enable you to retain money from your sale proceeds. The procedure is the same as a normal purchase.