A lifetime mortgage is a loan secured against your home. It's a way of unlocking some of the equity that is tied up in your property, tax-free. 

The money you release with a lifetime mortgage is yours to do with what you choose. You can either take out a lump sum or a smaller initial amount, followed by smaller releases at a later date - otherwise known as a drawdown.

We want to highlight that you will  continue to own your home, and with plans that meet the Equity Release Council's standards, there’s a no-negative-equity guarantee. This means you will never owe more than your home is worth, so you're not passing debt down to your children/estate.

That being said, a lifetime mortgage will reduce the value of your estate and may affect your entitlement to means-tested benefits. It will also reduce the amount of assets that could be used to pay for care costs, if ever required.

A lifetime mortgage works by allowing you to release your property’s equity in tax-free cash, dependent on your age, property value, and any health issues. There are also no monthly repayments - dependent on your plan's criteria.

The equity you have in your property is the value of your home, minus any outstanding mortgage amounts and any other existing loans secured against it. This equity is often passed on as an inheritance. However, an increasing number of people are using some of this wealth to help boost their retirement finances, leave a living inheritance, or cover important costs.

If you have an outstanding mortgage, you’ll need to repay it before accessing your lifetime mortgage funds. 

Important note: Clearing an existing mortgage with a lifetime mortgage may result in a higher cost of borrowing.

Payment term lifetime mortgages (PTLM) are specifically designed for those who want to release equity from their homes, while maintaining interest payments for a specified period.

Unlike traditional lifetime mortgages, where interest accumulates over the life of the loan, payment term lifetime mortgages allow you to make mandatory interest payments during an agreed-upon term. After this period, interest starts to accrue, and the loan continues until you pass away or move into long-term care. Because interest is not accumulating during that period, it can help retain some of the value of your home.

Lifetime mortgages may mean your family receives less inheritance when you pass away. The lifetime mortgage is repaid through the proceeds of the sale of your property, meaning there could be little or no inheritance left for your family. If you opt to pay some of the interest, you may be able to mitigate some of this, but it depends on your unique circumstances. 

One of our specialist advisers will be able to help you decide what is going to work best for you.