A single lump sum
You receive the whole amount at once. It's straightforward and suits one larger need, such as paying off a mortgage or funding building work. Interest is charged on the full sum from day one.
So what is a lifetime mortgage?
A lifetime mortgage is a loan secured against your home. The property stays yours and you keep living in it just as you do now.
It is the most common kind of equity release. I also advise on retirement interest-only (RIO) mortgages, where the interest is paid each month. If you're 55 or over and own your home, a lifetime mortgage can release part of its value without you having to move. The whole process is set out on the page about how equity release works.
Choice 1
How the money can be paid to you
Drawdown
You take a smaller sum to begin with and keep the rest in reserve to draw on later. Interest is charged only on what you've actually taken, so if you don't need everything at once this can work out cheaper.
Choice 2
Ways of handling the interest
Roll-up interest
You pay nothing each month. The interest is added to the loan, so with this choice the debt grows fastest, but there are no monthly payments to find.
Paying some or all of the interest
Some plans let you pay part or all of the interest each month, which slows or stops the loan growing. On many plans these payments are optional, so check the terms. You can also choose to make capital and interest payments if you'd prefer.
Features you may be able to choose
- Inheritance protection: set aside a share of your home's value for your family. It reduces how much you can borrow.
- Enhanced terms: some lenders offer more if you have certain health or lifestyle conditions.
- Fixed or capped rates: Equity Release Council standards require your rate to be fixed or capped for life.
Points to bear in mind
- The loan can grow quickly if interest isn't paid.
- It can reduce the value of your estate.
- It may affect your entitlement to means-tested benefits.
- Council members offer a no negative equity guarantee, so you'll never owe more than your home is worth.
Is it right for you? That depends on your age, your health, your home and what you'd like to leave behind. Sometimes it isn't the right choice, and if that's the case I'll say so. This page is general information, not advice. I can go through your options with you and explain what may suit you, alongside the alternatives to consider.
Not sure yet?
That's exactly what the first conversation is for. It's free, with no obligation.