Equity Release & Lifetime Mortgages will reduce the value of your estate and can affect your eligibility for means tested benefits.
A lifetime mortgage is when you borrow money secured against your home, provided it's your main residence, while retaining ownership.
You might be able to ring-fence some of the value of your property as an inheritance for your family.
Also some providers might be able to offer larger sums if you have certain medical conditions, or even 'lifestyle factors' such as a smoking habit.
The home still belongs to you and you're responsible for maintaining it.
Interest is charged on what you have borrowed, which can be repaid or added on to the total loan amount.
When the last borrower dies or moves into long-term care, the home is sold and the money from the sale is used to pay off the loan.
Anything left goes to your beneficiaries. If your estate can pay off the mortgage without having to sell the property they can do so.
If there's not enough money left from the sale to repay the mortgage, your beneficiaries might have to repay any extra above the value of your home from your estate.
To guard against this, most lifetime mortgages offer a no-negative-equity guarantee (Equity Release Council standard).
With this guarantee the lender promises that you (or your beneficiaries) will never have to pay back more than the value of your home.
This is the case even if the debt has become larger than the property value.
Types of Lifetime Mortgages
Broadly speaking, there are three types of lifetime mortgages: home income plans, drawdown mortgages, and roll-up mortgages.Depending on the borrower’s individual circumstances and long-term plans, it should be made clear which mortgage may be suitable. Advice should be taken into careful consideration, before opting for any particular type of lifetime mortgage. Different providers will normally have different rules and criteria, so if you are unable to find the product you are looking for with one lender, try a different or even a specialist lender. The assistance of an all-market mortgage broker will be invaluable for this type of mortgage.
Warning: Equity Release will reduce the value of your estate and can affect your eligibility for means tested benefits.