Is a lifetime mortgage a good idea?

Everyone has unique circumstances, so asking if a lifetime mortgage is a good idea will depend on your financial situation. 

If you don’t want to make monthly payments on a mortgage and need a lump sum, then a lifetime mortgage may suit you. If you can make monthly payments towards a mortgage, you could consider alternatives to this, such as a retirement interest-only mortgage, remortgaging, or a standard residential mortgage.

Is a lifetime mortgage a good idea? Let’s find out more:

Is a lifetime mortgage a good idea for me?

If you own your home and want to continue living in it (and have access to some more cash), then a lifetime mortgage may suit you. You can also use products like a retirement interest-only mortgage (RIO) to release equity. 

Unlocking some of the value in your home could boost your retirement funds, but choosing a lifetime mortgagee isn’t a spur-of-the-moment decision, and there are alternatives. That’s why expert advice is so important. Whether or not you end up going for it, an adviser will be able to tell you how it works and if it’s right for you.

What is a lifetime mortgage? 

A lifetime mortgage involves unlocking some of the value tied up in your home. By using the equity in your property, which has built up from years of paying off your mortgage, you can get a lump sum or regular payments, without having to sell your home. Options are available from the age of 50, with a payment term lifetime mortgage, and from the age of 55 for lifetime mortgages. The cash released is tax-free, and repayments are not required.

Are lifetime mortgages safe?

Lifetime mortgages are safe when handled by regulated professionals. Initiatives like the no-negative equity guarantee are in place to make sure you never owe more than the value of your home. 

Many lenders are registered with The Equity Release Council, who provide a set of standards to help protect customers. 

Previously, the equity release industry used to be an unregulated industry, which had some negative consequences. It is, however, from these mistakes that strict rules and regulations have come into play. Financial security is key, and the market is now focused on more flexible, customer-focused options. 

A specialist adviser will always ensure that you’re making a decision that’s right for you, and you’ll have the option of involving your family in these discussions at any point. The process is now very transparent and well looked-after, as it should be.  

What are the benefits of lifetime mortgages?

Having access to the money tied up in your home can open doors for home improvements, debt consolidation, gifted deposits, and even travel. This money is tax-free and you can continue to live in your property.

What you choose to do with the money is entirely up to you. You can essentially use this money to supplement your retirement income, however you see fit. This is especially useful for those with limited savings or investments.

What are the risks of lifetime mortgages?

If you’re not making repayments on your loan, the amount you owe can significantly increase over time, as compound interest is typically applied. Because of this, it can diminish the inheritance your beneficiaries receive. While you can take out plans that protect a certain portion of your equity, this may reduce how much equity you can release. 

Note as well that some plans may have early repayment charges if you sell your home before a certain period.

Are there alternatives to lifetime mortgages?

You could choose an alternative mortgage, such as a retirement interest-only mortgage or even a standard residential mortgage. You can also downsize, which involves selling your home and moving to a smaller, cheaper property. Read more about that below:

You could speak to an adviser to help extend your mortgage term, which can reduce the amount you pay monthly. However, certain lenders may have upper age limits. You may also have the option of remortgaging onto a new, standard residential mortgage, and lenders have become increasingly flexible with options like this. 

Speak to a mortgage adviser for advice about what’s right for you!

Why getting advice is important

An adviser will assess your financial situation, explain the different options available to you, and outline the potential risks and benefits. Getting a lifetime mortgage is a process that requires advice, but our advisers go one step further. We’ll find rates and products that are right for you, and always explore alternative options where appropriate.