With a lifetime mortgage, you can use your home to fund what’s important to you.
You might have heard about ‘releasing money from your home’ through equity release. But what do you actually know about it? There are a whole load of ifs, buts and uncertainties around this type of financial arrangement. So we’re here to help you pull apart the facts from the fiction
– and bust those equity release myths you might have heard.
First things first – the type of equity release we offer is a lifetime mortgage, but what is that?
A little look at lifetime mortgages
A lifetime mortgage is a long-term loan which allows you to release some tax-free money from the value of your home after you turn 55. You’ll carry on living in your home, and still own every square inch. The loan is usually repaid from the sale of your home once you (and your partner, for joint lifetime mortgages) pass away or need long-term care.
The myths Vs the reality
Now let’s take a look some of those myths and explain the reality behind each one.
You’ll be leaving your loved ones with nothing
The first myth for us to bust. What actually happens is, as long as your home’s sold for the best price it can reasonably get, anything that’s left after the loan and interest have been paid will go to your loved ones.
It’s true that they may not get as much in inheritance had you left your entire home to them in your will. But when you apply for a lifetime mortgage, you can tell us if you want to safeguard a percentage of the sale price to go to your estate. This is known as an inheritance guarantee.
It’s worth noting that if you choose to do this, you won’t be able to borrow as much. That’s because the loan is based on your home’s value without the percentage you’ve asked for as an inheritance guarantee.
Alternatively, you can choose to repay the loan and interest in another way. Although most people tend to pay it off from the sale of their home, it’s completely up to you.
You’ll need to repay more than your home’s worth
Years ago, this may have been the case with some equity release products. But with a no negative equity guarantee, neither your family nor your estate will need to pay back more than your home’s sold for, as long as it’s sold for the best price reasonably possible.
You will have to move out when the other dies or goes into long-term care
This isn’t the case if you take it out together. With a joint lifetime mortgage, the loan will only need to be repaid when you’ve both passed away or need long-term care.
You can’t move
Just because you’ve taken a lifetime mortgage, it certainly doesn’t mean you can’t move home. You may be able to transfer your loan to your new property – as long as it meets the lender’s eligibility criteria.
It could even be that you just want to make the most out of your retirement.
Before you decide
Deciding whether to take a lifetime mortgage is a big decision. It’s a good idea to speak to your family about your plans. It may affect them too, especially if it’ll impact their inheritance.