As a senior UK citizen, you may be looking for funds to boost your retirement, support your children, complete a home renovation or pay off a mortgage you may have on another property.
Did you know that there is a loan type you can apply for to gain these funds? Lifetime or equity release mortgages are one answer you might consider.
If you've looked into this loan type, you will know multiple options are available. How can you choose one that meets your specific circumstances?
Keep reading this article, in which we provide a guide to lifetime mortgages and our first-hand reviews of the best eight options you should consider when selecting one.
| Provider | Score | Details |
|---|---|---|
| 1. Scottish Widows | ★★★★★ | Click Here |
| 2. Pure Retirement | ★★★★★ | Click Here |
| 3. Canada Life | ★★★★★ | Click Here |
| 4. Responsible Lending | ★★★★★ | Click Here |
| 5. OneFamily | ★★★★★ | Click Here |
| 6. Simply Lifetime Mortgages | ★★★★★ | Click Here |
| 7. More2Life | ★★★★★ | Click Here |
| 8. Standard Life | ★★★★★ | Click Here |
What Is a Lifetime Mortgage and How Does It Work?
After researching what a lifetime or equity mortgage is, you'll see that this is a secured loan.
This secured loan is a kind of equity release, giving you access to tax-free cash. You'll not need to repay this loan until you pass away.
The mortgage will not affect your property ownership. You will still be the homeowner. However, with this loan type, you'll accrue lifetime mortgage interest rates on top of the amount you borrow. The interest rate you pay will be determined by a few factors, including your property value and your age.
If you're wondering, “How does a lifetime mortgage work?” here's how. If you don't pay the equity mortgage by the time you pass away, the property will be sold, and the value raised will go towards the loan expenses. The typical amount you can receive with a lifetime equity mortgage is between £10,000 and £100,000.
Lifetime Mortgage Features
You'll notice that there are several specific features of lifetime equity mortgages.
Here are the features you will need to look at when selecting this loan type.
- Interest rates — The interest rate is also known as the cost of borrowing money. Each provider will expect you to pay different rates of interest. Therefore, you should compare each provider to find the best rate.
- Age threshold — You are typically eligible for this loan type if you are over 55. Many providers will also establish an upper age threshold, which may be 85.
- Early repayment charge — Some providers will charge you for early repayment of your loan. The early repayment charge will depend on the specific lender.
- Secured loan — The lifetime mortgage is a loan secured by your property. As mentioned, if you pass away without repaying this loan type, it will be settled by the value of your home.
Lifetime Mortgage Pros and Cons
Several pros and cons apply to lifetime mortgages.
Here, we'll explore the advantages and disadvantages you should consider when selecting this loan type.
Pros
✔️ You choose how to spend the funds — How you spend the equity release is your choice. Whether you want to support your children with their existing mortgage costs or add an extension to your property, it is up to you how you spend the funds.
✔️ Remain in your home — You will not need to downsize or sell your home while you are alive with this mortgage type. You can remain in your home as a homeowner until you pass away.
✔️ Inheritance protection — Some providers offer an inheritance protection feature. With this feature, you can pass on part of the value of your home to your family and still repay the loan with your property value.
✔️ Guarantee for no negative equity — You will receive a no negative equity guarantee with many providers. This guarantee means you'll never need to repay costs that exceed the value of your home.
Cons
❌️ High interest rates — With this loan type, you will have to pay high-interest rates. These rates will be higher than a standard or typical mortgage.
❌️ Lower inheritance amount — Even though you can leave some of your property's value to your beneficiaries with inheritance protection, you may pass on a lower amount.
❌️ State benefits may be affected — If you have state or means-tested benefits and choose to take out this mortgage type, your benefits may be affected, and you may not be entitled to them.
Best Lifetime Mortgage Options for UK Citizens
Now we have answered the question “What is a lifetime mortgage?” we can look at the best options available to UK citizens.
Here are some of the lifetime or equity-release mortgages we reviewed first-hand.
1. Scottish Widows
Scottish Widows, a Lloyds Banking Group subsidiary, offers lifetime mortgages with a drawdown facility, meaning you only pay interest in the drawn-down funds. We found that it offers a no-negative equity guarantee.
Early repayment charges apply to the original balance of your subaccount, and after 10 years, you will not pay any charge for paying the loan early.
You can protect some of your property value using inheritance protection and also choose from Lump Sum or Future Release options. With the Lump Sum option, you'll receive a £600 cashback sum that can go towards legal fees, a property valuation for free and free conveyancing options.
With the Future Release option, Scottish Widows will reassess your loan to value position and consider your existing mortgage balance, new borrowing amount and property value assessment.
Upon testing, we found that interest rates are fixed for life; you will also receive a bereavement exception.
The minimum age to be accepted for this loan type is 55. You cannot be over 85 to be eligible. You can receive a minimum facility of £30,000 and a maximum of £1.5m.
2. Pure Retirement
Pure Retirement is an award-winning provider of lifetime mortgages. With Pure Retirement, we learned that you will not need to make monthly repayments.
Your loan and interest will be paid off after you pass away when the property is sold. This mortgage type is tailored to your financial circumstances, and you'll receive a no negative equity guarantee.
The amount you can release will typically depend on your property's value, personal circumstances, and your age. In terms of your interest rate, this will depend on the set rate when you take out the loan.
Most of Pure Retirement's equity release or lifetime-type mortgages have higher interest rates than traditional or standard mortgages. However, the rates will be fixed, and you'll not have to repay until the plan ends.
When testing these services, we discovered that some of the fees you will need to pay include the valuation, arrangement, solicitor, and advice fees. You may be able to get a contribution from Pure Retirement to cover the costs of setting up the lifetime mortgage.
This range of equity release options will release tax-free cash, but it may affect your entitlement to state benefits, so ensure you discuss these factors with your adviser.
3. Canada Life
Canada Life provides a wide range of lifetime mortgages. When looking into these services, we found that their Capital Select Option gives you the flexibility to make repayments worth 10% every year, and you'll not have to pay any penalties if you choose not to repay the loan.
You can choose their cash reserve option, giving you access to funds later. This option will give you a tax-free cash payment, and you will not need proof of affordability to receive this mortgage type.
We discovered that Canada Life's Lifestyle Select Option allows you to access the cash reserve and gain an inheritance protection guarantee. If you choose to repay the loan early, you can do so; however, you will face fixed early repayment charges.
You can also choose the second home option. With this option, we learned that you'll be able to borrow more money, skip the affordability checks and get valuations on your second home for free.
4. Responsible Lending
Responsible lending offers equity release-type mortgages to homeowners over 55. We found a few types of this mortgage type with Responsible Lending.
You can select from a full product offering, including Lump Sum, Drawdown, Fee Paid and Premier lifetime mortgages.
While the Lump Sum option gives you access to a one-off tax-free lump sum, the Drawdown equity release option gives you a smaller initial lump sum and ensures you reserve the rest of your funds. We learned that you'll not get rolled-up interest with the drawdown option.
The Fee Paid option enables you to exchange a £500 application fee for a lower rate on your initial release and any additional drawdown options. The Premier option, however, is ideal if your property is high value and gives you access to a minimum loan of £100,000. Your minimum property value must be £2,000,001.
Several criteria must be met to qualify for the lifetime mortgage with Responsible Lending. Your property must be in England, Wales or Scotland and your main residence. You cannot be older than 84 and require a property valued at at least £125,000.
5. OneFamily
In addition to Junior and Lifetime individual savings accounts and over 50s life cover, OneFamily offers lifetime mortgages to UK citizens who are over 55 and own property in the United Kingdom.
It offers a cash lump sum, and you will still own your property. We found that with this loan type, you'll never owe more than your property's value.
You'll need to pay fees to establish the equity release mortgage. Some fees you will need to pay for if you choose One Family include legal, valuation, building insurance, arrangement, adviser and completion fees. Your unique circumstances will determine the costs of these fees.
Using this loan to make home improvements, support loved ones financially, or clear your interest-only mortgage is possible.
When using this service, we found that there are a few eligibility expectations besides your age. You must have a property worth at least £70,000. You must also have no, or very little, mortgage left to pay on your property.
6. Simply Lifetime Mortgages
Simply Lifetime Mortgages offers the options you need for drawdown and lump sum lifetime mortgages. Their lump sum option is ideal if you want a tax-free sum of money.
You'll not need to make any monthly repayments, and any interest repayments are made after you pass away when your property is sold.
We learned that to be eligible for Simple Lifetime Mortgages's lump sum equity release mortgage, you must be 55 and over.
You'll be able to continue owning your home, gain a no negative equity guarantee so you'll never owe more than your property's value, and may gain an inheritance protection guarantee to protect a sum for your family to inherit.
You can access your money flexibly with the drawdown equity release mortgage from Simply Lifetime Mortgages. It's possible to release your funds over a specific timeframe and reduce the interest you'll owe.
One advantage of this loan type is that the funds are tax-free. Upon testing we also discovered that like with the lump sum option, you will receive a fixed interest rate, a no negative equity guarantee, and an inheritance protection guarantee.
Some properties are excluded and less likely to be accepted for lifetime mortgage applications with Simply Lifetime Mortgages. For example, if you have a basement flat, a maisonette, a farm, a houseboat or a mobile home, you may not be accepted.
7. More2Life
More2Life offers multiple types of lifetime mortgages, including Flexi, Tailored, Capital, and Maxi options. When we looked into these services, we found that their Flexi option is available to UK applicants over 55 and under 84. It offers a minimum loan amount of £10,000 and a maximum loan amount of £1m.
The minimum valuation of the property must be £125,000 to be eligible. You'll receive fixed early repayment charges and downsizing protection with this option.
You can also choose More2Life's Tailored option. This option offers loans from between £10,000 and £1m. You must be between 55 and 85 to apply as a UK resident. The minimum property valuation is £70,000 for eligibility, and there isn't a maximum property value. Fixed early repayment charges apply to this option.
We discovered that you can receive loans between £10,000 and £1.5m for the Capital option.
8. Standard Life
Standard Life has a reputation that has lasted for approximately 200 years. It offers lifetime mortgages to homeowners aged between 55 and 84.
In our first-hand review, we learned that you must have a property worth at least £99,000 to be eligible. Standard Life will not conduct an affordability check or check your credit score when you apply.
You have options between a lump sum equity release and a drawdown option. Whether you want to receive the funds all at once or leave an amount for later, Standard Life has you covered.
We also discovered that you can release more equity as an older individual with a higher-value property. You can also use Standard Life's equity release calculator to determine the amount of equity you can receive.
With Standard Life's equity release mortgage, you can choose between reduced or zero monthly payments. It may be possible to remortgage the plan if you need to release more equity or secure a better interest rate, but this might include early repayment charges.
Compound interest applies to these options. With the lump sum option, you’ll receive interest on the entire amount you borrow from the first day. With the drawdown option, you will receive interest only on the release amount.
Best Lifetime Mortgages: The Verdict
Whether you're hoping to support your children in taking out their first mortgage or release equity, a lifetime mortgage can help. Since each option has different pros and cons, ensure you compare your providers and check the interest and loan-to-value ratios.
Some top options include More2Life and Responsible Lending, but match your financial circumstances to your loan provider to make the best choice. Check your lifetime mortgage options and select a provider to enjoy the benefits of your hard-earned cash lump sum.
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