In this guide, we’re looking at the differences between equity release and a lifetime mortgage to help you make informed decisions and understand exactly what your mortgage broker is speaking about.
What is the difference between equity release and a lifetime mortgage?
Equity release and lifetime mortgages are both ways of borrowing money against the value of your home, but there are some key differences between the two:
Equity release
Equity release refers to a range of products letting you access the equity (cash) tied up in your home if you are older. It is suitable for homeowners over the age of 55.
There are different types of equity release plans, with the two main types being lifetime mortgages and home reversion plans.
The amount of equity you can release will depend on the value of your property and the value of any outstanding mortgage. Most providers have a cap on how much you can borrow. The maximum amount will often be up to 60% of the value of your home.
Equity release does not require you to own your home outright and can be paid back in various ways, depending on the type of plan you choose.
Lifetime mortgages
A lifetime mortgage is a type of equity release that allows you to borrow money against the value of your home for the rest of your life.
Lifetime mortgages are the most popular type of equity release plan.
With a lifetime mortgage, you will always own 100% of your home.
There are usually no repayments to make, but most plans now allow repayments for those wishing to control the future balance.
You can generally borrow between 18% and 50% of your property’s current value with a lifetime mortgage.
You can receive your money from a lifetime mortgage as a single cash lump sum or as a smaller initial amount with the option to receive additional payments later on.
Choosing a single cash lump sum may suit your requirements, but you’ll be paying interest on the full loan amount from day one.
In summary
In summary, equity release refers to a range of products that let you access the equity (cash) tied up in your home if you are older, while a lifetime mortgage is a specific type of equity release plan that allows you to borrow money against the value of your home until you die or go into long-term care.
Considering equity release?
Book a free initial consultation with our specialist equity release advisor in Loughborough. We will explain everything you need to know without the jargon and offer a personable service.
Equity Release, Lifetime Mortgages & Home Reversion Plans will reduce the value of your estate and can affect your eligibility for means tested benefits.