A lifetime mortgage is a type of equity release; a loan secured against your home that allows you to release tax-free cash without the need to move out of your property.

Equity in your home is the current market value minus any loans secured against it – to include any remaining mortgage.

To qualify for a lifetime mortgage, you need to be aged 55 or over. You need to have your own home that’s located in the UK and worth a minimum of £70,000 and have a wish to release a minimum of £10,000.

You can take the money as a lump sum or as a series of payments. No repayments are required until you either die or move out of your home into long-term care, although you do have the option to make payments towards the loan should you wish.

The amount loaned depends not only on the amount of equity you have in your property, but also, your age. At 65, 25% of the equity - in the form of a loan can be released. If you are in older years, this can climb to 50%. Interest rates vary from between 2.5% up to an annual rate of 4 or even 6% in some instances with the rate increasing along with the amount borrowed. It is always advisable to select a lifetime mortgage product with a fixed interest rate.

How the money is used is entirely up to you. They can be used to help with day to day living expenses or perhaps for home-improvements. The money could even be used as a ‘gist’ to someone who is close to you.

Whilst lifetime mortgages can represent a way of accessing tax-free funds, which can be particularly attractive in the absence of other pensions, savings and investments, you need to be aware of the following:

• Interest of the loan is added to the debt on a continual basis and this can quickly build up – although most lifetime mortgage products have a fixed rate of interest.
• Amount of money received from a lifetime mortgage could affect your entitlement to state benefits.
• You are potentially reducing the amount of ‘inheritance’ that you can pass on to your family when you are gone.
• A lifetime mortgage can, in some instances, make moving more difficult.

For further information on Lifetime Mortgages, talk to Dunham McCarthy, we can give you independent advice on all your options.