Key Lifetime Mortgage Factors To Consider in 2023

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Lifetime Mortgage Questions and answers

Relaxed senior couple lying on sofa at home using laptop to look at equity release companies.

1. What is the criteria for a lifetime mortgage?

The main criteria for a lifetime mortgage are a minimum homeowner age of 55, your home value must be over £70,000, and any existing outstanding mortgage must be repaid from any funds released. Ensure you speak to a qualified equity release adviser to understand the criteria for your specific circumstances. For example, flats tend to have lending caps applied for the level of money available.

2. What are the pitfalls of a lifetime mortgage?

There are no pitfalls as lifetime mortgages advice is FCA (Financial Conduct Authority) regulated. However, it is important for homeowners to seek qualified advice to ensure the mortgage is being arranged in the most economical way and to discuss your plans with family members if you need any additional support, for example. Previous issues with lifetime mortgages arose from the effect of equity compounding at high interest rates, and also a lack of flexibility for a surviving homeowner on first death. Flexibility has changed in recent years. Modern plans contain a clause allowing the mortgage to be repaid on first death with no early repayment charges for flexibility in case the surviving home owner wishes to downsize and repay the mortgage, for example.

3. Who is the best lifetime mortgage provider?

This depends on your specific requirements. Your individual priorities will determine who the best provider is for your needs. A provider offering the most competitive interest rate may not offer 'downsizing protection, for example when moving home. Ensure you discuss exit criteria with your adviser, as this may be more important to you than the interest rate on the mortgage for your longer term economical benefit to avoid high exit fees.

4. What is a typical rate for a lifetime mortgage?

Interest rates in 2023 are starting around 6% up to 8%, depending on the level of funds required, however interest rates may decrease over the coming months. Request an up to date illustration as these change on a weekly basis.

Equity release FAQs

The main downside to equity release is the effect of compound interest on the most common type-the lifetime mortgage. However, this interest effect can be avoided or reduced with voluntary repayments. The equity release council included voluntary repayments as a requirement for lenders to meet their strict codes of conduct. The ability to make voluntary, penalty-free partial repayments was made a compulsory feature for all products to meet Equity Release Council standards from March 2022.
Prior to finalising your decision on equity release, it is crucial to seek financial guidance with a qualified equity release adviser. Discussing your plans with an independent equity release adviser will enable you to compare the whole market, and your adviser will identify the most suitable solution to match your specific circumstances. Additionally, should you opt to proceed with equity release, it is essential to obtain legal advice. Your adviser will be able to suggest an independent solicitor who specialises in equity release.
While Martin Lewis does not provide a direct endorsement for equity release, he acknowledges that under specific circumstances, it can be a viable solution to access funds tied up in your home to meet living costs and provide financial security. Where downsizing has been ruled out, for example, Martin Lewis has a balanced view on the concept of equity release and it's benefits to homeowners seeking extra funds in later life, and advises independent advice on equity release is obtained.
Equity release provides you with a cash lump sum or a drawdown facility to take the cash over a longer timeframe. The "catch" with equity release is that the money released from your home, plus interest will need to be repaid when the property is eventually sold. With a Lifetime Mortgage, you will owe the money borrowed plus the loan interest accrued. If you make voluntary repayments to the mortgage this will help reduce the amount of interest repayable on the mortgage, and will help maximise any inheritance your beneficiaries may receive.
It takes between six and eight weeks for an equity release application to complete and to receive your funds. The timescale depends on whether you have a mortgage to repay from the money taken, and whether there are any legal processes which may delay the process, such as moving home or changing the title.
A lasting power of attorney, or LPA is not required to setup an equity release plan. However, having an LPA in place is important to ensure access to further funds from a drawdown plan if you ever lose capacity to make your own decisions, or cannot sign your wishes for physical reasons, such as a stroke. If you have not set up an LPA and it is required, the Court will need to appoint a deputy for you. Planning ahead is prudent to ensure you have arranged such measures in case an LPA is required in the future, and this can save a great deal of stress if and when the time comes to use the LPA.
Equity release funds are tax-free and can be used for anything you wish (providing any existing mortgage is repaid from the funds). Popular uses of equity release funds include repaying mortgages and unsecured debt, home improvements, a cash boost, purchasing second homes, and helping family with a financial gift.
Lifetime mortgages are the most popular form of equity release and provide the flexibility to move home and make voluntary payments, if preferable. Equity release customers unlocked £1.6 billion in property wealth in Q2 of 2022. (Equity release council)
An equity release application should take around eight weeks until you receive your equity release funds. This depends on whether you have an existing mortgage to repay and if any changes to the title are required, which can increase the timescale to arrange.
In July 2023 the lowest Equity Release rate is currently 6.03% (Monthly Equivalent Rate) fixed for life. The highest interest rate in the market is currently 8.64% (Monthly Equivalent Rate).

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