The Financial Decision: Lifetime Mortgages vs. Equity Release
The decision of whether or not to release equity in your home is a difficult one. With so many different options available, it’s hard to know which one is best for you. Equity release advice can help you make that decision!
Equity release has been around for a long time. In fact, it dates back to the early 90s in England. After seeing many people unable to pay their property taxes and bills due to low pension funds, they decided that equity release was the best option available at the time. The market has grown substantially since then as more options have become available.
Lifetime mortgages are relatively new when compared with traditional forms of equity release, but only by a few decades (invented in 1980). Their popularity grew quickly after they were introduced because of all the benefits they provide over normal equity releases: no monthly or yearly fees, tax-free capital released from your house and no loss of ownership until death or moving into care home. However this comes at a price – the interest rates are typically higher.
A lifetime mortgage is a loan secured against your home that allows you to release money from it in exchange for a lump sum or regular payments. The loan is repaid when the property is sold, either by you or your estate.
There are no monthly repayments with a lifetime mortgage; instead, the interest on the loan builds up over time and is added to the amount you owe. This means that, although there’s no set term, the debt will eventually have to be paid off (unless you move into residential care).
The main advantage of a lifetime mortgage over other types of equity release is that there are no fees payable each year, and released is tax-free. You can also borrow the full value of your home, or if you prefer to leave some equity in place it’s possible to take out a smaller loan. The downside is that interest rates are typically higher than other forms of equity release and there isn’t much flexibility when it comes to repaying capital early.