Lifetime mortgages are becoming more popular as a generation of people with all or most of their lifetime wealth tied up in their homes. Many have small or inconsequential pension pots and will be relying on the equity in their homes to sustain them in retirement.
Like the rest of us, those in retirement need somewhere to live and so a variety of equity release schemes have come to the market whereby homeowners may take mortgages for their remaining lifetime and in return they may release cash to help them live.
There are many advantages to this innovative financial instrument but there are also drawbacks. In particular, taking out cash now will mean it needs to be paid back later (with interest) out of the sale of your home after you die. If you have children, this will affect what they might expect to inherit.
In the past, borrowers would agree a lump sum and take it on day one. That sum would accrue interest and in many cases a good proportion of the cash released might end up sitting in a homeowners bank or savings account earning little or no interest and being devalued every year by inflation whilst at the same time interest on the lump sum drawn was accruing interest at an alarming rate.
The big advantage to the drawdown lifetime mortgage is that you only pay interest on the money drawn down. Most lenders will set a drawdown limit and then it’s simply a matter of applying for a cash drawdown as and when you need more cash. This saves interest that would otherwise be payable on the entire sum and has the additional benefit of reducing cash at hand in savings, meaning that you may still be entitled to various means tested benefits.
As with all mortgages specific terms will be dependent on the lender’s criteria and the borrower’s personal circumstances, so it’s always worth taking specialist advice before committing to any form of secured loan. At Mortgaged Required we offer details up-to-date advice on all the options available to homeowners looking to release cash from their homes in a prudent and cost effective manner.
Contact Mortgage Required to speak to a mortgage adviser on 01628 507477.
Related articles:
Download our Free First Time Buyers Guide
Recent posts
The government has announced plans to make buying or selling a home cheaper and quicker with what is being called the “biggest shake-up to the homebuying system in this country’s history.”
More borrowers using equity release
6 days ago
Almost one in five equity release mortgages are now taken out to provide financial support to family.
Buyers purchasing properties sooner
8 days ago
According to industry data, the expected wait for those looking to buy a property has dropped from just over 11 months to less than six months.
It is common for your first mortgage payment to be higher than your subsequent monthly payments for two reasons.
What to do just before you get your keys
13 days ago
Firstly, a big congratulations, you’ve now exchanged contracts! After weeks and months of waiting, you are about to move in. What should you do first?
The chancellor will deliver her second budget this autumn. Due to slow economic growth and high inflation, the government need to manage a £40 billion shortfall in public finances. There have already been reports about changes to taxes including income tax and capital gains tax.
Landlords could face a new tax this autumn
29 Aug 2025
The chancellor has advised that landlords could have another tax to pay this autumn as the Treasury decide whether to extend national insurance contributions to rental income.
According to a report in the Guardian, senior ministers have asked Treasury officials to look into a “proportional” property tax to see how it would work as an alternative to the existing stamp duty land tax on owner-occupied homes.
More information
Trusted by
