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
Buy to Let Stamp Duty Changes April 2025
Yesterday
On the 31st October 2024 stamp duty for those purchasing additional properties increased by 2% from 3% to 5%.
From 1st April 2025 the threshold will be reducing from £250,000 to £125,000
Where did Londoners move to in 2024?
6 days ago
Research from Metro shows that those who chose to move home didn’t actually move that far away. With a 430g pack of chicken costing on average almost double in London than the rest of the UK, it's no wonder some people are choosing a change of scenery to save a few pennies.
Reasons to get a Buy to Let Mortgage
10 days ago
Following recent changes in the Buy to Let market, some investors may find this product less appealing. However, if done correctly, building a buy to let portfolio can be very profitable.
Stamp duty: how is it changing in 2025?
23 days ago
Helping you understand the upcoming changes in stamp duty (SDLT) from April 2025.
UK homebuyers and homeowners are hoping for stability in 2025.
We are hoping that mortgage rates will ease this year, but how drastically depends on inflation trends, swap rates, and the Bank of England’s decisions in which way the base rate should go.
Budgeting over the Christmas Period
3 Dec 2024
The most wonderful time of the year can easily turn into the most expensive time of the year. Watching the pennies doesn’t mean that the Christmas festivities have to stop, following a few budgeting tips can mean you still have a special Christmas and don’t go into the new year in debt.
Preparing your home to sell in winter
29 Nov 2024
December is usually a less desirable time to buy as many people don’t want to move over the holidays. However, prospective buyers do start to look at this time. Selling your home in winter may require a bit of extra attention to showcase your property at its best.
We look at why mortgage rates increased following the Bank of England's choice to reduce the bank rate, and should you fix now?
More information
Trusted by
