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lifetime mortgage rates

This article was last updated on 1 September 2020.  

Best Lifetime Mortgage Rates 2020 and 2019

I’m sure you will agree that when it comes to a better understanding of what the best lifetime mortgage deals are it can get confusing. Luckily, we are here to help you find the best deal.

The key topics in this guide will help explain lifetime mortgages to you in a straightforward way. In this guide you will find:

– The best lifetime mortgages and lifetime mortgage providers

– The benefits and drawbacks of lifetime mortgages 

– Eligibility criteria

– Where you can get financial advice

Topics that you will find covered on this page

What is a lifetime mortgage?

Equity release schemes are rapidly growing in prevalence in the UK and overseas – and with good reason.

Unfortunately, more and more people are finding they have left it too late to prepare for the cost of long-term care in later life. As a result, equity release is understandably becoming an increasingly popular option. 

The two most popular options are lifetime mortgages or home reversion plans. These can provide you with a retirement income or cash reserve, for financial security in old age. 

So, what are lifetime mortgages? A lifetime mortgage is the most popular type of equity release scheme, as it’s the most flexible and versatile option. It provides instant access to a loan that can be used to pay for long-term care in later life. The amount you receive depends on your property value. 

But as the needs of customers continue to diversify, new products emerge on the market to meet them. We recommend seeking advice from money experts or advisors, to ensure you make an informed lifetime mortgage comparison and choose the right equity release plan for you.

Could I end up in an equity deficit?

Many lifetime mortgages offer a ‘negative equity guarantee’, ensuring that you won’t have to pay back more than the loan amount you received when you eventually come to sell your property.

Any trade body that wants to be a part of the equity release council has to offer a negative equity guarantee as part of your equity release plan. 

It’s easiest to think of a mortgage as a kind of long-term loan, secured against the value of your property. Also, the mortgage is not repayable until you either die or move. 

Am I eligible?

To be eligible you must own your home and be over the age of 55. The property value of your home must be at least £70,000. You must also have a bank account for payment to be made into.  

There is no maximum age for a lifetime mortgage. However, you should seek advice from an advisor to check specific eligibility criteria.

What is the difference between equity release lifetime mortgages and regular mortgages? 

The difference with regular mortgages or loans is that, although interest is added by the lender (usually annually no repayments are due until the termination of the contract. The equity release plan terminates upon death or the sale of the property.

As with all investment options, there are benefits and drawbacks to consider if you are thinking about approaching one of the best lifetime mortgage providers.  You can see some of the top companies for lifelong mortgages below.

Here is a short video on how Lifetime Mortgages work.

Best lifetime mortgage interest rates 2020

The table below sets out the best lifetime mortgage interest rates available.   

Equity Release ProviderRateKey Feature
Legal General 2.9%Cashback & free valuation
Pure Retirement2.99%10%pa Partial Repayment Option
More 2 Life3%Downsizing Repayment Charge Exemption
Legal & General 3%Cashback & free valuation
Aviva3.4%3-year No Early Repayment Charge

Try the lifetime mortgage calculator and see how much cash you can receive   

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How much can I borrow?

Your loan amount will depend on your property value. Therefore, you will need to get a home valuation to find out exactly how much you might expect to borrow. 

The amount you can borrow also depends on your age. Those who take out plans in later life can typically borrow a higher percentage of their property value.

How much interest will I pay? 

The lending rate that you get will typically depend on the amount of money or loan to value (LTV) you are taking.

Typically, you would see figures starting around 3% going up to about 7%.  As you can see, the range of deals that you can get is very wide.  That is why we strongly recommend that you speak to a specialist to help you find the most competitive deal.

All the providers below are also regulated by the financial conduct authority

Here are the best rates available in 2020.  However, the exact rate can change daily so you should ring the number below for the most up to date information and advice.

What are the advantages of a lifetime mortgage?

Retaining ownership of your property

If you wish to keep your property in the family, this option allows you to do so. This might be the case if you or your family members plan on living in your home indefinitely. You can also sell your home early should your circumstances change.  

Freedom to use your money

The money borrowed can be spent (or reinvested) however you choose, giving you freedom and flexibility. 

Negative equity guarantee

Many lifetime mortgage providers offer a ‘negative equity guarantee’, ensuring that you won’t have to pay back more than you received when you eventually come to sell your property.

Inheritance planning

Some lenders also allow you to portion and protect a percentage of the property’s value to gift as inheritance, or make partial repayments early should your circumstances change. This means you can ensure your family receives some inheritance from your home.

Partial repayments

Some lifetime mortgages will allow you to repay some of your debt early. This will help increase the amount that may be available to your family when you pass on.

best lifetime mortgage

What are the disadvantages of a lifetime mortgage?

Reduces your inheritance

Equity release schemes and lifetime mortgages, in particular, are likely to reduce the amount of inheritance you’re able to gift to family members and friends. However, this is less of a concern if the cost of imminent care needs is likely to reduce the amount you can leave when you pass away. We recommend seeking independent advice so that you make the best decision based on your circumstances.

Impact on benefits and tax position

A lifetime mortgage can affect your entitlement to certain state benefit payments as well as your tax position – so it’s worth obtaining a clear picture of how enrolling on a scheme could affect your income support before making a decision.

Accruing interest

Lifetime mortgages accrue interest – both on the mortgage itself and the interest added each year.

This significantly increases the amount you’ll have to repay later down the line. (Interest only lifetime mortgages can be taken out to alleviate this – as detailed below).

Repayment

You may need permission or be forced to make repayment early should you decide to rent out your property or sell it before the agreed time has elapsed.

Therefore, if you do change your mind, or find that your circumstances change, things  can become rather complicated. 

Here is a short video advising you on the disadvantages you should consider before taking out your plan.

What are the different types of lifetime mortgages?

Primarily, there are two different types of mortgages that you can choose between:

– An interest roll-up mortgage

This is where you get a lump sum at the start of your equity release plan, or you are paid a regular amount over a period of time.  You are then charged interest on the amount that is borrowed., which is added to the loan. 

The effect of this is that you don’t have to make any regular repayments back to the mortgage provider. The amount that you initially borrowed plus the rolled-up interest is repaid at the end of your mortgage term when your home is sold.

– An interest-paying mortgage

This is where you get a lump sum and make either monthly or ad-hoc payments to cover the cost of the interest on the amount borrowed. This reduces or stops, the impact of interest building or ‘rolling-up’. Also, some mortgages allow you to pay off the capital as well.

The amount you borrowed is repaid when your home is sold at the end of your mortgage term, minus any repayments already made.

best lifetime mortgage rates

Alternative equity release products

A range of alternatives to lifetime mortgage products are available – further increasing the potential for complications and confusion as you make your decision.

Each has benefits and drawbacks of its own – but many have been developed to circumvent or alleviate problems that have been run into by traditional standalone policies.

One such example is the ‘interest-only lifetime mortgage’. This prevents the need for a huge repayment inclusive of interest on termination of the contract. By making  low monthly repayments that cover interest accrued you have less to repay when your home is sold.

An interest-only lifetime mortgage also helps homeowners to protect a greater portion of their property for inheritance purposes. Another type of scheme, known as a ‘home reversion plan’ has additional benefits for those looking to retain residence in their property long-term.

What does a lifetime mortgage cost?

Like with many financial products, there are often costs involved with setting up a mortgage.  Also, there may be other insurances and products that you need to purchase as part of your agreement.

In our experience, these additional costs typically add up to somewhere between £1,000 to £4,000. However, the price often depends on the amount you are looking to borrow.

Typically, the following costs may apply:

  • Buildings Insurance.  You may want to also take this alongside your contents insurance.
  • Solicitor and legal costs.
  • Home valuation fees.
  • An arrangement fee to the lender for the product.  These can vary greatly and an advisor can tell you what these are.  You can call 0800 953 3792 to speak to a specialist and find out what the current arrangement fees typically are.
  • A completion fee.  You normally have two options with this.  You can either pay this as a lump sum when your mortgage is set up or you can add it to the amount that you have borrowed.

You should note, however, that if you do look to pay off your mortgage earlier than you originally agreed, you may be liable to pay an ‘early repayment charge’. 

What is a ‘no negative equity guarantee’?

The Equity Release Council are the industry body for the equity release industry in the UK.  Any equity release plans that they approve have a no-negative equity guarantee’.

In essence, what this means is that you will never owe more than what the house is worth when you use a lifetime mortgage.

This is really important because, in the main, people don’t repay the loan until the property is sold, which happens when you either pass on or move into a care home.

When this happens, the provider that you took the lifetime mortgage out with will calculate how much is owed from the point you took out the loan up until the point a repayment is due.   They do this by adding on all the interest owed in the intervening years.

What happens if I owe more than my home is worth?

If the calculation from the mortgage provider shows that you owe more than your home is worth when it’s sold on the open market, the mortgage provider isn’t able to try and get any more money from your estate.  This is where the ‘no-negative equity guarantee’ kicks in.

In this circumstance, when the property is sold, the entire proceeds of the sale will be paid across to the mortgage lender.   Clearly, this also means that you will have nothing left to pass on to your family.

If you’re worried about the interest on Equity Release Mortgages and want to guarantee that you have something to pass on to your family, you always have the option to not ‘roll-up’ the interest.

This means that you can look to structure your loan like an interest-only mortgage, and opt to make interest payments throughout the life of the loan.  This allows you to keep the outstanding balance fixed rather than seeing it escalate with the interest amount rolled up.

The benefits of speaking to an equity release specialist

As well as the video above where Martin Lewis talks about why you should speak to an advisor before taking out an equity release scheme, we recommend you watch this really useful video from the government’s Money Advice Service where individual’s talk about the benefits of taking independent financial advice.

Why is a lifetime mortgage a popular choice?

When the opportunity to put aside money to pay for care in later life has passed, the range of options for investments that don’t affect the quality of life and inheritance begins to narrow. Therefore equity release has become one of the most viable and attractive ways to fund care – and with good reason.

Equity release schemes allow you to retain ownership of your home and, in most cases, continue living in your home.

Some people won’t be eligible for certain types of equity release schemes due to the lending criteria. For others, they simply may not be the best option. 

For example, you may prefer to sell your property and move to sheltered accommodation, using the funds raised from downsizing to pay for additional care needs. Or, you could choose to hold your property in trust.

If you are still paying the original mortgage on your home it will need to be paid off in full before you can apply for an equity release scheme. To discover more about equity release schemes and lending criteria, and decide whether they are a viable option for you, take a look at our handy guide here.

What are the risks?

When you die or move into care, the debts (loan amount and any interest) must be repaid to the lending company. As a result, the amount of inheritance to your family will likely be reduced. 

Often, there are also extra costs and fees to pay. These might include fees for home valuations, or legal fees. 

What is a ‘no negative equity guarantee’?

The Equity Release Council are the industry body for the equity release industry in the UK.  Any equity release plans that they approve have a ‘no-negative equity guarantee’.

In essence, what this means is that you will never owe more than what the house is worth when you use a lifetime mortgage.

This is really important because you don’t repay the loan until the property is sold, which happens when you either pass on or move into a care home.

When this happens, the provider that you took the lifetime mortgage out with will calculate how much is owed, from the point you took out the loan up until the point a repayment is due. They do this by adding on all the interest accumulated in the loan period. 

What happens if I owe more than my home is worth?

If the calculation from the mortgage provider shows that you owe more than your home is worth when it’s sold on the open market, the mortgage provider can’t try and get any more money from your estate.  This is where the ‘no negative equity guarantee’ kicks in.

If you owe more than your home is worth, when the property is sold, the entire proceeds of the sale will be paid across to the mortgage lender. This does mean that you will have nothing left to pass on to your family, but the extra that you owe is written off.

How can I ensure my family inherits some of the value of my home?

If you’re worried about the interest on Equity Release Mortgages and want to guarantee that you have something to pass on to your family, you always have the option to not ‘roll-up’ the interest.

This means that you can look to structure your loan like an interest-only mortgage, and opt to make interest payments throughout the life of the loan.  This allows you to keep the outstanding balance fixed rather than seeing it escalate as the interest amount rolls up.

When you die, only the fixed outstanding balance needs to be repaid. This is paid off using the profits from the sale of your home. Any remaining money from the sale can then be passed on to your family. 

What are the benefits of speaking to an equity release specialist?

As well as the video above, where Martin Lewis talks about why you should speak to an advisor before taking out an equity release scheme, we recommend you watch this really useful video from the government’s Money Advice Service.  In this video, individual’s explain the benefits of taking independent financial advice.

What should I ask my adviser when discussing a lifetime mortgage?

Many people that are looking to take out a lifetime mortgage will be doing so for the first time.  This is why we have set out some questions that you should ask when you do speak to someone.

  • What happens if you decide to move home?
  • What happens to the mortgage if you pass away soon after taking out the mortgage?
  • If you do take money out of your house, what impact could that have on any benefits that you receive?
  • If you feel that you may want to repay some of your loans early, make this clear to your advisor. Ask what rates each of the shortlisted providers will charge you to repay the loan early
  • If you intend to use some of the money for home maintenance or modifications, ask if you can also apply for any local or national grants to fund the cost?
  • Ask that there is a ‘no-negative equity guarantee’.   This offers protection if you end up owing more than your house is worth.  You can read more about this below.

5 best lifetime mortgage rates

1 – The best lifetime mortgage rate

Provider – Legal & General – Authorised and regulated by the financial conduct authority

Annual interest rate (AER) – 2.9% – A lower rate may be available 

The amount of lump sum you can borrow – £20,000 to £500,000 as a cash payment.  

Offers available with this deal

  • Cashback
  • Free Valuation
  • Free Application
  • Legal Fees Contribution
  • Inheritance Protection Guarantee
  • 3-year No Early Repayment Charge

2nd best rate

Provider – Pure Retirement – Authorised and regulated by the financial conduct authority

Annual interest rate (AER) – 2.99% – A lower mortgage rate may be available

The amount of lump sum you can borrow– £250,000 to £2,000,000 as a cash lump sum payment.  

Offers available with this deal

  • Free Valuation
  • Free Application
  • 10%pa Partial Repayment Option
  • Fixed Early Repayment Charges
  • Downsizing Repayment Charge Exemption

What to do next if you want to know more

Do it online – Click here to use the calculator to see how much this deal will cost you.

Speak to someone – Call 0800 953 3792  to speak to a specialist and see if you are entitled to a lower mortgage interest rate.

—————————————

3rd best rate

Provider – More 2 Life

Annual rate (AER) – 3%

The amount of lump sum you can borrow – £250,000 to £2,000,000 as a cash payment.  

Offers available with this deal

  • Free Valuation
  • Free Application
  • 10%pa Partial Repayments Option
  • Fixed Early Repayment Charges
  • Downsizing Repayment Charge Exemption

What to do next if you want to know more

Do it online – Click here to use the calculator to see how much this deal will cost you.

Speak to someone – Call 0800 953 3792  to speak to a specialist and see if you are entitled to a lower mortgage interest rate.

4th best rate

Provider – Legal & General  

Annual interest rate (AER) – 3% – A lower mortgage rate may be available 

Amount you can borrow – £20,000 to £500,000 as a money payment.  

Offers available with this deal

  • Cashback
  • Free Valuation
  • Free Application
  • Legal Fees Contribution
  • Inheritance Protection Guarantee
  • 3-year No Early Repayment Charge
  • Can be used for long-term care costs

What to do next if you want to know more

Do it online – Click here to use the calculator to see how much this deal will cost you.

Speak to someone – Call 0800 953 3792  to speak to a financial adviser and see if you are entitled to a lower equity release interest rate.

 

Book an appointment to speak to a specialist to compare lifetime mortgages

 


5th best rate

Provider – Aviva  

Annual rate (AER) – 3.40% – A lower mortgage rate may be available.

The amount of lump sum you can borrow – £10,000 to £750,000 as a cash payment.  

Offers available with this deal

  • Cashback
  • Free Valuation
  • Reduced Application Fee is available
  • Inheritance Guarantee
  • 10%pa Voluntary Partial Repayments
  • 3-year No Early Repayment Charge**
  • Bespoke Interest Rates available

What to do next if you want to know more

Do it online – Click here to use the calculator to see how much this deal will cost you.

Speak to someone – Call 0800 953 3792 to speak to a financial advisor and see if you are entitled to a lower equity release interest rate.

What Lifetime Mortgage Providers can I use?

The market for lifetime mortgages is not as large as your typical mortgage market.  This is because there is more demand for conventional mortgages, so there are fewer providers for lifetime mortgages.   However, the best lifetime mortgage providers in the market are:

  • Legal & General
  • Aviva
  • Hodge lifetime
  • One Family
  • More 2 Life

Because the market for these types of mortgages is much smaller, we can not stress enough the importance of speaking to an advisor.  You can either leave your contact details below or ring 0800 953 3792 and speak to a specialist that can help you understand the best available options.

Try the lifetime mortgage calculator and see how much tax-free cash you could receive.

Lifetime mortgage advice – where can I get it?

You should use a specialist to secure an equity release scheme.   They will ensure that your interests are always protected and also ensure that you don’t waste thousands of pounds on a bad deal.

There are two options for you to consider when looking for financial advice:

Option 1 – Find an advisor in our directory of specialists

We have created a directory of advisors that specialise in helping people find the right provider.  The directory has advisors listed from all over the country.   You can access the equity release advisor directory here.

Option 2 – Let us, the UK Care Guide, find an equity release mortgage advisor for you

If you do not feel confident in choosing an advisor you can speak to us on  0800 953 3792 in conjunction with Key Advice.  We can guide you through the process, making it easier to choose the right product.

Martin Lewis on lifetime mortgages

Here is a video from Martin Lewis on ‘This Morning’ explaining why you should speak to a specialist before taking on a plan.

In the video, he says that Equity release, or lifetime mortgages, are when “you get a mortgage on the house that will be paid off when you die. So you are not repaying it month to month”.

 

Would you like some help to see whether lifetime mortgages are the right option for you or to find out what the latest deals are?

You can either book an appointment using the calendar, leave your contact details or call us, via Key Equity Release directly on 0800 953 3792 to compare lifetime mortgages.

Book an appointment

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Would you like some help examining equity release and lifetime mortgages?

We work with with Key equity release for them to bring you their market leading equity release support. Through a free consultation they can help you decide what the best options could be for you. 

If you would like some help, please leave your details below and someone will be in touch.

Or you can call Key directly on 0800 953 3792

More interesting articles about Equity Release

how does equity release work

In this article, we answer 22 important questions that you may have about equity release, including what it is, how it works and what the best interest rate deals are.

Alternatives to equity release

Equity Release is not for everyone.  In this article we look at the alternative options that you can consider if you need access to money in later life to pay for care, top up your pension etc.  

Lifetime Mortgages

A lifetime mortgage is the most popular type of equity release scheme, as it’s the most flexible and versatile option. The amount you receive depends on your property value. 

Pros & Cons of Equity Release

In recent years equity release has become a very popular option. This article looks at the pros and pitfalls of equity release and what you need to consider before taking it out.

How much can you borrow

How much you can borrow from equity release varies depending on your age and house value.  In this article we look at how much you could borrow from your  home.  

Drawndown Lifetime Mortgages

A drawdown mortgage is a type of equity release scheme, offering greater flexibility and freedom compared with traditional plans. In this article we explain all that you need to know.

Equity Release Calculator

An equity release calculator will give you a good indication of what you can borrow from your home.  This article explains how the calculator works and also shows you what you can receive.

what happens when you die

One of the big concerns that people have about equity release is what happens to their home and borrowings when they die.  In this article we explain everything you need to know.

Home Reversion Plans

A home reversion plan is primarily suited to individuals over 65 looking for a solution to their finances.  This article explains all you need to know.

Summary of this page

1 – What is an equity release calculator

An equity release calculator will tell you how much money you could receive as a tax-free lump sum. The amount is usually dependant on your age and the value of your house.

2 – What sort of interest rates are applied to equity release mortgages?

Interest rates vary and can be anywhere between 3% and 7%. You can call us on 0800 953 3792 and get information on the latest deals, as they can change every day.

3 – Is the money from equity release tax-free?

Yes, the money you receive is tax-free. However, if you are in receipt of means-tested benefits then these can be impacted. You can contact us on 0800 953 3792 and see if you would be impacted.

4 – What can you use the money from equity release for?

The money from equity release can be used for a variety of things. Typically it is used to pay for long term care, modify your home to help with later life living or even to treat yourself to a holiday of a lifetime and help your family financially.

5 – What are the different types of equity release mortgage?

The most popular type is called a lifetime mortgage. If you are over 65 then a home reversion plan might be a better option, Get in touch with us and we will be able to tell you what we think would be best for you.

Meet the author

Hayley Kenyon

Hayley Kenyon

Hayley is responsible for writing content on the site as well as managing the social media channels. She has a degree in Art and Humanities. Hayley has been reviewing and writing on products for a number of years and uses her experience to recommend the best products.

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Recent reductions in interest rates mean that there are some great equity release deals available. Speak to a specialist.

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