Transcript for video Lifetime mortgages in a nutshell
Understanding equity release and how it could work for you
Your home is likely the most valuable thing you own. It’s special to you, a place filled with memories. And it could be part of your financial planning.
If you’re 55 or over and own a property worth at least £75,000, you may be able to use equity release to unlock money tied up in your home, turning it into tax-free cash.
Equity release is a way of borrowing money against your home without having to make monthly repayments. The type of equity release we offer is a lifetime mortgage – you stay living in your home, and you’ll still own it. But it’s not suitable for everyone. Whether it’s right for you depends on your personal circumstances.
There are costs and charges involved, and releasing equity may affect your tax position and any entitlement to welfare benefits.
So, why should you consider it?
It’s a way of increasing the amount of cash available to you. You could use that cash for things like improving or adapting your home, paying off your mortgage, having more financial breathing space, helping your family, or enjoying a more comfortable retirement.
While equity release reduces the amount you can leave behind, you don’t need to worry about spending all of your inheritance. You can set aside a percentage of the value of your home to leave to the people you love – this will lower the amount you can borrow. Inheritance will still be reduced.
And our lifetime mortgage has a ‘no negative equity guarantee’, which means your loved ones will never have to repay more than the money received from the sale of your property, as long as it’s sold for the best price reasonably obtainable.
With a lifetime mortgage, interest is charged on the total amount borrowed and the interest already added, so the amount you owe goes up quickly. The loan and interest on it are usually repaid from the sale of your property when you die or go into long-term care. You can choose to repay up to 10% of the amount borrowed each year, without paying an early repayment charge. The minimum partial repayment is £50.
Releasing equity from your home may affect your tax position and your entitlement to any welfare benefits. You should think about other options, like your savings and investments or downsizing. It’s also worth talking to your loved ones about your plans.
So, what next?
You will need to speak to an equity release adviser. They will give you a personalised illustration, outline the benefits, costs and risks, and help you understand if it’s right for you. They will tell you if it’s not suitable.
Find out more by visiting aviva.co.uk/equity-release
Terms and conditions apply.
Call us on 0800 141 3493.
Lifetime mortgages in a nutshell
A lifetime mortgage is a long-term loan secured against your property, that allows you to access some of the money tied up in your home. It’s available to homeowners aged 55 and over.
Unlike a standard residential mortgage, you don’t make monthly repayments; instead, interest builds up on your loan each year. Interest is charged on the total borrowing and any interest previously added, which quickly increases the amount you owe. The loan plus interest is repaid through the sale of your property, once you (and your partner, for joint lifetime mortgages) have passed away or entered long-term care, subject to terms and conditions.
A lifetime mortgage will reduce the amount of inheritance you are able to leave, so it’s a good idea to have a chat with your family first. Your tax position and any entitlement to welfare benefits may also be affected – therefore you’ll need to talk through your full financial situation with an equity release adviser.
What are the features of our lifetime mortgage?
How much can I borrow with a lifetime mortgage?
Interest rates and how much you can borrow are based on your individual circumstances such as your age, property value, health and lifestyle details. When you speak to an equity release adviser, they’ll arrange to give you a personalised illustration which will show you your loan amount and interest rate.
How does our lifetime mortgage work?
If you're 55 or over and own your own home in the UK (not including the Isle of Man or the Channel Islands), you could borrow a one-off cash sum, starting from £15,000. Or you could borrow an initial lump sum, starting from £10,000, and set up a cash reserve of at least £5,000 to draw from when you like. And as it’s a loan, any money you release is tax-free. The amount of cash you can get will depend on factors such as your age, health and property value. Before you take out equity release, you'll need to speak to an equity release adviser. They'll provide you with a personalised illustration and talk you through the benefits, costs and risks.
We offer a fixed interest rate unique to your personal situation, and that rate will never change. If you choose to take a smaller initial lump sum and set up a cash reserve, we’ll offer you an interest rate for the lump sum. Then each time you dip into your cash reserve, you’ll get the interest rate that applies at the time. You'll only be charged interest on the money you borrow, and you won’t have to make any monthly repayments.
When you take out a lifetime mortgage, some costs and charges will apply. Your equity release adviser will explain these so you can make an informed decision. It’s also important to understand that interest builds up throughout the lifetime of the loan. This is charged on the total amount borrowed and the interest already added to your lifetime mortgage, so the amount you owe goes up quickly.
Your loan and interest are usually repaid from the sale of your house when you (and your partner, for joint lifetime mortgages) pass away or need long term care, subject to our terms and conditions.
Protecting your most important people
Our lifetime mortgage could make sense if you’re keen to stay in your home, whether for the years of memories it holds, because you’re settled in the area, or you don’t want the stress of moving. And you’ll still own every square centimetre of it.
Lots of people worry that taking out equity release means they won’t be able to leave anything behind for those they care about. But, with us, you can safeguard a percentage of your property as an inheritance, so you know there’ll be something to pass on. If you choose this option it’ll reduce the total amount you can borrow, so take care to check you’ll still be able to meet the minimum loan amount of £15,000.
You – and your family – can also sleep easy knowing that you’ll never have to pay back more than the money received from the sale of your property, if it’s sold for the best price reasonably obtainable. This is our no negative equity guarantee.
Make sure a lifetime mortgage is right for you
Taking out a lifetime mortgage is a big decision, one that you should consider carefully, and speak to your family about too. As the name suggests, it’s intended to be a lifelong commitment. So if you change your mind and want to pay off your lifetime mortgage early, you could face a large early repayment charge.
It’ll also reduce the amount of inheritance you can leave and may affect your tax position and your eligibility for welfare benefits. Because of this, a lifetime mortgage isn't suitable for everybody, it all depends on your personal circumstances.
