With an Equity Release Lifetime Mortgage, you borrow against the value of your home to unlock cash in your property.
Equity Release is a long-term commitment, lasting until either you pass away or until you move into a retirement home. At this point, your house is sold and you repay the provider the sum you borrowed, plus any interest ‘rolled up’ into the loan.
Given how long they run for, it’s vital to make sure you’re getting the best Equity Release plan for your circumstances. You can achieve this by comparing providers from across the market to find the most favourable rate.
Searching for the best Lifetime Mortgage interest rate is important because it will impact the overall cost of the loan and therefore how much you need to repay.
With so many different Equity Release companies on the market, each will offer you a slightly different service. There’ll be a difference in how much equity you can release from your home between providers, also.
Some companies may impose a higher age limit than the industry minimum standard, potentially limiting their Equity Release products only to the over-70s.
Different Equity Release companies will offer different interest rates on Lifetime Mortgages, so it’s important you compare the market to find the best deal for you.
Top UK Lifetime Mortgage Providers
Aviva is an award-winning Equity Release provider and has helped more than 200,000 people release £7 billion in equity from their home since the turn of the century.
To release cash from your home with Aviva, you need to be at least 55 years old.
Bridgewater Equity Release was founded in 1998 as a specialist Equity Release provider. It has won numerous awards for its service, being voted Best Home Reversion Provider for 9 consecutive years between 2006 and 2014.
You must be at least 65 to release cash with a Bridgewater Equity Release Lifetime Mortgage and your home must be worth at least £120,000. Bridgewater requires you to sell at least 25% of your property or release £25,000, whichever is lower.
Just is a financial services brand entirely focused providing retirement solutions. It is one of the leading Equity Release providers.
If you want to release cash from your home with a Just Lifetime Mortgage, your home must be worth at least £70,000 and you need to be 60+. Just will lend a minimum of £10,000 against your home.
Legal & General launched its own brand of Lifetime Mortgages under the Legal & General Home Finance banner in 2015. It is a wholly-owned subsidiary of the Legal & General Group, one of the leading UK financial services providers.
Legal & General will only release equity in mainland Great Britain (excluding Northern Ireland and the Scottish Islands). The property must be worth at least £100,000 (£150,000 for ex-council, ex-housing association or ex-Ministry of Defence properties) and you must be aged 55+.
Liverpool Victoria is one of the biggest financial services firms in the UK and a major provider of insurance and retirement solutions. In partnership with Hitchin, LV started offering Equity Release in 2002.
LV require your property to be worth at least £70,000 and for you to be between the ages of 60 and 95. The maximum you can release depends on the value of your property and your age – if you’re aged 60, the maximum LV will release is 20% of your property value; at 95, the maximum is 55%.
A relatively new entrant to the Equity Release market (November 2017), Nationwide is the UK’s largest building society with 15 million members. It is among the largest providers of non-Lifetime Mortgages in the country.
You must be at least 55 to release equity with a Nationwide Lifetime Mortgage.
OneFamily is one of the UK’s biggest mutual organisations and was founded in 2015 through the merger of Engage Mutual and Family Investments. It has a 5-star rating from MoneyFacts for its Lifetime Mortgages.
OneFamily Lifetime Mortgages are available to those aged 55+. Under OneFamily’s Lump Sum Voluntary Payment Lifetime Mortgage, you can repay up to 10% of the initial loan amount each year, without incurring an early repayment charge.
Retirement Advantage offers a range of Lifetime Mortgages, from products that you pay no interest on during the life of the loan to those that allow ad hoc interest payment to those where you make regular monthly interest payments.
You must be aged between 55 and 90 to release equity with Retirement Advantage and the property must be in Great Britain.
Interest rates on Lifetime Mortgages have come down in recent years, but they’re still higher than on regular mortgages. This reflects the fact that with most Equity Release plans you don’t repay any part of the loan during its lifetime.
As of January 2020, the average rate on a Lifetime Mortgage was between 4.55%, but they could be as low as 2.84%1. Interest rates change often, which is why it’s important to compare providers to ensure you’re getting the best Equity Release deal.
As interest rates from the Bank of England rise, the rates on Equity Release Mortgages may also increase. Many plans will allow you to fix your interest rate for life, so you know what you’ll be paying for the life of the loan.
Other providers may offer variable rates on Lifetime Mortgages. However, even where the rates are variable, the Equity Release Council still places a cap on the maximum amount of interest you can be charged.
As well as the interest rate you’re charged, there are a number of other fees and costs you’ll have to take into account with Equity Release. These are largely for professional services, such as independent financial advisers, solicitors, surveyors etc.
You may prefer to use the services recommended by your provider, but you can also shop around in the wider market to ensure you’re getting the best rates.
Senior Paraplanner at Drewberry
There are two types of Equity Release: Lifetime Mortgages and Home Reversion Plans. Home Reversion Plans are not covered by the above calculator, but are an alternative way of releasing cash from your house.
Lifetime Mortgages see you borrow against the value of your home. They represent by far and away the largest proportion of all Equity Release plans. How much you can borrow depends on your age, state of health and how much your property is worth.
Many people turn to Equity Release Mortgages to fund care, adapt a home to suit reduced mobility needs or boost a small retirement pot. Sometimes people release cash from their homes at retirement for lifestyle reasons, such as to go on holiday or buy a new car.
With an Equity Release Mortgage, you can choose to roll up the interest into the loan and therefore pay nothing for the life of the plan. Alternatively, you can make ad hoc or regular interest payments on the loan to keep the cost of borrowing down.
When it comes to the best interest rate on Lifetime Mortgages, this will depend on your circumstances.
Can you afford to make regular monthly repayments? If not, then rolling up the interest might be the best option for you.
However, this will increase the amount you’ve borrowed and could significantly eat into the amount you’re able to leave your beneficiaries when the time comes to repay the loan.
When you release cash from your home with a Lifetime Mortgage you have two options. You can either take it all as one lump sum or draw it down gradually. The benefit of this is that you limit the interest you owe at any one time, as interest will only be due on the actual amount you’ve drawn down.
If for any reason you have a shortened life expectancy, perhaps because you have an illness or you smoke, you may be able to release more equity from your home than if you were in good health.
With a Home Reversion Plan, you sell a proportion of your house to a provider for less than its market value. When the house is later sold, typically after you pass away or move into residential care, you have to repay the provider the fixed proportion of the property you released from the sale price.
Home Reversion Plans don’t attract interest because you haven’t borrowed any money, but be aware that you’re selling a slice of your home at less than the market value. You also no longer own all of your home and won’t benefit from house price growth on the proportion of your property you’ve sold.
It’s important to realise that although Equity Release can provide a valuable cash injection to help with retirement, it’s not the best option for everyone.
If you want to leave your home to beneficiaries, Equity Release will reduce what you can pass down.
Of course, you can always release equity from your home and spend money on your children and grandchildren etc. now. However, be aware that any gifts you make during your lifetime may be subject to inheritance tax if you don’t survive for 7 years.
If you’re looking to take cash out of your home, you may want to consider moving to a smaller house and/or a cheaper location. This isn’t always possible or desirable, however.
There are also fees associated with moving, such as stamp duty, solicitors’ fees, conveyancing fees, removal fees and estate agent charges. These can quickly add up and you should weigh these up against the costs of Equity Release.
If you’re struggling on a low income, you may be entitled to certain help from the government, such as pension credit. Despite pension credit being there to help pensioners with the lowest incomes make ends meet, it’s not widely taken up.
It should be noted that any cash you release from your home could affect your entitlement to certain means-tested state benefits, so you should factor this in when you’re deciding if a Lifetime Mortgage is best for you.
If you’re considering entering into a Lifetime Mortgage with the idea to exit early, be warned that you’ll likely face early repayment charges for doing so.
Equity Release is designed to be a lifelong commitment that lasts until you pass away or move into long-term care, so there isn’t typically the option to repay early without facing a hefty fee. If you might repay in the future, it may be best to look at an alternative option.
Drewberry has partnered with the trusted Equity Release Provider Responsible Life to offer our clients access to the best Equity Release Advice.
Responsible Equity Release was founded in 2010 and is part of the Equity Release Council. It is also authorised and regulated by the Financial Conduct Authority and is one of the largest UK equity release advisers, with access to every single provider across the marketplace. 99% of its reviews on independent reviews website Trustpilot are listed as 5-star.