Release date: Nov 2008

Despite the economic downturn in the financial markets, lifetime mortgages remain a popular means for the over 60s and in some cases for those over 55, to unlock part of the value of their home.

Lifetime mortgage products, also known as Equity Release, allow you to borrow a set amount of money against the value of your home in the form of a mortgage. This money is usually borrowed in one lump sum although there are plans available which allow you to receive regular payments in lieu of or in addition to the initial lump sum.

The flexibility offered by a lifetime mortgage allows you, for example, to supplement your regular income in retirement, pay for that holiday of a lifetime you always dreamed of or fund the home improvements which you have planned. Any existing mortgages must be repaid at the time of completion of the Lifetime mortgage.

Whilst Lifetime mortgages have been on the market for many years, consumers have in the past been wary of them. Now, however, the Financial Services Authority (FSA) has regulated the market and the majority of Lifetime mortgages now come with a "no-negative equity" guarantee which means that no matter what happens with the property market your family or estate will not be left with a debt that cannot be repaid.

One of the key differences that a lifetime mortgage has over a standard mortgage is that there are no monthly repayments. Instead, interest accrues throughout your lifetime and the whole debt is then paid off using the proceeds of sale from your property when the last survivor dies, or moves out of the property into long-term care or sheltered accommodation or to live with family.

There are advantages and disadvantages of taking out a Lifetime Mortgage. Adrian Noble has considerable experience in this field and has listed some of the advantages and disadvantages below:

Advantages

• No monthly repayments
• Allows you to free up cash to use as you wish
• You keep ownership of your home and do not have to move
• You know how much you will receive from the outset
• You know the costs from the outset
• Regulated by the Financial Services Authority
• Can reduce any inheritance tax bill
• Depending on the size and length of the mortgage you may still leave some equity for your heirs
• In later years you may then have the opportunity of borrowing further money against the additional equity that has been created if the value of your property has increased due to inflation

Disadvantages

• May have an impact on your tax position and any state benefits you receive
• Will reduce the amount of inheritance you leave your family
• Early repayment charges may apply.

If you'd like further advice, please contact Adrian Noble on 01325 466461 or adrian.noble@close-thornton.co.uk.

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