Those who hear the term “lifetime mortgage” may immediately think that it’s some type of mortgage they have to pay until they die. The name may be confusing, but it’s actually nothing like it sounds. In fact, it’s a way to make use of the investment you’ve made in your home. You have put a good amount of your income into your house over the years. Some people may have paid off their mortgage by the time they retire, but some may have not. That’s where an equity release can come into play.
An Equity Release or Lifetime Mortgage Defined
These two terms are both used to describe the same thing. An equity release, or a lifetime mortgage, allows homeowners to use the equity they have built up over the years to make other purchases. This equity becomes cash that is tax-free and has very few limits on it. There are other ways to access this equity, such as by selling the property or by getting a new mortgage. However, these options have a number of downsides to them that an equity release does not have.
Who Can Get a Lifetime Mortgage?
Not everyone qualifies for a lifetime mortgage. First, you have to have a mortgage on your property that is in your name. Second, you have to meet the minimum age requirement, which is usually 55. However, like traditional mortgages, lifetime mortgages vary between lenders, so you will want to make certain you meet this requirement. There is also generally a maximum amount of cash you can take out. It’s often 60% of the total value of your home.
The Benefits of an Equity Release
There are a number of reasons why a mortgage equity release is the right move to make if you need money. First of all, you still own your property. An equity release doesn’t require you to sell your home or any portion of it to anyone else. This means that you can live in the home for as long as you want. Your spouse or partner is also protected in the event that you die first, and he or she will be able to remain in the home.
Of course, you can move at any time if you want to. You are able to transfer your lifetime mortgage to another property without paying any kind of penalty fee. If the property you purchase is less than what you owe on the lifetime mortgage, you can pay it off.
How Much Money Do You Receive?
The amount of money you can receive from your equity release is calculated by subtracting the amount you still have due on your mortgage from the property’s fair market value. You can then have this sum released to you in a single payment, or you can set up a type of savings account that you can draw on whenever you’re in need of extra money. You can even do both, taking a small lump sum upfront and then placing the rest of the funds in an account.