Are There Any Differences Between Lifetime Mortgages and Equity Release?

equity release

Living in these modern times can sometimes be challenging because every product and property gets more expensive daily. As your property increases its value over time and you wonder how to get a win out of this situation, here is a solution. With the help of your property, there is a chance to get some extra money for your retirement.

There are two types of equity release mortgages: a home reversion plan, more commonly known as equity release, and lifetime mortgages. It is wrong to try and make a difference between those two because one is part of the other. On the other hand, you can compare each aspect to find out which has more benefits for your situation. The home reversion plans have been around for a while now. After seeing so many individuals unable to keep up with their monthly bills and property taxes due to small pension incomes, the government found a way to provide people in need with an option. Since the 90s, when it first appeared, the market has been continuously growing, and more types are now available.

Lifetime Mortgages

Lifetime mortgages popularity has met a rapid growth since invented. It provides people plenty of benefits such as no monthly and yearly fees, no taxes for the capital released in the process, and no loss of your property until death or moving the forever home to a special care place. Despite these benefits, the price has a single counter side because the interest rates are usually higher than a regular equity plan. A lifetime mortgage is a loan secured by the home that allows you to release some money from it in exchange for an amount of money paid either integrally or through regular payments. This loan is paid after the property is sold. No monthly fees are involved in a lifetime mortgage; instead, the interest sum builds up in time and is added to the final amount you will owe. This loan will eventually have to be paid off unless you move into a care home.

Because of the economic uncertainty nowadays, many people over 55 consider their home a valuable financial asset. Even if the interest rates are usually higher in this type of loan, they are fixed for the rest of your life, and once set, they will not change in time. This is one of the main advantages of this type of equity release. You can also borrow the total value of your property or a smaller amount and leave some equity in place.

Advantages Of a Lifetime Mortgage

If you are still unsure of what this type of loan can bring you, here is a small but consistent list of the advantages you get:

  •          Benefit from fixed interest rate for rest of time.
  •          A favorable equity contract grants you the fact that you will never be in debt with a more significant sum than the value of your property.
  •          Depending on the lender’s requirements and policies, you will have the ability to pass over your mortgage at a later date.
  •          Flexibility contracts allow you to take as little as 10.000 tax-free money and save the rest for another time.
  •          Granting security ensures you will not lose your house but borrow against it.
  •          Complete control, which means some lenders give you the possibility of reducing the interest from accumulating in time. A drawdown mortgage will let you borrow money and pay interest only for that specific sum. Other lifetime mortgages allow you to pay off the monthly or yearly interest to prevent it from raising the costs significantly.

Equity Release Plan – Home Reversion

A home reversion is a process in which you must sell a part of your property to a lender for a fixed sum or regular payments. Usually, you can receive up to 60% of the entire value of your home. This is an excellent plan in case you need some money for renovations, a holiday or to pay other debts. You will still be able to live on your property, but you must keep it well maintained and insured. The remaining percentage will always stay the same, regardless of the house changing its value.
An equity release mortgage is considered a higher-risk plan that can affect the taxes, benefits, inheritance, or long-term finances, which is why you should first advise the lender to see if this option is the best in your case. It is essential to take expert advice before making such a decision.

lifetime mortgages

Enhanced Lifetime Mortgage

If you want the maximum equity from your house or a lower interest rate, you can talk to an expert lender more about how an enhanced lifetime mortgage works. Also known as an impaired mortgage, this type of loan is represented by a scheme in which the lending criteria are strictly based on personal health records. This scheme will allow more money to be released according to the answers given in a health questionnaire. In other words, if your health is poor, you will be able to borrow more money.

A simple health questionnaire will consider the following aspects:

  •          You will be asked whether you are a smoker or not.
  •          They will ask you what your body mass index is.
  •          It matters if you have high blood pressure.
  •          You will be asked if you suffer from medical problems such as angina, heart attack, stroke, or cancer.
  •          There will be questions about multiple sclerosis MS or Parkinson’s disease.
  •          You will be asked if you are on any prescribed medication.


The list of questions will be short, and in case you suffer from other serious illnesses, you can mention them at the bottom of the questionnaire. You will be given a more considerable amount of money from enhanced lifetime mortgages.

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