What is a lifetime mortgage?

About Standard Life Equity Release

• Standard Life has looked after retirement needs for around 200 years
• For equity release, we've partnered with experts Key Retirement Solutions
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Lifetime mortgages explained

A lifetime mortgage is a loan secured against your home which allows homeowners aged 55 or over to unlock tax-free cash from their property’s value without having to move home or give up ownership.

When choosing a lifetime mortgage, you have two options; a lump sum lifetime mortgage, where you take all your money in one go, or a drawdown lifetime mortgage; where you take an initial amount but leave some behind for future use if you need it.

There are no repayments to make as the loan, plus compound interest, is typically repaid through the sale of the property when the last remaining applicant passes away or moves into long-term care, although there are other repayment options available.

This is a lifetime commitment - check the benefits and drawbacks before going ahead.

Am I eligible for a lifetime mortgage?

Unlike some other forms of later life borrowing, a lifetime mortgage’s eligibility criteria is fairly straightforward.

If you’re a homeowner aged 55-84 and your property is worth at least £99,000, you may be eligible. There’s no affordability check and your credit score doesn’t affect your application.

See how much value you could release from your property today with our free equity release calculator.

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One important thing to remember, however, is that before you can take out a lifetime mortgage, you first have to receive qualified advice. It’s a regulatory requirement. To help, we will introduce you to equity release specialists, Modern Lending Advisers, who offer honest and bespoke equity release advice.

How do lifetime mortgages work?

The amount of tax free cash you can release through a lifetime mortgage depends on two characteristics; the age of the youngest applicant, and how much your property is worth. The older you are and the more valuable your property, typically, the more you can release.

With a lifetime mortgage, there are two ways to unlock funds from your home. A lump sum lifetime mortgage, where you take all your money in one go, or a drawdown lifetime mortgage, where you release an initial amount and leave some behind for a later date, should you need it.

A lifetime mortgage’s interest rolls up over time and is added to your loan, known as compound interest. And the main difference between a lump sum and drawdown lifetime mortgage is how that interest accrues.

With a lump sum lifetime mortgage, the interest is charged on the total amount you borrow from day one. Whereas with a drawdown, you only pay interest on what you release. Taking all your available funds in one go will limit your future borrowing options. As interest accrues on the full amount taken from day one, the amount you owe will increase faster.

Should you then choose to make any further releases from your drawdown, the interest is charged at the prevailing rate at the time, which may be higher or lower than the original interest rate. This ensures you’re not being charged interest on any money you don’t need immediately, and it could help you save thousands of pounds over the lifetime of your borrowing. A drawdown facility is not guaranteed as the lender has the right to withdraw it.

You can also tailor your lifetime mortgage to ensure it not only helps you meet your needs now, but that it remains suitable throughout your life.

Horizon interest reward lifetime mortgage

Save thousands in interest over the life of your plan by making interest payments, helping you reduce your total cost of borrowing and giving you more control over your financial future.

With a Horizon interest reward lifetime mortgage, you receive an interest rate discount by making monthly interest payments. The longer you commit to making payments, and the more interest you pay, the bigger the discount.

How much can I save?

With an interest reward lifetime mortgage, you can reduce your interest rate by up to 0.45% in comparison to the equivalent, comparable Horizon lifetime mortgage.

How Marge saved over £116,000 with her Horizon interest reward lifetime mortgage

Case study example
Marge is a 71 year old divorced retiree looking to release £100,000 from her £600,000 property to gift money to her grandchildren. By committing to paying 100% of the monthly interest for 10 years, Marge is rewarded with a 0.30% interest rate discount.

Through this interest rate discount, and by paying monthly interest payments for 10 years, Marge can save more than £116,000 over 20 years compared to making no repayments through the same Standard Life Home Finance Horizon lifetime mortgage.

*Monthly Equivalent Rate

Standard Life Home Finance Horizon 300 lump sum lifetime mortgage. Interest rates correct as of 30/11/2023. Interest rate received and plan features are subject to eligibility. Ask your adviser for a personalised quote.

Benefits and drawbacks of a lifetime mortgage

Your lifetime mortgage can be personalised to your wants and needs. There are many features and benefits available to help ensure the plan you receive is the right one for you.

Benefits

• You can unlock cash from your home, tax-free, to help meet your needs in later life
• You’ll always retain full ownership of your home and can stay in it for as long as you wish with a lifetime mortgage
• You can choose to make reduced or no monthly repayments to suit your circumstances
• You’ll never owe more than your home’s worth with a lifetime mortgage
• You may be able to remortgage your lifetime mortgage in the future to release further funds or secure a better interest rate this isn’t guaranteed and may be subject to early repayment charges

Drawbacks

Your equity release adviser will also outline the following important things to think about:

• A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
• Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
• Equity release may leave you with limited or no property equity remaining
• Equity release will reduce your financial options in the future
• A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment charges may apply