Equity release explained Lifetime mortgage restrictions
Most lifetime mortgages let you move house but you might not have enough equity
Most lifetime mortgages are portable, which means you can take the loan with you if you sell your home to buy another one. However, the debt may have grown so much in relation to your property’s value that you don’t have enough equity to move to the type of home you need.
The minimum amount you can borrow with any lifetime mortgage is £5,000 through Hodge’s Lifetime Mortgage Option, but most other products have minimums of between £10,000 and £26,000. The maximum amount you can borrow in relation to your property’s value ranges from 25% to 49% depending on the product, but the actual percentage will depend on your age – the older you are, the more you can borrow. You can only borrow up to 11% with New Life if you’re 55, for example.
Cheaper lifetime mortgage options
A cheaper option could be to choose a lifetime mortgage that offers a drawdown facility. The total amount you can release is agreed at the outset, but you take the money only as you need it. This means that you’re not paying interest on the whole amount from the start and you pay interest only on the money you use. Around half of the products currently available let you do this.
You may also be able to borrow an initial amount and then apply for a further loan later, though you may have to pay extra fees for this and there may be a time limit for doing so.
Holmesdale and Scottish Widows Bank have lifetime mortgages that let you make interest payments each month. You can also do this with the Vernon scheme as it has no early repayment charges (ERCs). If you can afford to do it, this is another way to minimise your debt.
A further variation is Just Retirement’s Fixed Lifetime Mortgage, which fixes the size of your debt at the outset, but this could be particularly expensive if you die soon after taking out the product.
- For more information on equity release, talk to our experts on the Which? Money Helpline
- For alternative options, take a look at our guide to annuities
