The range of retirement planning solutions has expanded with the introduction of Lifetime Mortgages.

What is a Lifetime Mortgage exactly?
A Lifetime Mortgage is a specialist type of mortgage available to people over 55 with their own property.

It is different to a conventional mortgage because affordability is not based on income, so it can be used by people who have retired.

The amount you can advance depends on your age, usually the older you are the more you can advance.

You can repay the loan or there are various interest only options, usually with a fixed rate of interest for life.

Lifetime Mortgages are fully regulated and there are a growing number of financial planning opportunities that can be realised by releasing some of the equity in residential property, especially with the combination of low interest rates and high property values.

The Loan and Interest
The loan and interest can be a monthly repayment of capital and interest; monthly repayment of interest only; or pay nothing and have interest rolled up until the property is sold. Interest rates are fixed at the outset so you know exactly what the cost will be.

Loans can be for between 31% and 58% of the property value depending on your age. They are available from age 55, where the maximum loan can be up to 31% of the property value. There is no upper age limit.

Loans can also be flexible and work like a drawdown facility, so you only pay interest on what you use.

Some of the situations we have seen where releasing equity with a Lifetime Mortgage can be beneficial include:

• Reduce Inheritance Tax; release money from the home for giving to family now
• Maintain lifestyle when ‘asset rich and cash poor’
• Mitigate Capital Gains Tax; raise funds without selling assets
• Care planning
• To defer Pension and SIPP drawdown and retain Inheritance Tax reliefs
• Release money to help children and grandchildren onto the property ladder
• Raise money to invest in your business or to help a family business
• To bridge a shortfall and move or downsize without selling straightaway

Able to retire
Mrs A was 63 and had lived in her property for the last 32 years, the first 27 years of which were with her husband who had sadly passed away five years ago. Due to insufficient pension provision and little in the way of savings, she was still having to work and was desperate to retire. With costs rising, she saw no other option but to downsize from her existing property that she loved and was full of memories. But instead, she was able to release some of the equity from her property by means of a Lifetime Mortgage and this meant she could afford to retire without having to sell her home or cut back on her standard of living.

Gift for grandson
Mr & Mrs E were in their early 60s and had one daughter and one grandson. Their grandson had recently finished his education and had started full time employment and was desperate to buy his own home with his girlfriend who had just become pregnant. Due to the cost of houses in the area, they couldn’t foresee being able to save the deposit they needed for a property for many years to come. Mr & Mrs E, who owned their property outright, released sufficient equity from their own property to be able to give their grandson enough money for a deposit on a property.

Holiday fund
A couple in their late 50's, had for many years dreamed of going on a cruise around Scandinavia. Despite trying hard to save, something had always cropped up and they had to use their savings and were left starting again. They were concerned that they wasn't getting any younger and that by the time they had managed to save the amount needed, they may not be able to do it due to health reasons or even worse. They released some of the equity from their property. Later that year they were on an exclusive cruise ship, sailing around the Scandinavian coastline. They were even able to budget for future holidays with a reserve facility built into their plan which would also serve as an emergency fund if required.

Mortgage in retirement
Mr and Mrs F had been loyal clients of a major high street bank for more than 20 years. They had sold their business and retired early and lived off their investment income. They wanted to move and increase their mortgage, which they could easily afford to service. But then they were told they could not extend their mortgage at all and, in fact, they needed to repay the existing mortgage within a few months or face dire consequences. Being retired, even though they had investment income, they could not pass the high street bank’s narrow and restrictive affordability test, even though their income was pretty good. Instead, they were able tore-finance to a Lifetime Mortgage with affordable Interest Only payments at a fixed rate and are actually in a better position than previously, especially knowing the new mortgage rate would be fixed for life.

Home improvements
Mr C, a single and very house proud man was 78 years of age. All of his life he had maintained his property himself, but due to medical conditions, this was becoming more and more difficult to do. Over recent years his home had become a little neglected and this was really getting him down as he loved to have his home looking nice. With an income that was just sufficient to pay the monthly bills and provide a modest standard of living, he couldn't afford to get any help with maintaining his property, but with no children to leave it to, released enough equity so that he could have his whole home re-decorated and brought back to the standard that he had kept it at himself before his health had deteriorated.

Please speak to your usual partner or one of our financial advisers if you would like to make an appointment.

RNS does not give advice on Lifetime Mortgages directly and we will refer you to a qualified adviser from outside our group. We may receive a referral fee. Meetings are available with no obligation for clients, family and friends, in our offices, over the telephone or by video call.