Lifetime mortgage or equity release

Spudtm

I am 58 years old with a property valued at £425,000; mortgage paid off.  I want to take cash out of the property, not a large amount in one go, but to be able to take the occasional smaller sum.  I am not worried about leaving a smaller inheritance.  I am uncertain as to the differences between a lifetime mortgage and equity release - or are they the same thing? Thank you.

MWT

A lifetime mortgage is one type of equity release, there are others, but from what you've said so far it is likely to be the option you'll want to use.

Specifically you can opt for a drawdown solution that gives you an agreed total that is available, an initial lump sum and then you can draw further amounts up to the total over time.

There are limits on how frequently and how small the further withdrawals can be, so if you think you'll be wanting to make frequent small withdrawals you may be better off looking at products that give you a regular monthly income for life instead... 

Also keep in mind that although the interest rate on your initial lump sum is fixed, further withdrawals will be at the prevailing rate at that time, which could be higher or lower than your initial interest rate.

Similarly early redemption charges with run for the agree time period for each withdrawal separately, which may or may not be a concern depending on your future plans.

Do be aware though that you are relatively young to be using this type of product and you will typically only be able to access around 25% of the valuation of your property at your age.

You can return when you are older and see if the amount available to you can be increased, but be aware that the full rolled-up amount of your facility including interest will be taken into consideration so it will not always be possible to get much of an increase in the future.

Spudtm

Thank you for your very comprehensive and helpful reply.

MWT

You will need to take advice if you want to go ahead with one of these products, the majority of those able to advise you will charge for the advice one way or another so take care to understand want that charge will be.

There is also the option to use a 'free' service like the one offered by Step Change Financial Solutions. Like all the others they will get paid by the lender if you proceed, but unlike the others they make no other charge for their services. They are part of the 'Step Change' charity.

Julieh365

I I am divorcing and have to pay 80k to my husband as part of settlement, I live in marital home aged 64 with a small pension what would be the best product to use to release money? Thank you

MWT

Obviously you should be getting both legal and financial advice in the circumstances you describe so do please make sure you are getting that, as your advisors will have access to far more information about your circumstances and options than you would want to share on a public forum.

However, it may be possible to at least make a suggestion or two for further discussion with your advisors, if you want to provide a little more information here, such as the current value of the house, and if there any other loans already secured on it...