What is a lump sum lifetime mortgage?

Get your equity in one go with a lump sum lifetime mortgage

Planning on adding that extension, or helping one of your kids buy their first home? If you’re looking for a way to raise a large sum of money, then a lump sum lifetime mortgage could unlock the cash you need from the value of your property. But remember, a lifetime mortgage will reduce the amount of capital that is passed on to your beneficiaries when you die, and gifting money maybe subject to inheritance tax.

What is a lump sum lifetime mortgage?

A lump sum lifetime mortgage is a type of equity release plan that provides all the money you release in a single one-off payment. To be eligible for a lump sum lifetime mortgage, which is a loan secured against the home, you must be aged 55 or over and own a home in the UK worth over £70,000.

How does a lump sum lifetime mortgage work?

A lump sum lifetime mortgage works in a similar way to a traditional mortgage, as you own your home but use it as security for the loan. There are a few differences to note:

• With a lump sum lifetime mortgage, you don’t have to make regular monthly repayments unless you want to
• The interest is rolled up and compounded – that means you’ll pay interest on the interest (unless you decide to make full monthly interest payments). The mortgage ends when you, or the last borrower if you’ve taken out a joint mortgage, die or move into permanent long-term care.
• Interest rates on lifetime mortgages are typically higher than on a standard residential mortgage. Interest will accrue on the amount borrowed and on any interest that isn’t repaid, which means it will cost more over time
• Usually the loan is paid off from the proceeds of the sale of your property, although executors can choose to use alternative funds to settle the outstanding balance
• You’re required to get financial advice before taking out a lifetime mortgage, and you should take the time to consider all the alternatives carefully.

If you don’t need access to a large sum of money all at once, you could also consider a drawdown lifetime mortgage where you take an initial lump sum from the agreed amount and then you can withdraw the rest as and when you need it.

How much can you borrow with a lump sum lifetime mortgage?

The amount you can borrow will depend on the location, value and condition of your home . It’s worked out based on the age of the youngest applicant, who must be 55 years old or over to qualify. Some providers may also take your health and lifestyle into consideration, and this may affect the amount you can borrow and the overall cost.

Get an idea of how much equity you could release with a lump sum lifetime mortgage by using our online calculator. This will give you an indication but isn’t advice or a recommendation.

The advantages of lump sum lifetime mortgages

• You get all the released equity in one go so it can help if you’ve got a big purchase to make
• You can spend the money on almost anything you want to, from home renovations to holidays
• You don’t pay income tax as the cash counts as a loan, even if you use it to top up your income. However, if the money released is placed into an interest bearing account, savings tax could become payable on the interest
• You’ll still own your home and can stay living there until the last borrower dies or moves into permanent long-term care
• The loan plus interest is repaid when your plan ends, and you don’t need to make monthly payments unless you choose to
• A ‘no negative equity’ guarantee means that you will never owe more than your home is worth when it is sold following death or moving into permanent long-term care.

The disadvantages of lump sum lifetime mortgages

• A lump sum lifetime mortgage, as with all lifetime mortgages, will reduce the value of the estate you leave when you die, which means that you leave less money to your beneficiaries
• Taking a tax-free lump sum may affect your entitlement to some means-tested state benefits, so you might lose cash that you rely on for living expenses
• If you wanted to release more funds at a later date, you’re not guaranteed access to additional cash
• If you wanted to pay off the lump sum lifetime mortgage early you could face early repayment charges.

You must always take professional advice before going ahead with any equity release product.

How do I find out more about lump sum lifetime mortgages?

Saga Equity Release, provided by HUB Financial Solutions Limited, is an advice service for people thinking about taking out equity release, including lump sum lifetime mortgages. As part of the service an adviser will look at alternatives to equity release and will complete a free state benefits check.

The product available through Saga Equity Release is the Saga Lifetime Mortgage, an exclusive product provided by Just, a leading provider of lifetime mortgages who have helped their customers release more than £6.7 billion from their properties. It’s a flexible product with multiple options to meet your needs, including different ways to access your money or to pay back some or all of the interest. A lifetime mortgage is a loan secured against your home.

This exclusive Saga Lifetime Mortgage also comes with these exclusive features:

A 6-month Money Back Guarantee

If circumstances change and you no longer need the money, you can pay back what you borrow within six months of the completion date of your initial advance. You won’t need to pay any interest or any early repayment charges – you just pay the money back and walk away. To be eligible for this Guarantee your initial advance must not exceed £150,000. There are other eligibility terms that you need to be aware of and you can find all of these on our Terms and conditions page.

The Saga Service Promise

The Saga Lifetime Mortgage comes with a Saga Service Promise included as standard. Saga Equity Release will aim to have your money released to your solicitor's account within 40 working days after your application has been accepted by Just and if this doesn’t happen and you’ve met all of the eligibility criteria, you’ll receive a payment of £100 (T&Cs apply). This promise will not apply if you're using the Saga Lifetime Mortgage to purchase a new property, rather than re-mortgaging an existing one.

If after taking advice you decide to take out a Saga Lifetime Mortgage you'll need to pay an advice fee of £799.