Martin Lewis Advice
Equity Release & Lifetime Mortgages?
MSE Review: 02/2024
*5 Mins Read
What's Martin Lewis say on Equity Release Lifetime Mortgages?
In this Equity Release Martin Lewis Lifetime Mortgage Money Saver Expert Tips review guide - we will look at these keys areas & more....Does Martin Lewis recommend Equity Release & Lifetime mortgages? What are they & other options does MSE consider? Whom best qualified to discuss & buy these Mortgage finance types with?
*MSE Martin Lewis view on Equity Release?
Martin Lewis Equity Release & Lifetime Mortgages Guide
'Martin Lewis on Equity Release' says YES 💯 100% it's something that 100,000's of UK households have done BUT Equity Release has long-term implications.
In this review, we therefore look at "Does Money Saving Expert Recommend Equity Release & Lifetime Mortgages?"
Also, what the MSE expert thinks are the key questions to firstly consider here, with their typical balanced view on financial matters.
MoneySavingExpert acknowledges UK Homeowners do already use Equity Release to typically unlock billions in cash from their properties each year.
So therefore it makes sense for him to comment on this area, and see whereby MSE may possibly save you money by say switching to a better deal.
MSE also says, if that's you & you've already got a Equity Release 'Lifetime Mortgage' and charged a interest rate higher than what's available today? It might be possible to save £10,000s & check if it's worth it.
They also offer up various alternatives to firstly consider, like downsizing your property; As Equity Release Lifetime Mortgages are typically an expensive way to raise cash, with costs involved to consider.
MSE says according to those numerous adverts we may have all seen on the TV, radio or papers..."The easiest solution they say is to equity-release if you are over age 55, own your own home, but struggling for cash and want a more comfortable retirement"
The question he asks & answers in their Money Savings Expert (MSE) Equity Release review is what is it...and what are their main Pros + Cons?
'Martin Lewis Equity Release Advice' Review
House = £475,000 | Mortgage = £75,000 | Equity = £400,000
In terms of the large range of Equity Release products available, Money Saving Expert are fully impartial with all their best buy reviews. As you maybe aware, neither Martin nor MSE never endorse products.
Note: Yes, they mention individual products & services on MSE site, but they make it very clear don't 'support' them.
Therefore to also make it clear, this is our own independant broker review on MSE Martin Lewis' Guide to Equity Release. With our own professional FCA Regulated Advisers commenting on aspects of their overall review.
As many people respect & follow their Money Saving Expert opinions, they always say if sure (or unsure & need advice) you speak to a qualified Equity Release Broker.
Martin Lewis on Equity Release - The Money Saving Expert
Who is Martin Lewis CBE & OBE? He's one the UK's renowned Financial Experts & a successful Reporter. Martin Lewis is the well known founder of the online website Money Saving Expert (MSE), which he remains executive chairman.
Martin Lewis also has his own regular current affairs TV Money Show, usually on ITV. These shows may include money savings expert Martin Lewis Equity Release advice and other Finance aspects, were all initially broadcast after the London Olympics back in 2012.
Martin Lewis is now often seen or heard on his Podcast commenting on all different UK and world current financial matters. Or appearing on daytime TV, Martin Lewis equity release mortgages advice on This Morning is often watched, being the popular go to person for some sound financial advice.
Martin Lewis in these challenging 2020’s is therefore our all round UK Consumer Champion for his respected in depth finance opinions.
However, his undoubted success today in 2024 hides a very sad story from his past, which he emotionally & honestly explains further in this BBC Podcast >
Martin Lewis sadly told of his own life story, where at only aged 11 he unfortunately lost his late Mother Susan Lewis, in a tragic road accident.
What happened to Martin Lewis as a Child then reportedly left him emotionally unable to sometimes leave his own house - for upto 6 years (Times Newspaper Article).
Except for going to school, this emotional impact left him he said looking back with both extreme anxiety & trauma.
As such, Martin Lewis illness mentally as a teenager back then & during some darker days says he sometimes “struggled to even get out of bed”.
he tragedy on the longer term impact of someone losing a parent so young into their lives, whether this be financial, psychological or both.
As such today he says 'Financial problems and mental health issues are locked together — it’s about time treatments were linked too', urges Money and Mental Health Policy Institute & its chair founder Martin Lewis.
This then means that he can also speak now with some authority around the subject of mental health & where he also explores the link with finances and money management.
Some of these Martin Lewis' Money Management books shown below are all therefore well worth a read, especially in this ongoing cost of living crisis.
Important Note: This overview on Money Saving Expert Martin Lewis on Equity Release or 'Lifetime Mortgage Martin Lewis' guide is not a scam fake advert re MSE recommending our own broker services. As you may be aware he & MSE are impartial. Therefore he does not endorse any particular products. Any Martin Lewis Money video's shown may have some out of date information on them - due to the ongoing cost of living crisis. Often these equity release MoneySavingExpert articles may no longer be personally updated or written by Martin Lewis himself. MSE do state he oversees site content, especially the MSE weekly email. Naturally, although MSE is an independant website finance allows noadvertising nor subscription, it may receive a revenue via 'affiliate links' to the top products or providers (which we aren't mentioned)
Compare UK Lenders Top Deals >
*What are the main types of Equity Release?
There are 2 main types of equity release available, with some product variations, and both of these are regulated by the Financial Conduct Authority (FCA).
- Lifetime Mortgages
- Home Reversion plans
The *Equity Release Council says it involves releasing money (or equity) tax free from your home but whilst you are still living there. ie; Over 55's + later life lending.
MSE points out that well over 300,000 UK households have done some form of equity release or lifetime mortgages since 2011. As brokers, we concur that the Equity Release market is on the rise in the 2020's.
But while UK interest rates are now rising (compared to past years), comments Martin Lewis equity release schemes themselves are he says still an expensive & risky way to raise cash.
Note: The reason why as brokers we see many people initially make an inquiry about having an equity release lifetime mortgage - is that typically for one reason or another...
- Don't have sufficient in their savings & investments
- Don't have a large enough pension pot to see you through their retirement
- Don’t wish to move home or downsize properties
- Do want to repay debts
- Do want to go on those holidays of a lifetime
- Do want to make home adaptations suitable for older age
Please note: There are less UK providers in the market place involved in this area, than mainstream style mortgages...so you may need to seek advice from someone who can access a multitude of finance partners.
As Equity Release finance brokers we are whole market specialists (ERC members) who may help & guide you through the equity release & lifetime mortgages maze.
Let's now go over his equity release money saving expert key points you may need to consider. MSE explains those different types of schemes available, their pros & cons (or alternatives) which we will review below.
Compare UK Lenders Top Deals >
Martin Lewis on Equity Release v Downsize Property?
If looking into Equity Release Martin Lewis on Lifetime Mortgages says you should firstly evaluate whether downsizing your property could be an useful option instead? He says Equity Release certainly is not something to be taken on lightly.
He points out quite rightly you could always sell up, and then down size on to a smaller home. This means you could hopefully live off the excess cash you have just made. 'Sounds' all great for some.
You may also find that the new property is also more suitable as you get older ie; You currently live in a 3 storey town house, so now want fewer stairs perhaps. Or maybe a bungalow, with no stairs at all.
- If downsizing is right for you (Don't put it off)
- People in their 60's often say to me (I will do it in a few years)
- A few years later it still (Not ready just yet)
- Then after that it is....(We are now too old to leave)
Martin Lewis, the ever practical person he is....says 'If downsizing is right for you', then consider selling your home and doing it sooner - rather than later...
Having said that, he also caveats that if it is a family home or an area where you may have lived for years, you also may have many friends & ties into that local community.
Martin Lewis says please do not underestimate the personal & social impact of moving away - especially if you can only afford to downsize well away from that area.
Commenting on what Martin Lewis says, I would say that moving home can also be (for some people) one of most emotional and stressful things in life?
No wonder some people may understand what their downsizing point maybe BUT still don't want to do it.
As brokers, we would also add that according to research 4 out of 5 homeowners say they would rather stay in their homes than downsize *Standard Life & Age Partnership.
Here are what many of our own clients say are probably their Top 5 Life Stress events...
- Divorce & Separation
- Accident & Illness
- Moving Home
On top of this, the financial costs to move he says can also be high, with various agent fees and your removal costs to factor in. So therefore you will still need money to potentially finance this downsizing property option move anyway initially.
Their money savings expert selling your home guide also has more helpful info & tips on what's involved when selling your property.
Money Saving Expert does not mention this in their article here. However, as finance brokers another couple of other money raising options to maybe consider?
- Rent a spare room (earn up to £7,500 per year tax-free threshold & let out furnished room in your home)
- Go back to work part-time (older person work support)
Does Martin Lewis recommend Equity Release?
How does Equity Release work?
Equity Release Martin Lewis points out is a way to unlock the value of your domestic property and then turn it into cash. You do not need to have even fully paid off your mortgage to do this.
You can action this process via a number of policies. These may then let you access or 'release' this equity (cash) tied up in your home, but only if you are aged 55+.
As a rule, you can either take the money you release
- One lump sum
- Smaller amounts over time (known as drawdown)
- Combination of both
Since 2020, nearly £5bn of property wealth was turned into cash via various equity release schemes.
Yet Martin Lewis Equity Release advice is to make sure you do it in the right way. If you get equity release wrong, he says it can prove very expensive as seen
The most common form is an equity release mortgage that is not paid off until you die or the property is sold. So if you had no one to leave your assets to, Martin Lewis think this is a decent, though expensive, route to raise cash.
If you do have people to pass your assets to, then for Martin Lewis equity release mortgages generally means there will be less for them to inherit. Then again he points out, it is your own property and money, so you can prioritise your own standard of living.
What are costs for Equity Release Martin Lewis asks?
Martin Lewis does not simplify this review section by just stating that the initial & main ongoing costs for equity release will be based around....
- Product taken
- Interest rates
- Whether or not repayments are made
- Plus the initial set up fees.
Average interest rates on a lifetime mortgage Martin Lewis says are currently substantially higher than the top rates on a normal residential mortgage.
Typical rates we may see as brokers can vary between around 5% to 6%. This he points out is low compared to say 10 years ago.
He also says that just because a lifetime mortgage deal has a lower interest rate, this does not always mean it is also the best deal for you.
When weighing up which equity release product would suit you best, the key Martin Lewis says is to remember that the eye-watering price-tag cost your estate would have to repay comes 'if you have chosen NOT to make any monthly repayments to reduce the debt' ie; your mortgage interest compounds & compounds.
He gives an example to clearly point out the impact if you decided you wanted to do equity release via a lifetime mortgage. However, more importantly you choose that you do not want to make any monthly interest payments.
Note; We have doubled their example figures via money savings expert equity release review, which has also been illustrated via YBS website Our Money Movement to amplify its impact.
Example: Equity Release Mortgage BUT with No Interest or Capital Repayments
You decide to borrow £40,000 aged 60 at 5.1% on a £240,000 home. The amount you owe doubles roughly every 14 years, as you made no repayments.
So if you lived until 74 (you now owe around £80,000). Or you live until age 88....and therefore (you now owe £160,000) etc; Average life Expectancy in the UK is early 80's.
As well as the actual cost of the ongoing mortgage interest, you will have to pay a number of set up fees & costs.
So Martin Lewis Equity Release reviews & calculates this will likely set you back between £1,500 > £3,000, depending on the type of lifetime mortgage or home reversion plan being arranged.
You must also take into account any finance broker fees for their time in helping you.These are usually a percentage of the overall loan amount of between 1%> 2%) which maybe extra to above arrangement & valuation costs, plus fees for legal work involved and surveyor costs.
Or in other words, as finance brokers we add to MSE comments and say this is not a total fees free process.
We would say as brokers, ensure you have always had clearly explained beforehand all those likely current & future costs. Then do you need to advise your family of your plans, if it may impact their inheritance?
Horror stories he says can happen when the family only later on find out that a likely legacy is much lower than they had expected.
The Equity Release products available to free up cash fall in to a couple of different camps:
What does Martin Lewis say on Lifetime Mortgages?
Lifetime Mortgages Martin Lewis is he says now the most popular form of equity release in the UK for aged 55+. Here you borrow some of your home's value at either a fixed or capped interest rate.
You can either take the monies for lifetime mortgages Martin Lewis says all at once in one big lump sum. Or alternatively, you can take it instead via drawdown on smaller chunks as and when you need it.
He says, if you should choose 'the drawdown option', then mortgage interest will only be charged upon the cash you have actually taken. You will not pay any interest on the money you are yet to draw down.
With both above forms of lifetime mortgage Martin Lewis says, if you do not make any repayments then the interest will compound rapidly, as the amount that you owe is increasing all the time.
These days in the 2020's however, Martin Lewis on Lifetime Mortgages & in the forums comments that (unlike the past) you are now allowed by Lenders to make regular repayments.
From a brokers perspective & the FCA Consumer Duty on treating customers fairly, this ensures that you the customer can keep a better control on your lifetime mortgage borrowing. The money savings expert lifetime mortgage forums debate these points.
Note: These regular repayments can be either...
- Repayment of the Mortgage Capital
- Or just repay the Mortgage Interest
- Both means you can reduce the overall cost
Typically, there will be a cap on the amount you can overpay by, normally 10% of the loan value each year. A lifetime mortgage is different from standard mortgages martin lewis points out.
Martin Lewis Lifetime Mortgages Guide
Home Reversion plans | Aged 60+
Home Reversion is where a mortgage lender pays you a tax-free lump sum but for a portion of your home, & at a rate below its market value.
You can then continue to live in your property (rent-free) until you die. When your property is then sold, any sale proceeds are then split, based upon the % percentage you own and the % percentage the mortgage lender owns. So if your property value then rises significantly, Martin Lewis on equity release home reversion plans says...so does the amount the lender then gets.
For example, if you sell a 40% share in a £400,000 property in return for a lump sum of £80,000, this cash you receive is at a huge discount to the £160,000 this share is actually worth (at current market prices) – mainly because the provider will have to wait many years to get its money back.
Years later, when you die, if your home is eventually sold for £750,000, the provider would then be entitled to £300,000, which is equivalent to 40% of the sale proceeds.
So home reversion plans are better if uk property prices stay flatter, and worse if property values rise substantially.
In many cases, a home reversion plan can potentially work out to be more expensive than a lifetime mortgage. The money savings expert home equity release forums are full of people discussing all these issues.
As brokers, we would add you may also wish to consider Over 60's Life Insurance Martin Lewis doesn't comment on, to maybe help protect some of this downside equity risk.
To sum up so far on our Martin Lewis Equity Release schemes review, here are what we as Brokers think are some of the main pro's & cons Money Saving Expert have highlighted...
EQUITY RELEASE Schemes | 10 PRO'S
- Access some of the equity value tied up in your property
- Funds paid as a tax-free cash lump sum or regular smaller payments
- Home Reversion enables you to continue to live in your home
- Lifetime mortgage also means you continue to own your own home
- Property only sold once you pass on or go into long-term care
- Lifetime mortgage lets you pay interest & capital to maintain control
- No Negative Equity Guarantee means you never owe more than the value of your home once sold
- Benefit from any rise in the value of your property
- Many equity release schemes are transferable
- Move or Downsize to another future property & pay off lifetime mortgage
EQUITY RELEASE Schemes | 10 CON'S
- The home reversion company would own all or a proportion of your property
- Lifetime mortgage interest charged is compounded or added up over the loan term
- A lifetime mortgage debt may increase rapidly if not repaid from your income
- If you choose to repay interest or capital there are often limits
- Receiving a lump sum may also reduce any entitlement to any means-tested benefits
- Eligibility for specific local council-funded care services could now be affected
- Council may also expect you to now pay more yourself as you have the money
- Pension credit or council tax support could also be affected
- May end up with less property inheritance to leave to your loved ones
- If you pay back the full amount owed early you may have Early Repayment Charges
Remortgage & Equity Release Martin Lewis | Under & Over 55's
In the UK, equity release schemes for lifetime mortgages Martin Lewis says are only available to those aged 55 and over.
However, if you are a homeowner who is under 55 and you cannot wait several years, as you are in a more pressing financial need, what should you do?
Remortgaging he says is often a good way of lowering what you pay towards your mortgage each month...AND in some cases you might be able to raise further cash against your property.
In recent years, several UK mortgage lenders have also increased their application upper age limits when it comes to who is able to apply for a mortgage.
So he says if you are an older homeowner (over 55+) but not interested in equity release, do not automatically assume you would not be eligible for a standard mortgage.
Either way, 'Martin Lewis lifetime mortgages' says are not your thing, then it is worth seeking out professional advice via a broker about the possibility of remortgaging instead, rather than say a secured loan, which MSE are not big fans of.
'Equity Release Martin Lewis' 4 Top Tips
1. DO NOT Borrow all you need in one go!
Martin Lewis says the sooner you decide to borrow, the more expensive it becomes, as the mortgage interest has longer time to compound up. So, only borrow as little as you need now....and then wait as long as you can (but only if you want to do it again).
As brokers we say if this is the route you chose to go down, we may agree that Drawdown lifetime mortgages are set up to make this a little easier. For example, he says if you think you may need £40,000 from your home to cover 20 years, only take what you need now and then wait to take more until needed.
2. You will need Professional Advice BEFORE you Equity Release
Before applying for any lifetime mortgage or home reversion plan, Money Saving Expert says you will first need to seek advice from a suitably qualified equity release adviser. This he points out is a requirement of the Financial Conduct Authority.
A qualified financial advisor will be able to compare equity release deals from across the uk market. Again, we point out that Martin Lewis on Equity Release is not recommending our particular services here in this review.
However, by getting independant advice this means you should get the best advice & be recommended products tailored to your circumstances.
He says that you might want to consider using an adviser that is also a member of the Equity Release Council
Do note that most general financial advisers cannot advise on equity release (unless they are qualified to do so). Note for reference: Our brokers are suitably qualified for equity release & also members of Equity Release council.
If you think that remortgaging is a better option, he says it is often best to speak instead with a general mortgage broker.
We say as brokers, you cannot ask any old mortgage broker (if not suitably qualified) to then compare a remortgage v advice on equity release schemes.
3. ENSURE Providers if chosen are Equity Release Council approved
Martin Lewis comments that The Equity Release Council (ERC) is a UK body that exists to ensure both equity release lenders & advisers provide the highest possible standards to borrowers.
Lenders who are members of this ERC may be allowed to carry its Trust Mark. They must abide by their certain rules & regulations eg; the 'no negative equity' guarantee, which means your estate will never owe more than your home is worth.
So Martin Lewis says if you are seriously considering any lifetime mortgages or home reversion plans, make sure it is one from a lender that is an ERC member (virtually all equity release lenders are anyway).
If it is, then you will also need to arrange for legal advice from a solicitor. Their job is to ensure you fully understand the legal and financial pros & cons and implications of equity release. One of these meetings with your solicitor will have to be legally face-to-face.
As well as lenders, he says that both solicitors and financial advisers can also be members of the ERC.
4. BE AWARE that Equity Release can affect any State Benefits
Importantly Martin Lewis says that having cash (rather than a property) can affect any UK state benefits you maybe entitled to.
If you are unsure, he says always ask an equity release adviser to check what that impact could possibly be before proceeding.
Equity Release & Tenants in Common
MSE also does not touch on this subject of tenants in common (other than in MSE forums) in their 'Martin Lewis on Lifetime Mortgages' article. However, as brokers we think it is important subject to now discuss here.
If your property is held joint tenancy already, then this section should not really concern you. However, if it is instead % co-owned with another person under tenants in common (or tenancy in common), you may still be able to get an equity release mortgage. However, we will now touch on the future implications of this decision.
Where properties are % co-owned under tenancy in common, then any equity release application must be made in both their joint names. One co-owner/person cannot take out equity release upon their share of the property alone. It requires both parties to co-sanction.
So what happens if 1 person dies? Well, upon the death of the first tenant/owner or borrower, your equity release lender may then restrict future changes to your existing scheme. This may also include any further access to borrowing future monies. It all depends on the terms of their will.
For example under a tenants in common property ownership, upon the death of one co-owner, their share of the property is then left according to their Will (strongly recommended to make one, if you have not done so as yet)
Assuming their Will then says that their share of the property is willed to their surviving owner, then there is little impact on their equity release scheme.
However, if their Will then states that their % share is willed to another 3rd party, or parties, then potentially there could be issues to their ongoing equity release plan.
In this situation, their equity release lender could possibly then
- Refuse any further borrowing (secured on their property)
- Cancel access to any drawdown facilities (if in place)
So, as brokers we would say it is important that you consider the impact financially upon the 1'st death, upon any joint equity release lifetime mortgage application. Plus all parties making a will & each understanding the others wishes.
What happens if partner has already died re a Tenants in Common property ?
Again, this subject impact on tenancy in common is not touched on in their equity release review. So please note, most equity release lenders currently will not entertain any application, unless legally their title deeds are now amended to remove the deceased tenant % co-owner.
Legally, the late owners Will is then needed by the equity release lenders, to show how they wished for their % co-owned share in their property to be distributed.
If their estate has already been executed through probate, the surviving person hopefully should know what their deceased partner wanted to happen.
Where their % share is clearly stated and willed to their survivor, an equity release application can be potentially submitted. The land registry may be updated separately to the equity release application.
Alternatively, this now maybe done as part of the process by your nominated solicitors (for a fee).
It may be also that after reading up on this subject, you then decide to legally remove any tenancy in common restriction from the title deeds? This is your choice, but should be perhaps discussed with family members who maybe impacted by your financial decisions.
We would recommend that should you go direct to an equity release provider, you then discuss these areas with them and any legal advisers.
Don't forget Mortgage 'Equity Release Insurance'?
One of things they do not mention in their money saving expert equity release article...is also considering mortgage life insurance rather than critical illness. As brokers, we were surprised by this omission.
This could ensure that if you died, then the mortgage debt could be repaid also. You could choose either then, would this equity release mortgage be repaid fully or just in part?
The life cover amount could depend on whether you made mortgage payments to cover the interest, so the debt remains static. Or harder to calculate, if the mortgage is not repaid, so the debt compounds.
You would have the option of mortgage level whole life assurance (which will always payout, even if you lived until age 190). Or alternatively, a level term life insurance policy, (but say upto age 90 only).
For more information on his thoughts, check out our broker Martin Lewis on Life Insurance review also.
Equity Release and Inheritance Tax?
Another thing they do not really go into any detail in the Martin Lewis equity release article...is also considering its impact on UK Inheritance Tax?
Your property is perhaps the largest asset you will own? If you are looking at equity release anyway, it maybe because you have no other large assets, investments, savings or cash in the bank?
As such, it will probably represent the majority of your estate when you die. So if you release equity from your home, does it therefore also reduce your inheritance tax liability?
YES, Equity release does 'potentially' reduce the overall value of your estate. So by releasing equity you could therefore be also reducing your Inheritance Tax (IHT) liability bill when you die.
BUT, it is not that simple and there are a few things to also consider...
- Valuing an Estate (depends on Government rules)
- Inherited Property (rules with a lifetime mortgage)
- 7 years IHT Gifts Rule (if you died within 7 years after gifting)
- IHT Property Thresholds (if you died before any spending or gifting)
- Gift Property Away but live there still (gift with reservation rules may apply)
So as brokers, we are NOT saying we recommend equity release as an inheritance tax tool. BUT it is a consequence of taking out an equity release product. Please seek legal advice on all these aspects if they concern you.
Do I need a Portable Deal?
MSE confirm that these days most lifetime mortgages are portable. This means in theory you should be able to take your lifetime mortgage, with you should you decide to move home in future.
However in practice, some equity release lenders tend to have fairly strict criteria about what properties they are (or not) willing to lend on. This might restrict you.
Properties that you would unlikely be able to port your lifetime mortgage across to would include:
- Studio Flats
- Basement flats
- Housing authority block of more than 4 storeys
- Flats of maisonettes in a local authority
- Retirement properties
- Static Homes
- Mobile homes
- Guest houses
As brokers we would agree with their comments that the issue of portability is especially relevant, if you believe it is more than likely you will move at some point either before you die, or moved into long-term care.
Bottom line is check that the lifetime mortgage you maybe getting is portable and when the equity release lender allows this process.
What is Downsizing Protection?
Many lifetime mortgage equity release deals come with a feature known as downsizing protection. This ensures that should you downsize, you will not be charged an early repayment exit fee.
This means you may possibly wish to downsize property sometime in future (to a lower value home & not just size wise). However, to do so means you would need to partially or fully repay your lifetime mortgage.
With downsizing protection you would be able to move and repay the existing loan, without no early exit fees.
There maybe various reasons however that you might need to partially or fully repay the loan. This could include the new property not fitting your equity release lender's porting criteria (see above).
Or alternatively the lender being unwilling to lend as much money on the new property you have chosen.
To qualify, you will need to have the strong intention of taking your existing lifetime mortgage with you to the new property (in other words, you would want to port the lifetime mortgage).
Also if considering switching lifetime mortgage deals, if moving home is now something you believe is a possibility in future, then they recommend you check the new deal comes with downsizing protection.
*Can you save £1000's switching Equity Release Mortgages?
Money Saving Expert (MSE) state that UK homeowners used equity release to unlock around £5 billion in cash from property each year.
Have you in the past taken the plunge with a lifetime mortgage but it was setup on a high interest rate?
We will analyse their pros & cons guide here. MSE show you their top tips & how they may help you figure out if you personally could switch and save?
Equity Release Types | Martin Lewis Lifetime Mortgage v Home Reversion
There are some key differences between these two plans. As such, it will determine whether or not you could possibly switch & save asks Martin Lewis equity release schemes article review.
If you have a lifetime mortgage, then even after any equity release, you still retain ownership of your own home.
However, with a home reversion plan, the sale of your home (or part of your home) to a lender is then exchanged for a cash lump sum or a regular income for life.
As such, Money Saving Expert says with home reversion (unlike with lifetime mortgages) you unfortunately have no option to switch & save on home reversion plans.
|Are you charged interest?
|Can you make monthly repayments?
|Did you get cash in exchange for selling part of your home?
Why you 'might' be able to switch & save
If you are not making repayments, the interest on your lifetime mortgage compounds. This compounding factor is made worse by higher interest rates that were common 10+ years ago.
This means that by the time the lifetime mortgage needs to be repaid, what you now owe could be a far cry from the amount you originally took out. The idea behind any equity release plan is that you only need to repay it when you die.
The article review says switching to a new lifetime mortgage with a cheaper interest rate could cut £1,000's off the amount that you (or your relatives) need to repay when you died, or when you go in to long-term care.
Over years & decades, a difference of say 2% (or even 1%) can make a huge difference to what you owe.
Example of Interest Savings
- Imagine you had borrowed £50,000 at an interest rate of 6%
- BUT you are making no repayments so interest is compounding
- After 10 years, your outstanding balance would be around £90,000
- At 20 years you would owe around £165,000
But, now imagine if you had switched to a deal charging a lower 4.5% after the first 10 years.
- Now you (or your estate) would owe around £140,000 after 20 years
- This is £25,000 less than if you'd been paying 6% interest the entire time
If you have had an equity release lifetime mortgage for a long time, but you now owe more than 60% of your home's value, then MSE say it is unlikely you could get a new lifetime mortgage to replace it.
Note: This MSE Martin Lewis on Lifetime Mortgages review was written before interest rates have started to risen again in the 2020's. As such, it could be there is a lesser rate advantage at the time you are reading this.
MSE asks 'Should you switch Lifetime Mortgage Providers'?
Step 1: Check how much you owe, current interest rate (and any fees to leave)
MSE says typically this information is likely to be on the last mortgage statement you got from your lender.
However, you may want to call them to get the most up-to-date figures (which will include)
- How much you currently owe. This will be a larger amount than you borrowed when you took out the deal as you will have been charged interest since (unless you're making repayments to pay off the interest).
- What the interest rate is. Many older deals will have interest rates between 6% and 9% a year. Find (or ask) what yours is.
- What fees you'd need to pay if you paid off (switched) your lifetime mortgage now. This is often called an 'Early Repayment Charge' and is usually a percentage of your original loan amount or outstanding balance, often between 0% to 5% (though it can be more).
Step 2. Check out what a new lifetime mortgage could cost
Note he says that any interest rate will depend upon your age, amount you wanted to borrow, and your property type. Below are typical costs to consider if swapping providers.
- Application (or arrangement) fees – between £0 > £500
- Valuation fees – between £200 > £500
- Adviser fees – between £0 > £1,000+
- Legal fees – around £500
Step 3: Use MSE calculator to see when you may start to save by switching
The *Martin Lewis Equity Release calculator > is a very useful tool. It will enable to help you easily compare how much you would pay on your existing old deal v how much might pay on any newer deal
It clearly takes into account potential fees & costs which you are likely to be charged for. If swopping providers for lifetime mortgages Martin Lewis has also included an option in the calculator, should you wish to add on these fees to the overall mortgage cost.
- Application fees
- Valuation fees
- Adviser fees
- Legal fees
- 'Add' these fees to the mortgage?
Their calculator will also tell you how many years or months it may take you to help offset the impact of any switching fees. After that time, Martin Lewis lifetime mortgage calculates it could be you actually start saving by being on a better interest rate.
Step 4: Will you live long enough to actually save?
As Martin Lewis on lifetime mortgages says you will need to be paid off when you either die or alternatively need to go in to long-term care.
If sadly this is sooner rather than later, then it could be as they point out that you may not see much (or any) financial benefits from changing deals.
Plus you would still be paying off the set up fees associated with the new lifetime mortgage switch.
Note; If you are in a couple, married or otherwise, it is when that 2nd person dies or moves to a care home that the lifetime mortgages martin lewis says is repaid.
What's the process to switch a Lifetime Mortgage deal?
He says initially compare the old v new deals with help from the *Martin Lewis Equity Release calculator >
If overall on balance it is likely you may live to see financial savings, then he says it may be worth investigating this further.
The process of switching any lifetime mortgage equity release deal he says is almost identical to if you were taking out a brand new lifetime mortgage.
That is also the case even if you are switching to a brand new equity release deal with your existing lender. They will just treat you as if you are a new borrower & so re-underwrite the case from the start.
The only difference here is that the cash from the new mortgage goes to pay off your old mortgage deal, rather than being given to you as cash lump sum.
He says that if you have decided switching might be right thing for you, here are you steps to get started using ideally the qualified services of those preferably carrying the Equity Release Council (ERC) TrustMark.
* Appoint an Equity Release Broker (ideally ERC Approved)
These are the 3 questions to ask, before selecting any Equity Release Broker ideally approved by the Equity Release Council (See their logo above)
- Do you offer a 'Free' initial consultation (This lets you explore if an equity release switch could work & at no cost)
- Charge 'Broker fees' to arrange the Equity Release Scheme (If so, how much)
- Access Equity Release deals from 'all UK Lenders' (You need a YES answer)
* Instructing a Solicitor
You will naturally need to appoint a solicitor to carry out the relevant legal work involved in taking out a lifetime mortgage.
MSE suggest it is best to instruct a solicitor with experience in this area of equity release and ideally who also carries the Equity Release Council Trust Mark. You can search for solicitors on the Equity Release Council website.
One of the meetings with your solicitor will also likely be face-to-face. As brokers, we say this process could be either done by you directly, recommended by the finance broker or sometimes via the lenders panel.
* Decide which Lifetime Mortgage maybe best for you
Martin Lewis says it is probably best to discuss the issue with your family & anybody else who might be relevant at this point (but you don't have to).
The equity release finance adviser should present you with the most appropriate equity release deals for your circumstances.
When picking an equity release lender, he says make sure it is one approved by the Equity Release Council. He states that virtually all lenders are BUT ask your adviser if you are unsure
Lenders with this ERC approval must then give certain guarantees
- No-negative equity guarantee
- This means your estate will never owe more than your home is worth
- The right to stay in your home until death or long-term care
- Option to move finance across properties (provided it meets certain conditions)
* Your adviser then applies for your Lifetime Mortgage
Once you have decided and agreed which equity release deal you may prefer you to apply for, you will need to fill in the Lenders application form. The equity release finance adviser should help you with this, as that is their job.
Your adviser will then send the equity release application on your behalf to the lender. This may include a cheque or bank details to cover any fees which must be paid upfront eg; application fees.
* You will hopefully then receive an Offer
You will only be sent an offer letter, once the equity release lender has finally instructed a surveyor to carry out a valuation of your property. From that they will then decide on the amount it maybe willing to let you borrow.
Your solicitor will then sit down with you to discuss the details of their offer. They must then highlight any obligations the lender specifically requires of you.
Only once this is all completed & if you are happy with this, you will then be asked to sign your equity release legal agreement.
* The funds will be released to pay off your old Lifetime Mortgage
Once all the final legal checks have been completed, the funds will be released to your solicitors. They will then transfer the monies to your old equity release lender to pay off your old lifetime mortgage.
He says, if you have done all that, you will now have a new, cheaper equity release deal. Hopefully this should see your interest rack up more slowly.
* How long does this Switching process take?
It should be around 8 week between submitting your application & then receiving the funds.
However, the process can be longer or shorter depending on your own circumstances eg; unusual property types, pandemic issues etc;
What does Martin Lewis say about Equity Release?
Conclusion 'Martin Lewis on Equity Release' 2024
To sum up, Money Saving Expert Martin Lewis on Equity Release is as ever the practical person he is. He quite rightly points out that this process may not be the right option for everyone & their circumstances.
Also, if you already have one, then consider ways of reducing the overall cost of your lifetime mortgage Martin Lewis suggests in the longer run.
As brokers, we found this money savings expert summary very good with their useful hints & tips, such as....
- Start to make (or increase) repayments towards your Lifetime Mortgage
- Pay off your lifetime mortgage in full
- Downsize rather than take out Equity Release
- Switch deals if you can save money
So, whether you wish to go direct, having read the equity release money saving expert guidance. Or instead, prefer to speak to a professional broker. You pay’s your money & takes your choice.
Article on ‘Equity Release Martin Lewis’ by Martyn Spencer Financial Adviser review 2024
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NOTE: YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBTS SECURED ON IT.