1 LEGAL & GENERAL HOME FINANCE Guide to Lifetime Mortgages
2 A lifetime mortgage could give you the freedom to really enjoy your retirement. We re delighted you re finding out more about lifetime mortgages. Many people could use the money locked up in their homes to change retirement for the better and we ll do our best to help you find the answers to many of your questions. However, because your circumstances are unique, you must get personalised advice from a specialist financial adviser to find out if a lifetime mortgage is right for your situation. In this guide, we answer all of these questions: What is equity release? Why is specialist advice so important? Lifetime mortgages how do they work? Do you qualify? What could you spend the money on? Things to think about And what are the next steps? This is a lifetime mortgage. To understand the features and risks ask for a personalised illustration.
3 You ve worked hard to own your own home. Now may be the right time to make that valuable asset work hard for you, too What is equity release? Equity release is a way of raising money from the home you own without having to move. The most common type of equity release scheme is called a lifetime mortgage. This lets you access some of the money tied up in your property without having to move, either as a tax-free lump sum or in smaller amounts as and when you need it (known as drawdown). The other type of scheme is a home reversion plan. We don t offer those plans, but your adviser can give you more details about them. Here, we explain how Legal & General s Lifetime Mortgage could make a difference to your retirement in the right situation. I ve heard bad things about them are equity release plans better now? Over time, equity release plans have changed. Today, lenders follow the Statement of Principles set up by the Equity Release Council. As long as the lender you re talking to is a member of the Council (we are), you can be confident you re buying a reputable equity release plan and a specialist adviser will help you find the answers to all of your questions. We take your security and happiness very seriously, so we only offer our Lifetime Mortgage through specialist advisers.
4 Why is specialist advice so important? You must take advice when purchasing a lifetime mortgage, but this specialist advice is vital, because equity release is a large financial commitment that s designed to last a lifetime. The advisers who can help you have passed detailed, professional exams about equity release, qualifying them to look at your situation and work out if a lifetime mortgage is an appropriate choice. Your adviser will also help you compare different options, complete an application, organise for your property to be valued, and help you find a solicitor too. A specialist adviser can help you: get the most from your current financial circumstances (your income, outgoings, savings and investments etc.); explore any unclaimed entitlement to state benefits; create a clear plan and set realistic expectations for the future; see any implications for your estate and find out about securing an inheritance; understand all the risks and features of a lifetime mortgage; help you look at alternatives you may not have thought about yet; discuss which option s best one lump sum or a drawdown arrangement; choose a lifetime mortgage you re happy with and feel 100% confident about.
5 Equity release plans have changed over the years, but you still need specialist advice. Where can I find specialist advice? Talk to your own financial adviser, ask if he or she can advise you about equity release. Or visit the Equity Release Council s website where you ll find an option to search for qualified advisers in your local area. As with all mortgages, there s usually a fee for these services that s payable directly to the adviser. A financial adviser will always show you clearly what the charges are in advance. Please make sure you read everything you re given and ask your adviser if there s anything you want more information on. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
6 Lifetime mortgages how do they work? A lifetime mortgage is a loan secured against your property. The amount release is based on some or all of the property s currently market value. It s different to any other type of mortgage, because you never have to make monthly repayments on the loan and it usually lasts for the rest of your life. So there s no need to move? That s right, you still own your own home and can continue to live in it as you always have. The loan along with the interest is only repaid when the property is eventually sold after you die or move into long-term care. And if you and your partner make a joint application, it s the person who lives in the property last that triggers the sale. Lots of people look at downsizing (selling their property and buying another cheaper/ smaller one), as the logical way of releasing more money in retirement. But, for many, the home is where a lifetime of memories has been built up, it s probably close to friends and family and useful services such as shops and doctors. With a lifetime mortgage you can stay where you re most comfortable for as long as you want. What about if we still have a mortgage? Sometimes people use a lifetime mortgage to help pay off long-term debts (like a traditional mortgage), so they can have a better quality of life with more money to spend each month. If you re in that situation, that s okay, you can still apply for our Lifetime Mortgage. But if your application is approved, we ll insist the existing mortgage is paid off first using the money from the loan. Your adviser will take you through the advantages and disadvantages of using a lifetime mortgage to pay off debt and will only recommend it if it is the right course of action for your circumstances. Although you should be aware that by consolidating debts onto a mortgage you could pay more and over a longer period. It s a tax-free lump sum of money You can carry on living in your home You can move later if you want to, although terms and conditions apply As members of the Equity Release Council, Legal & General s Lifetime Mortgage products carry a no-negative equity guarantee meaning that the amount to pay back will never be more than what s left after the property s sold. Equity release is not suitable for everyone and if it s not right for you your adviser will inform you and may suggest alternatives.
7 What options are there? Our Lifetime Mortgage gives you the flexibility to consider two important decisions when you re arranging the loan: Inheritance Protection Although it frees up the equity for you to spend straight away, a lifetime mortgage will reduce the amount of inheritance you can leave to your family. After all, your home will in most cases have to be sold eventually. Our Inheritance Protection option reduces the amount you can borrow, but it does ensure that, whatever happens to house prices, there ll be some equity left for the people you love. We strongly recommend you talk to your family about taking out a lifetime mortgage before making a decision to go ahead. Flexibility You can take the money when you want, it s entirely up to you. Some people need to take the whole tax-free sum at the outset, but you may prefer to have some money to start with and then come back to borrow more later on. If you leave some money set aside, rather than taking it all in one lump sum, means the overall cost of your borrowing is reduced, as you don t pay interest until you take the benefit. We don t charge interest until we release the money. The interest rate on future borrowing may be different.
8 Do you qualify for our Lifetime Mortgage? Yes Are you aged over 60? No Is the property your primary residence? No Yes You do not qualify Is your property made of standard construction, and in England, mainland Scotland or Wales? Yes Is your property valued at over 100,000 ( 150,000 for ex-council)? No No No Is your mortgage small enough to be paid off by some of the proceeds of the equity release? Yes Yes You may still be eligible Do you own your property outright? No Yes You may be eligible for a lifetime mortgage We re backed by the strength and security of the Legal & General Group and we take your security and happiness very seriously. We only offer our Lifetime Mortgage through fully qualified advisers. If you don t have an adviser, you can find one on the Equity Release Council website. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
9 What could you spend the money on? If you ve spent 40 years or more working hard to make your house into the home you love, it can feel good looking forward to enjoying your retirement in greater comfort. These are some fictional examples of why people look into lifetime mortgages: Our pensions aren t great and we d like to have a better quality of day-to-day life, but we ve still got a mortgage and a car loan to pay off It s an old house we d like to get new windows put in so we re spending less on the heating bills I m still really active, but I can t cope with the bathroom anymore. I d like a walk-in bath and a ramp to the front door, really. The idea of going into a home worries us! We love our own home, it s where we d like to stay, but we can t afford a full-time carer Our money all went into paying off the mortgage early. We have small pensions and not enough to put by for a reliable new car but we need one to stay independent! Every year we ve had weekend breaks, next year we want to treat the whole family to a luxury, once-in-a-lifetime holiday Our children both need a helping hand to get onto the property ladder. We ve got lots of money tied up in the house, but no actual cash to give them which seems daft
10 A typical journey with an adviser. 1. Use our lifetime mortgage calculator Use our equity release calculator it only takes a minute or so Make a note of how much you think you could borrow 2. Talk to your family Explain your motives for finding out more about a lifetime mortgage Think about inviting them along to the meeting with your adviser 3. Get ready for your meeting When you make an appointment with an adviser, this is some of the information that is worth thinking about and coming to your initial meeting prepared to discuss: 3 About you The adviser needs to see proof of your age, identity and address 3 Your income Make a note of any salary, regular pension income, and state benefits you re receiving Gather the details of all your bank accounts, building society accounts and investments 3 Your outgoings List all of your regular outgoings, things like bills, fuel, food, household goods Make a note of less regular expenses children s birthdays, trips out, entertaining 3 Your property Write down a few details about your property and what you think it s worth
11 4. Speak to a specialist financial adviser Ask questions as you go, don t save them until the end Take notes, they make life easier for you after the meeting If you re not sure about something, ask the adviser to explain it to you again Remember equity release is not suitable for everyone and if it s not right for you your adviser will inform you and may suggest alternatives Take time to look through the illustration Ask your adviser questions about anything that s not clear Explore all the alternatives in depth Think about the plans you d like to make for leaving an inheritance Consider making a will (if you don t have one already) 5. Start the paperwork Decide if you d like us to arrange Inheritance Protection Choose a one-off lump sum or a loan amount to drawdown as and when you need the money Get your property valued by an independent surveyor Talk through the final application with your adviser and confirm any changes 6. Get your money and enjoy life Receive the offer Check the legal aspects with your solicitor Legal & General will release the money and send you the documentation Start enjoying your money This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
12 Things to think about. Feature Benefit Consideration A lifetime mortgage lets you get at the money tied up in your home, tax free. This money goes further because there s no income tax on it. Compound interest is charged on the money you release so the debt grows quickly. You can spend the money on anything you want. You re able to get on with home improvements, enjoy more income and help your children get on the property ladder. You have to be at least 60 to take out a lifetime mortgage. Unless you pay the loan off, you won t make any repayments until you die or move into long-term care. If you have a lifetime mortgage for a long time, there may be very little money left to pass onto your dependants. A lifetime mortgage usually has a no negative equity guarantee. Usually, you won t make any repayments until you die or move into long term care. If you did want to repay the lifetime mortgage early, an early repayment charge would usually be applied. A lifetime mortgage should be bought with specialist financial advice and legal advice. A specialist adviser can help you make the right decisions for your unique situation. Solicitors and advisers charge a fee, and there will be administration charges too. A lifetime mortgage is usually only considered by people who have no other savings. Many people see it as a way of improving their living standards on a low income. The adviser will encourage you to explore all the alternatives in depth, before going ahead.
13 What are the next steps? Talk to your family, and talk to a specialist financial adviser about your options. We take your security and happiness very seriously. We only offer our Lifetime Mortgage through approved specialist advisers. Please read everything an adviser gives to you and make sure you understand it fully. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration. Legal & General Home Finance If you already know Legal & General, then you ll know we re a company you can trust. From helping you save for your hopes and dreams, to planning how to enjoy the money you ve worked so hard to build up, we re helping millions of people to build a secure financial future. That s why Legal & General Home Finance is a natural choice, particularly if you want to release money from your home with a lifetime mortgage to improve your retirement. We re always looking for new ways to help people lead a better retirement. We create products that work, mortgages that meet your needs as they change over time.
14 We knew a little could make a big long-term difference Brian and Sue are both 68. Even though Brian built up a good pension pot, they have to budget carefully. Sue s doing part-time hours in a local garden centre to help pay for a few treats now and then. Sue and Brian would really like to renew their windows and doors, as well as some other changes to make their home both warmer and more secure. They d really like to do this as well as making changes to their bathroom to make it more practical the bath is so deep, it can be hard to get out of some days! Whilst they don t have enough savings to make all these changes and updates, they do have a large house that s gone up in value over the years. They talked about how best to fund the changes and, following a meeting with their financial adviser, have agreed that equity release through a lifetime mortgage would be the best way to fund the improvements to their home. This is what Brian and Sue did: House value ,000 Joint Lifetime Mortgage... 50,000 We ve created this fictional case study to help explain how our Lifetime Mortgages work. You ll need a personalised illustration from a specialist adviser to find out if equity release is right for you.
15 When you meet your adviser We re always looking for new ways to help people lead a better retirement. And we re determined to help our customers make decisions with which they re confident and comfortable. It all depends on making an informed decision This is an overview of the topics you ll talk about with your adviser, as well as the risks, benefits and fees associated with any equity release products. We want you to be absolutely sure you re getting sound advice, and that you understand how equity release works and what it will mean for you. You ll look at: Your health, your life expectancy, changing house values and your tax position; Your eligibility for state benefits and how equity release may impact those benefits; The impact of equity release on your will, estate planning, and how this may impact your family; The alternatives to equity release including downsizing, grants, using your savings or pension income, or even getting financial support from family members and your budget as it stands now and (potentially) in the future. You ll need to consult an independent legal adviser who can guide you through these aspects of your arrangements in complete confidentiality. The adviser will also explain every aspect of the product s fees and risks, including: the impact of compound interest, any early repayment charges, restrictions on moving the mortgage, the implications of moving to age-restricted or sheltered accommodation. Finally, you ll be given an illustration (this may be called a Suitability Report), which outlines everything in detail. If there s anything you don t understand in full, please ask for another explanation before going ahead. The good news is the number of people joining the Equity Release Council is growing. All its members, which include financial advisers, solicitors, surveyors, product providers, intermediaries and other industry professionals, are committed to support the Council s Statement of Principles, and related standards.
16 Legal & General Home Finance is a trading style of New Life Mortgages Limited, a wholly owned subsidiary of Legal & General, and is authorised and regulated by the Financial Conduct Authority (Financial Services Register number: ). Registered office: One Coleman Street, London EC2R 5AA. Registered in England and Wales number Q /15