Although house prices are currently experiencing a downward cycle, the substantial growth in property value in recent years means that there are currently thousands of people who are sitting on untapped capital in the UK housing market.

For the over 55’s this is excellent news as equity can be released from a property via a lifetime mortgage.

Lifetime mortgages allow for finances that are tied up in a particular property to be released back to the mortgage borrower in the form of a loan. Equity is returned to the proprietor either via a lump sum or in the form of an income- or, if you prefer, a combination of both.

Although a lifetime mortgage is effectively a loan, no repayments are required as this is a secured loan against the value of the property. The most common form of lifetime mortgage allow the individual(s) to maintain ownership of the property, paying nothing back during their life time, or, if the full mortgage value has been returned to the owner, ownership is given up- which ever happens sooner.

The debt acquired from the mortgage is not repayable until the death or long-term incapacity (or in the case of a joint mortgage, the death of the remaining partner, or their incapacity) of the borrower. If an individual wishes to pay the mortgage voluntarily, it is possible; this is usually in situations whereby individuals are wishing to change properties.

Arrangements can be made for an interest only mortgage; this differs from the norm in that the interest paid is added to the capital released, rather than the re-payment of debt. When the amount of the loan, plus the accumulated interest has been returned to the borrower, they will stop receiving money. However, on sale of the property, the borrower will receive the sum of the difference between the final value of the property and the amount required to pay-off the loan.

The amount loaned is dependent on the property value and the age of the owners, on average at 55, you will be eligible for around 20-30% of the property value, rising to 60% at the age of 90.

Businesses in the market of lifetime mortgages are regulated by the FSA (Financial Services Authority), and are required to have obtained specific qualifications. For this reason, the expertise you will encounter when considering lifetime mortgages is second to none, and all contracts include risk assessments and safeguards to protect clients financially and legally. One such safeguard is the “no negative equity” guarantee; this means that you will never owe more than the value of the property.

During the current climate of economic uncertainty, a lifetime mortgage offers individuals over the age of 55 the potential to overcome some of the financial pressures they may be facing, especially with the rise in value of basic provisions, such as energy and fuel.

The release of a lump sum can, in the long run, be a sound financial investment as equity can be used to make home improvements and renovations, adding to the value of the property beyond its originally worth.