Aviva Lifetime mortgage - Lifestyle Flexible Option

Our lifetime mortgage Lifestyle Flexible Option offers either a one-off cash lump sum of £15,000 or more tax free, or a one-off cash lump sum of £10,000 or more with a cash reserve of £5,000 or more. The cash reserve offers flexibility for your clients to draw money as and when they need it.  This is often a cost-effective option, as your client only pays interest on the cash they draw down. They won't have to pay tax on the amount they release but depending on what they do with the money, there may be tax implications. 

Your client will still own their home and can live in it until they die or move into long-term care, subject to our terms and conditions. This applies to both borrowers on joint lifetime mortgages.

During the mortgage term, interest is charged on the amount borrowed plus interest already added, quickly increasing the amount the client owes. Releasing equity will reduce the amount of inheritance your client can leave, and may affect their eligibility for certain welfare benefits.

 

Great benefits as standard

• Your client receives an initial lump sum to spend as they choose
• Voluntary partial repayments. Each policy year, your client can choose to repay up to 10% of the initial loan, any additional borrowing and any cash reserve releases without incurring an early repayment charge. There is no limit on the number of repayments, but each repayment must be at least £50.
• Interest rates are guaranteed for 14 weeks as detailed on your client's offer. If the loan does not complete within this time, the case will be reviewed and a reoffer will be issued on prevailing rates which are guaranteed for a further 14 weeks
• No upper age limit - anyone aged 55 or over can make use of the equity in their home
• Online access - you and your client can see up-to-date policy details 24/7
• Downsizing protection is a standard product feature which allows a client to move to a property that doesn't meet our lending criteria and repay their lifetime mortgage in full without paying an early repayment charge.  The lifetime mortgage must have been held for 3 years before downsizing protection can be used. (terms and conditions apply)

Additional funds when they’re needed if a cash reserve is chosen

• Minimum drawdown of £500 from client's cash reserve
• They can leave up to 50% of the total amount they borrow in their cash reserve
• Minimum total loan of £15,000 (an initial loan of £10,000 with a reserve of £5,000)
• No interest is payable until the money’s released
• The interest rate on each release will be that which is current at the time and will be individually tailored to their circumstances

Peace of mind

• No-negative-equity guarantee - your client (or their estate) won’t have to pay back more than the property sells for, as long as it's sold for the best price reasonably obtainable
• Optional inheritance guarantee - your clients may be worried that the inheritance they leave will be reduced. This guarantee allows them to safeguard a percentage of their home’s value for their estate, although this will reduce the amount they are able to borrow.
• Moving-home option - your client may be able to transfer their lifetime mortgage to a new home as long as it meets our lending criteria at the time
  
• Your client may be able to borrow more in the future, though we can’t guarantee this and again it would depend on our lending criteria at the time

Enhanced rates

• Clients with certain health or lifestyle conditions could benefit from lower rates of interest or a higher loan to value.

Here we summarise some of the charges and fees your clients may need to pay. For full details please download our Tariff of Charges.

In July 2022, the FCA strengthened the requirements in relation to product oversight and governence following introduction of the Consumer Duty regulations (PS22-09). For information about client suitability, you can read our Target Market Statement

 

Lifetime mortgages are one solution to a number of wider issues facing customers and the UK more broadly, including, for example:  

• Helping a younger generation struggling to get onto the housing ladder – releasing value locked in older generation's houses
• Quality of life – remaining in their own home and staying independent is a key aim, with home adaptations and paying for care beyond that provided by the state
• Sourcing of later life borrowing where traditional mortgages are not an option – for example to replace interest only mortgages where no repayment vehicle is in place
  

Lifestyle Flexible Option is designed for clients who:

• Are homeowners aged 55 or over who need to raise capital
• Have no mortgage or can pay off their mortgage with the proceeds of the loan
• Have a minimum property value of £75,000
• Need to borrow at least the minimum £15,000
• Require a fixed rate of interest throughout the term of the lifetime mortgage. However, if a cash reserve is chosen, each release from the cash reserve may have a different fixed interest rate from that charged on the initial loan 
• Live in the UK (excluding the Channel Islands and the Isle of Man)

It’s unlikely to be suitable for:

• Clients who have savings or other money they could use first
• Those who would prefer to use a product that lets them release cash by selling all or part of their home
• Those who already have a large mortgage they couldn’t pay off with the proceeds of the loan
• Clients who’d prefer to sell their property and downsize

Things your clients should consider:

• Involving their family in the decision
• For couples, ensuring both borrowers understand the commitment
• The impact on their state and welfare benefits
• Whether releasing equity could affect their tax position
• How releasing equity will reduce the amount of inheritance they can leave
• Ensuring they’re prepared to commit to this for life, as early repayment charges could be expensive
• Understanding the costs involved, particularly the build-up of interest over the term of the lifetime mortgage

Possible alternatives to equity release include:

• Selling or using other assets.
• Local authority or other type of grant
• Taking out a standard secured or unsecured loan, if your client can afford the repayments
• Selling their home and downsizing
• Adjusting their standard of living
• Moving in with children
• Borrowing money from family
• Selling part or all of their home using a home reversion plan

If you are submitting an initial borrowing application online, you can find more support in our article What you need to know about the Consumer Duty Target Market for equity release