Canada Life Advantage Equity Release
Many people aged over 55 own a home that has gone up in value over the years.
This means a lot of their money is locked inside their property.
Equity release is one way to use some of that money without selling your home.
Canada Life has launched a new plan called Canada Life Advantage.
It is designed to give homeowners a discounted interest rate in return for committing to make a set monthly interest payment.
This guide explains how the plan works and what to think about before making a decision.
What Is Canada Life Advantage Equity Release?
Canada Life Advantage is a type of lifetime mortgage.
A lifetime mortgage lets you borrow money against your home while still living there and interest compounds on the funds released.
The loan plus interest is normally repaid when:
- the last homeowner dies, or
- the last homeowner moves into long-term care.
You must be at least 55 years old to take out a plan.
The amount you can borrow depends on things like:
- your age
- the value of your home
- the lender’s rules.
How the Canada Life Advantage Plan Works
The Canada Life Advantage plan is designed for homeowners who are comfortable committing to monthly interest payments in return for a discounted interest rate.
Customers choose the proportion of interest they will pay each month. This commitment determines the level of discount applied to the mortgage interest rate.
Pay Some of the Interest Each Month
With this plan you can choose to pay:
- 25% of the interest
- 50% of the interest
- 75% of the interest
- 100% of the interest
If you stop making these payments later, the mortgage changes to a roll-up lifetime mortgage, where interest builds up on the loan and compounds over time.
Interest Rate Discounts
One key feature of the Advantage plan is the discounted interest rate.
The more interest you commit to paying each month, the bigger the discount on the interest rate.
This may help slow down how quickly the loan grows compared with a plan where no interest payments are made.
Important Risks to Know
Equity release is a big financial decision, and it will not suit everyone.
Here are some important risks.
Your debt can grow over time
If you do not make payments, interest builds up.
The discounted rate is conditional on you making monthly interest payments. If these payments stop, the discount is removed, a higher rate applies, and unpaid interest is added to the loan, increasing the balance.
This can reduce property equity and significantly increase long-term borrowing costs.
It may reduce your inheritance
Releasing equity means less may be left for family and equity release will reduce your financial options in the future.
Benefits could be affected
Releasing funds may change your entitlement to means-tested benefits.
Early repayment charges may apply
A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower. Otherwise early repayment charges may apply.
Because of this, equity release always requires financial advice from a qualified adviser.
Key Features of the Canada Life Advantage Plan
The Advantage plan also includes several flexible features.
Voluntary Repayments
You can repay up to 10% of the initial loan amount each year without paying an early repayment charge.
This means you can reduce the loan if your finances change.
For example, you might choose to make a repayment if you receive an inheritance or sell another asset.
Protection for Your Home
Canada Life lifetime mortgages follow the rules of the Equity Release Council.
These rules include important protections such as:
- You can stay in your home for life
- The loan will never be more than the value of your home (known as the No Negative Equity Guarantee)
- Interest rates are fixed.
If the monthly payments stop, the mortgage will convert to a roll-up lifetime mortgage, meaning interest will be added to the loan each month.
Health and Wellbeing Support
Customers also get access to a service called WeCare, which is a virtual health and wellbeing service.
This service offers support such as:
- Access to a UK GP through video or phone call
- Mental health support
- Legal and financial guidance.
Who This Plan May Suit
The Canada Life Advantage plan may suit homeowners who:
- Are aged 55 or older
• want to release money from their home - Want more control over how interest builds up
- Are comfortable committing to making some monthly payments.
For some people, this type of plan sits between a standard equity release plan and a retirement interest-only mortgage.
Benefits of Canada Life Advantage
Some of the main benefits include:
Lower interest rates
Discounts are available if you commit to paying interest each month.
If you miss more than three payments, you won’t be able to restart them and the interest rate will revert to the non-discounted interest rate agreed at the outset of your mortgage, as the discount will no longer apply.
Your mortgage will then switch to a roll-up mortgage, where interest is added to the loan each month.
Flexible repayments
You can repay some of the loan each year without charges (up to 10% of the initial loan amount).
Stay in your home
You can continue living in your property. However, equity release will reduce the value of your estate due to compound interest.
Access tax-free cash
The money you release is usually tax free, although releasing funds may affect your entitlement to means-tested benefits.
How Much Equity Could You Release?
The amount you may be able to release depends on:
- Your age
- Your property value
- Your health
- The lender’s criteria.
Many people begin by using an equity release calculator to see an estimate.
Next Steps
If you are thinking about Canada Life Advantage equity release, the next step is to understand your options.
You may want to:
- Check your home’s value
- Try an equity release calculator
- Speak with a qualified equity release adviser.
A professional adviser can help you decide if equity release is right for you.
Important:
Equity release will reduce the value of your estate and may affect entitlement to means-tested benefits. Always seek professional financial advice before proceeding.
