Lifetime Mortgages

A lifetime mortgage is a special type of loan for people usually aged over 55, which allows them to release equity from their home by means of a secured loan, and only requires paying back (together with any interest rolled up if applicable) once the property is sold on their (or in the case of joint applications - their surviving partner's) death or permanently moving into care.

As opposed to a home reversion plan, a lifetime mortgage doesn't involve you in selling any legal ownership in return for money raised and allows you to remain living in the property for the rest of your life.  The debt is only repaid when the property is sold.  As no ownership of the property is lost under a lifetime mortgage, the property is sold when required by you or your family, the debt paid off and any balance would be retained by you or your personal representative.

Lifetime mortgages- Different types

A lifetime mortgage may be either:

A roll-up lifetime mortgage - Here instead of paying interest each month the scheme allows you to avoid making any repayments for the rest of your life but instead allows the interest to be rolled up and added to the loan so that the debt gets bigger.  The interest is added or rolled up either monthly or annually.  With roll up lifetime mortgages you receive either a lump sum or regular income, with the amount available being dependent not on income but your age and property value.  To find out how much you could release under such a scheme try our online calculator.

The amount you originally borrowed, plus the accumulated interest which has been rolled-up, is only repaid when your home is eventually sold, typically on death of the last applicant or when they need to go into care.  This means that should you die or go into care after just one year the amount you need to repay is much smaller than if you repay it after 25 years. Whilst the debt grows with time, the longer the time before the debt is repaid, hopefully your home's value will have increased although this cannot be guaranteed and could also fall.  However, for your reassurance such roll up lifetime mortgages which are either SHIP approved or at least meet their requirements, do carry a no negative equity guarantee which means that the debt repaid on death or going into care, can never be greater than how much the home is eventually sold for.  For further information on roll up lifetime mortgages click roll up lifetime mortgages.

A fixed repayment lifetime mortgage. Here you receive a lump sum, but don't have to pay any interest.  Instead, whenever the home is sold (whether it is in just 6 months or say 25 years), you or your beneficiaries have to pay back a fixed amount which is considerably higher than the amount than you received.  The amount you need to pay back is agreed in advance. For further information on fixed repayment lifetime mortgages click fixed repayment lifetime mortgages.

An ordinary interest-only mortgage which has no set repayment date.  If you do not like the idea of a debt building up, then an interest only lifetime mortgage could be just the answer you have been looking for. Unlike a roll up lifetime mortgage, providing you can afford to make monthly repayments of interest, this type of lifetime mortgage will preserve more equity in your property for future use, as the debt doesn't grow.  Like any ordinary mortgage, the amount you can borrow is based on your income but as these mortgages are designed to run beyond retirement it will be based on your post retirement income even if you are still working.

Professional Advice

With so many different types of lifetime mortgages, we would recommend that anyone considering releasing equity from their home should seek professional and impartial advice.  If you would like to benefit from a free initial home consultation to discuss all lifetime mortgages and the alternative of a home reversion plan, please complete our online enquiry form and we will call you back to discuss a suitable appointment.

Now what would you like to know more about?

Clicking on any of the following links will allow you to find out more about key information on releasing equity from your home.

Home Reversion Plans | Roll Up Lifetime mortgages | Fixed Repayment Lifetime Mortgages | Interest Only Lifetime Mortgages | How to book an appointment