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Lifetime Mortgages

A lifetime mortgage is a long-term loan where you borrow money secured against the value of your home to give you a lump sum and/or a regular income. This is one of the main types of equity release. The loan is repaid to the lender when the property is sold, on death, or when you move into long term care. If there is any money left after the loan is paid off, it will go to your beneficiaries. You retain ownership of your home.

There are two main types of Lifetime Mortgages:

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Interest-only mortgages; and

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Interest roll-up mortgages.

With both of the above types, some lenders allow you to take a regular income rather than a lump sum. This can mean that you accrue less interest as interest is only charged on the amount you actually receive, i.e. your monthly payments.

Some lenders also offer a flexible lifetime mortgage, where you can take a smaller lump sum at the beginning, then draw down further borrowings as and when required.

With an interest-only mortgage, you borrow a lump sum secured against the value of your home. You pay interest on the loan each month, and the lump sum you originally borrowed is repaid when your home is eventually sold. You need to be able to afford the monthly interest payments out of your pension or other income.

With interest roll up mortgages, no interest payments are made to the lender. Interest is rolled up and paid on redemption, death or if you move into long term care.

Aside from the receipt of a lump sum and/or income, the key benefit of such policies is that you benefit from any future house price inflation. However, with a rolled-up interest loan, the amount you owe continues to grow because you do not make any repayments and therefore the interest on the loan is added to your debt on a continual basis. This means there could b no value left in your home to pass on to your beneficiaries at the end of the mortgage. Thankfully however, most lenders offer a ‘no negative equity guarantee’ which means the value would not fall beyond zero and therefore result in your beneficiaries paying money back.

Eligibility depends on a number of factors, such as how much your property is worth, your outstanding mortgage and your age. In addition to any costs incurred in relation to receiving advice, there will be costs associated in settling up any equity release plans.

It is possible to move house and transfer the loan, although trading down to a lower value property could involve the payment of part of the loan. You would need to meet the relevant lender’s lending criteria at the time of the move and your new property would need to provide adequate security.

For more information, click on the next link:

Home Reversion Plans

Your home may be repossessed if you do not keep up repayments on your mortgage.

There will be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate that it will be £595.

The Financial Conduct Authority does not regulate most Buy to Let Mortgages.