Your guide to lifetime mortgages

Lifetime mortgages work differently to conventional mortgages and have become a popular way to unlock the value of a home. They do not have a specific term and essentially work as a long-term loan which is secured against the value of a property and is paid off when the home is sold.

Available to home owners aged 55 and over, most lifetime mortgage interest repayments are not made during the homeowner’s lifetime. So a lifetime mortgage can present an ideal opportunity to release equity and boost your retirement income or buy and do the things you’ve always wanted to.

There are two types of lifetime mortgage;

Equity Release enables you to borrow a percentage of your home (based on your age). This loan can be used for most purposes, and can be paid as a lump sum or as income for the rest of your life.

You’ll continue to own your home and you won’t pay any interest during your lifetime. Instead, interest payments will be ‘rolled up’ onto the mortgage (some schemes provide the option of repaying the interest with a monthly payment). When the last borrower dies, goes into long-term care or the property is sold, the mortgage plus the ‘rolled up’ interest is repaid from the proceeds. Any remaining equity is distributed according to your wishes.

Home Reversion Schemes enable you to sell part or all of your home. You’ll receive a lump sum but will be able to live in your home for the rest of your life.

No interest is payable on a Home Reversion Scheme, although you won’t get full market value for your property. This is because the purchaser is allowing you to live in your home for the rest of your life, or until you go into long-term care. As you get older, the amount you can sell a share in your house will increase – as your life expectancy decreases.

Making the right choice

With all lifetime mortgages the amount you can borrow depends on the value of your house, and the age of the youngest owner. The interest to be paid is determined by your age and how long you live for. All lenders charge different rates and have different terms and conditions – it’s important to choose the right lender for your circumstances.

There are many lifetime mortgages available and getting the right advice is essential.  Your decision could affect your right to state benefits, and chosing a life time mortgage will ultimately mean that your estate value is diminished.

At Mortgage Advice Network we can provide comprehensive, independent advice on lifetime mortgages. Please call 08000 11 29 30 to find out more.

As independent advisors, we offer the choice of not paying a fee for our services. Our fee can be paid by commission from lenders which in no way affects the costs or interest rate payable by you. Alternatively you can pay a fee, and have the comission rebated to you. Our typical fee should you decide to choose this option is 1% of the lifetime mortgage amount.