Lifetime Mortgage Explained.
What is a lifetime mortgage?
- It is a mortgage debt on your home.
How does it work?
- This is an interest roll-up scheme.
- You release equity and interest is charged each month to the debt.
- Think of it like a credit card that you never pay back.
Do I have to make payments?
- No, interest rolls up over the years.
- Some schemes will allow you to make payments after a period if you wish to stop the amount you owe increasing.
Is my home safe?
- You have the permanent right to live in your home until the day you die or sell your home or move or go into a care home
How much equity can I release?
- You usually set an amount, usually it will be no more than 50% of the value of property. Most people release smaller amounts than this
Who are lifetime mortgages suitable for?
- If you need flexibility to sell, move, have more money later
Can there be negative equity?
- If you live for a long time, the debt will mount up.
- We work on the basis that every 10 years the debt will double.
- Whilst this may sound drastic, do not forget that your home may go up in value
- Ask yourself how much your house was worth 10 or 20 years ago and you may feel better
- If negative equity did occurr, most schemes have a no negative equity guarantee, in short you are still safe to remain in your home
What sort of interest rates?
- Interest rates are usually similar to normal mortgage rates and usually around 1% higher
- There are both fixed and variable interest rates
Can I release more later?
- We usually recommend schemes that have the flexibility to some funds out today and release some more in the future
- There is little point releasing the whole amount and being charged interest if you do not need it all today.