A lifetime mortgage is when you borrow money that is secured against your home, providing it is your main residence and you are the homeowner(s).
You can still put aside some of the value of your property as an inheritance for your family.
When you die or move into long-term care, the home is then sold and the money from the sale is used to pay off the loan. Anything left will go to your beneficiaries. If there is not enough money left from the sale to pay off the mortage, your beneficiaries would left to pay any outstanding debt.
Most lifetime mortgages offer a no-negative-equity guarantee (Equity Release Council standard) to guard against the sale of the house not being enough to pay the mortgage. This guarantee means the lender ensures that you (or your beneficiaries) will never have to pay back more than the value of your home.
Types of Lifetime Mortgage:
An interest roll-up mortgage.
You get a lump sum or are paid a regular amount, and get charged interest which is added to the loan. This means you don't have to make any regular payments. The amount you borrowed, including the rolled-up interest, is repaid at the end of your mortgage term when your home is sold.
An interest-paying mortgage.
You get a lump sum and make either monthly or ad-hoc payments. This reduces, or stops, the impact of interest roll-up. Some plans also allow you to pay off capital, if you so wish. The amount you borrowed is repaid when your home is sold at the end of your mortgage term.
Equity release may involve a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration.
Equity release may not be right for everyone. It may affect your entitlement to state benefits and will reduce the value of your estate.
Check that this mortgage will meet your needs if you want to move or sell your home or want your family to inherit it. If you are in any doubt seek specialist advice.