Lifetime Mortgages

The lender will advance you an agreed lump sum based on your age and value of your home. One advantage is that nothing is repaid until you leave the property, interest is added to the amount you have borrowed each year the same as a conventional mortgage. However, this interest is rolled up over the period of the loan and repaid in a lump sum in addition to the original amount borrowed. Any remaining proceeds are then paid direct to you. A popular alternative will see the lender agree to pay a tax free monthly income for the rest of your life based again on your age and value of your home. Nothing is repaid until you move out of the property the interest is added to the amount you have borrowed each year. As with the lump sum option interest rolls up and is repayable with the loan. More recently lenders are also able to make a maximum loan facility available to you over a defined period of time or for your lifetime. This is known as drawdown, this allows you to ‘draw’ on these funds tax free as and when you require them. The main advantage being that you pay interest only on the amounts you withdraw. Again, as with the lump sum and income options repayment of the loan is from the sale proceeds of the property when you move out.

The Lifetime Mortgages on offer today are ‘portable’ this means that you have the right to move home in the future. In addition there are guarantees that the amount of outstanding mortgage owed will not be greater than the value of your property, this is also known as ‘negative equity’. With an equity release loan there is no need to prove any income or provide information about your credit history.

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