Like any mortgage, a lifetime mortgage is a loan secured against your home. You then repay it when the house is sold.
The loan can either be taken as a lump sum or in amounts drawn down over a set period or for life.
Interest is charged on the loan – which you either pay, or more typically, allow to roll up.
If you draw down the loan, you only pay interest on the amounts you take from the time you take them.
When you die or move out, your home is sold and the money is used to pay off the loan. Anything that’s left over goes to your beneficiaries.
If there isn’t enough money left from the sale to pay off the loan, your beneficiaries would need to make up any shortfall from your estate.
To guard against this, most providers offer a no-negative-equity guarantee.
This means that you, or your beneficiaries, won’t have to pay back more than the value of your home, even if the debt has become larger than this.
There are two different types of lifetime mortgages to choose from:
- a roll-up lifetime mortgage
- an interest-payment lifetime mortgage.