Lifetime Mortgages

While it may not sound very appealing, a lifetime mortgage is one of the many instruments that come to the financial rescue of retired folks around the UK. It is the most popularly used equity release, and is an umbrella term that encompasses different type of equity release. The most popular and well-known ones, however, are roll-up mortgage and drawdown mortgage.

As with all equity releases, you borrow a sum against your house, which is repaid with interest from the sales proceeds of your house upon your death, or when you move into long term care. The difference between the two types comes from the way the equity is released.

With either mortgages, you do not have to pay the borrowed or the interest to the provider. The interest is rolled-up or added to the principal amount, and the entire lump sum (with the compounded interest) is deducted from the sales proceeds. In the case of roll-up mortgages, you can withdraw money either as a lump sum or in monthly or periodic income. In the case of drawdown, you can withdraw the amounts as necessary, after making a specific initial withdrawal.

Depending upon your age, you can borrow from around 20-50% of your property’s value. The older you are, the more you can borrow. However, this also depends on the type of property to a large extent.

While a lot of people worry about the effect of the compounded interest on the final amount that is paid back to the provider, it is important to note that a zero negative equity deal altogether dismisses this fear, making a lifetime mortgage a very sensible choice for many people.