How A Lifetime Mortgage Could Help Pay For Your Long-Term Care
For most people, their largest asset is their home. And for many older people without a mortgage, their home can be worth a considerable amount of money that could be used to fund their care needs.
A lifetime mortgage is a type of equity-release plan that enables you to make use of some of the money (equity) that is in your home. It can be used to pay for long-term care – but only if you’re looking to stay in your home. A lifetime mortgage enables you to borrow money against the value of your home, and then repay it when your house is sold.
For people over 60 that own their own home, a Lifetime Mortgage can be an effective way of helping you finance your long-term care by releasing some of the money tied up in your property.
How Do Lifetime Mortgages Work?
A lifetime mortgage is a loan that is secured against your home, and the money that you receive can be taken as a lump sum or in amounts drawn down over a set period.
How Much Equity Could You Release?
The amount of equity released depends on a number of factors including your age, the value of your property, the amount of outstanding mortgage, etc.
What Is The Interest On A Lifetime Mortgage?
Interest is charged on the loan which can be paid in two ways:
- You pay the interest according to the terms of the loan.
- The interest accumulates until your property is sold. This form of interest is called ‘Roll up’ because the interest rolls-up until it is paid off.
Lifetime Mortgage Drawdown
When you drawdown a Lifetime Mortgage, you are drawing on the monies available to you. This is the same principal as pension drawdown.
The important thing to note with drawdown in the context of a Lifetime Mortgage is that you only pay interest on the amount of monies you take and from the time you take them.
How Is A Lifetime Mortgage Paid Off?
Your Lifetime Mortgage will be paid off when you die or move out of your home: your property will be sold and the money will be released to pay off the loan.
If there is money left in your estate after the Lifetime Mortgage has been paid off, you will receive it. If you have died then the money will be passed to the people specified in your Will.
If there isn’t enough money left in your property to pay off Lifetime Mortgage then your beneficiaries would need to make up any shortfall using the proceeds of your estate or by other means.
What Is A No-Negative-Equity Guarantee?
To prevent you or any beneficiaries to your estate having to pay off any outstanding balance of your Lifetime Mortgage, most providers offer a no-negative-equity guarantee. This means you, or your beneficiaries won’t have to pay back more than the value of your home, even if the total debt of the load has become more than this.