Roll-Up Mortgages Explained

Roll-up Mortgages Explained

Roll-Up Mortgages Explained

A Roll-Up Mortgage is a type of Lifetime Mortgage that is commonly used for Equity Release purposes. With a Roll-up Mortgage, you agree to receive a sum of money which is secured against your house. You will need to pay any interest because the interest on your loan rolls-up until you sell your home and the Roll-Up Mortgage is repaid.

How Do Roll-Up Mortgages Work?

Once you have agreed a loan with a Roll-up Mortgage lender, you will receive a sum of cash or a monthly payment (commonly known as ‘income’). The amount of money you receive will depend on the value of your property and the terms of the loan.

Roll-up Mortgage Payments

A Roll-up Mortgage is different to a conventional mortgage in that you do not have to make any repayments on your loan, or the interest.

What does ‘Roll-up’ Mean?

Instead of making repayments, the interest on your mortgage accumulates each year on a compound basis, and this is what is referred to as ‘Roll-up’. Every year, your interest rolls-up so that you will owe more money.

Risk Of Roll-up Mortgage

Because the interest payments roll-up each year, there is a risk your loan will become very large in relation to the original sum taken out. The rough estimate for Roll-up Mortgages is that your loan will double in value every ten years. For example, a £10,000 loan might become £20,000 after ten years; and £40,000 after twenty years.

No Negative Equity Guarantee

There is a risk that the value of your Roll-up Mortgage becomes larger than the value of your home if it is held for a considerable amount of time. To prevent this from happening, Lifetime Mortgage lenders provide a ‘No Negative Equity Guarantee’ which means that you will not owe any extra money if the value of your loan is higher than your home is worth when it is sold.

Roll-up Mortgage Age Requirements

Most Roll-Up Mortgages are available to people who are aged 60 or more but many providers prefer you to be aged 65 which is the current retirement date.