The Right Lifetime Mortgage

The Right Lifetime Mortgage

The Right Lifetime Mortgage

When you come to choose an equity release scheme, make sure you choose the one that’s suitable for you. For example, there are three different types of lifetime mortgages that are currently offered:

  1. A roll-up mortgage
  2. A fixed-repayment lifetime mortgage
  3. An interest-paying mortgage

1. Roll-up Mortgage

The interest you pay on a roll-up mortgage is added to the load so that it accumulates and is paid off when the lifetime mortgage is paid off.

There is no need to make regular payments, like a traditional mortgage, because you repay the amount you originally borrowed, plus the rolled-up interest, when your home is eventually sold.

BEWARE:

A ROLL-UP MORTAGE WORKS IN A DIFFERENT WAY TO A TRADITIONAL REPAYMENT MORTGAGE: THE INTEREST YOU OWE CAN GROW QUICKLY BECAUSE THE AMOUNT YOU OWE IS GROWING ALL THE TIME.

2. Fixed-Repayment Lifetime Mortgage

With a Fixed-Repayment Lifetime Mortgage, you will not pay any interest. However, a repayment amount is agreed in advance that is higher than the loan so that, when you come to sell your home, you will have to pay the lender a higher amount.

This Lifetime Mortgage will work well if you end up living much longer than the lender thinks you will. However, this type of mortgage will not work in your favour if your home has to be sold much earlier than you planned.

3. Interest-Paying Lifetime Mortgage

An interest-paying lifetime mortgage is similar to a traditional mortgage whereby you pay the interest on some, or all, of the loan on a monthly basis. It does not accumulate like a Roll-up Mortgage. When your home is sold, the amount you originally borrowed is repaid

This form of mortgage is particularly suitable for estate planning because you are likely to have a good idea of how much money will have to be repaid (plus the addition of any fees).

You can choose fixed or variable rate interest rates but you should take care with variable interest rates because it is difficult to calculate the exact amount you’ll be paying.