Lifetime mortgages also know as Equity Release refers to products that are specifically designed for people over the age 55, Financial Adviser Cardiff.
What is a Lifetime Mortgage?
This is a mortgage designed to run for the rest of your life and can be considered if you want the flexibility of having no monthly payment to pay each month. Instead the loan and compounded interest will be repaid by the sale of your home, when the last borrower moves into long-term care or dies. This may reduce the amount of inheritance you can leave for your loved ones. It can also affect your tax position and eligibility for some state benefits. Some lifetime mortgages offer the option to pay some, or all the interest and capital, however lifetime mortgages vary from lender to lender.
What do you need to know about lifetime mortgages?
Equity release can seem like a good option if you would like to some extra money but don’t want to move to a new house, however there are some important things to consider:
- There is no fixed term or date you are expected to repay the loan by
- Money received from equity release might affect your entitlement to some state benefits
- If you release equity from your property, there will be less for you to pass on to your loved ones as inheritance
- Equity release can be more expensive than a normal mortgage. Lifetime mortgages usually have a higher rate of interest and your debt can grow quickly if the interest is rolled up
Equity release will reduce the value of your estate and can affect your eligibility for means tested benefits.
Your home may be repossessed if you do not keep up with repayments on your mortgage.
Think very carefully before securing debts against your home. Your mortgage is secured on your home. If you do not make your mortgage payments, you could lose your home.