Lifetime mortgages (equity release)
A special type of loan, usually designed to run for the rest of your life.
New care enquiries: 01305443115
Advantages
- You continue to own and live in your home
- No negative equity guarantee (if offered by the provider)
- Plan provides a cash lump sum and/or partial payments
- Only pay for the time you hold the mortgage
- More flexible than Home Reversion Plans
- The payment is larger if the applicant suffers impaired health
- Portable – most are portable if you need to move home
Disadvantages
- Compound interest – the interest payment will increase significantly over time
- It can have an impact on your entitlement to certain state benefits and personal tax position
What happens if my home has negative equity?
Most lenders offer a ‘no negative equity guarantee’. This means that the amount you owe can never be more than the value of your home. Even if the amount you borrow (plus the rolled up interest) is more than your property’s selling price, you will not have to repay any more than the amount your home is sold for.
An example lifetime mortgage calculation
Your home is worth £100,000 and you are 65. You borrow £30,000 at a fixed rate of interest of 6.5%. There are no monthly payments. Instead, interest is added on and rolled up over the lifetime of the loan.
Because you do not pay off any interest as you go along, the amount you owe mounts up more quickly so that after 15 years you owe the lender £77,155. This includes the £30,000 you originally borrowed. Any increase in the value of your home, after paying off the loan and interest, belongs to you or your family.
Financial advice disclaimer
Agincare is not authorised to provide investment or other financial advice and nothing on this page should be construed as such. We recommend you obtain independent financial advice from an adviser registered with the Financial Services Authority.
