What is a Lifetime Mortgage?
A lifetime mortgage is a form of equity release, which allows you to release cash from your home so that you can enjoy the retirement you truly deserve, while being able to remain in the family home. Part of the terms in a lifetime mortgage is that you don’t pay any of the loan back until the house is sold, therefore, the interest amounts up and then is paid off along with the amount borrowed originally as one big lump sum.
With a lifetime mortgage, no payments are made until the house is sold and often, people who earn a lower income can be uncomfortable with the fact that debt is mounting up to a scarily large number and at no point is anything being chipped off.
But, this is where an interest only lifetime mortgage comes in.
Interest Only Lifetime Mortgage
If the idea of not repaying any of your debt until the end of the term brings a slight sense of discomfort, then an interest only lifetime mortgage may be the option for you.
With an interest only lifetime mortgage, you, the borrower, make monthly repayments to cover the interest that is accruing and the amount you pay monthly is decided by you. This means that when the mortgage is repaid upon the sale of your house, you could potentially only pay off the amount you originally borrowed, providing you have already paid off the entire amount of interest. If you take out an interest-only lifetime mortgage and you repay the entire amount of interest that accrued, you and your estate will benefit from any following increase in the value of your home.
Who is an Interest Only Lifetime Mortgage Most Suitable For?
When deciding whether a financial loan is right for you, getting expert advice is key, so you can be sure you are making the right decision. In general, interest only lifetime mortgages are suitable for people who are over the age of 55 and are interested in the process of an equity release. With that being said, an interest only lifetime mortgage requires you to pay back an amount of money per month, so, having the cash to do so is imperative.
Pros and Cons of An Interest Only Lifetime Mortgage
- You can remain in your property, while still being able to enjoy the lump sum payment in whatever way you wish.
- The term of an interest only mortgage runs until you sell the house, so essentially, you are in control.
- If you decide to move house, interest only lifetime mortgages can often be ported, this will depend a lot on your personal circumstances, so it’s always best to check with a lender.
- Releasing equity from your property will decrease its value.
- Interest only lifetime mortgages can also decrease the amount of inheritance you can pass down to your beneficiaries, so it should not be a decision that is taken lightly.