A lifetime mortgage is a loan (usually given to those over the age of 55) which allows them to release some of the equity from their home in the form of a secured loan. The loan is paid back on the event of death or if the applicant is moved to permanent care.
One of the reasons that lifetime mortgages are popular is that you do not have to relinquish any of the ownership of your house – as a secured loan, you only repay the money once you have chosen to sell the property (for the two reasons outlined above). Any balance remaining after the loan is paid off remains yours to keep, with no further charges incurred.
There are two main types of lifetime mortgage: a roll-up mortgage and a fixed repayment mortgage. A roll-up mortgage means that the interest you are charged is added on to the repayment sum – this is particularly good if the loan will not be long-term, as your interest rates will not have time to accumulate into a huge amount.
A fixed repayment mortgage means that you do not have to pay any interest, but rather you pay back a pre-defined lump sum after the house is sold. The amount is usually much higher than a roll-up mortgage, but is often a better option for long-term mortgages.
You should always seek independent financial advice, and consider all possibilities before committing yourself to a mortgage of any type.