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A Lifetime Mortgage is a form of Equity Release which allows you to take out a loan against the value of your property. This can be done either by taking the maximum lump sum at the outset or by agreeing on a series of smaller lump sums to be taken over time.

Interest on a Lifetime Mortgage is accrued from the time funds are drawn but unlike a conventional mortgage, monthly repayments are not usually required. Instead, interest is added to the outstanding loan which is settled in full when the property is sold.

When the property is sold the balance on the outstanding loan, including accrued interest, will be deducted from the sale proceeds and you, or your estate will receive the remainder.

The good bits

• With some agreements you can choose to release some funds now and some in the future
• With many schemes you will benefit from any future rises in property value

Is it for you?

• You cannot guarantee there will be an inheritance to leave to your family
• If property values fall, a larger proportion of your property value will be taken up by the loan and accrued interest
• As accrued interest is continually added to the outstanding loan balance, the longer your agreement is running, the more equity is used up. Ultimately this will leave a reduced surplus when you or your estate sells the property
• If interest rates drop you could be paying a comparatively uncompetitive rate although a fixed interest rate will allow you to see an accurate picture of how the debt will grow over time
• If the agreement is running for a long time, you could potentially end up owing more than the property is worth. However, all schemes who are part of the Safe Home Income Plan offer a ‘no negative equity’ safe guard
• Compared to Home Reversion Plans, Lifetime Mortgages release a lower proportion of the properties value