Lifetime mortgage guide

A lifetime mortgage is a lump sum loan that’s taken out on your property. That loan, and the accumulated interest, is then paid off through the sale of your house when you pass away or are moved permanently into residential care. 

Any money that remains from the sale of your house will be paid to your surviving relatives (subject to the instructions of your will).

You don’t have to make any payments on a lifetime mortgage if you don’t want to. There is interest charged to the loan meaning that the longer you live, the higher the value of the loan. 

So, you can make payments on the loan if you want, and doing so will help bring down the total amount repayable and negate the interest charges somewhat.

You can either choose to make a regular monthly payment or choose to make single payments whenever you are in a position to do so.

There are two possible scenarios that can play out in this situation. The first is that your beneficiaries would have to pay the outstanding value from your loan. However, as this could cause impossible strain, a lot of lifetime mortgages have what is called a ‘no negative equity guarantee’. This means that if the sale of your house does not cover the cost of the loan, your relatives will not have to cover the remaining loan themselves.

However, if your house sale covers the loan and there is some money left over, this will be split up between your beneficiaries – subject to the instructions of your will.

If you are thinking about getting a lifetime mortgage, it is advisable to seek advice from an industry professional. This will allow you to find out whether a lifetime mortgage would be right for your situation. 

If you could use the extra money a lifetime mortgage can potentially free up, a professional will be able to help you decide whether a lifetime mortgage is the best way to gain access to it, or whether there are other options that will give you what you need.