A
lifetime mortgage is a type of equity release
plan which allows you to borrow against your home.
Most providers will lend between a fifth and a half of its
value.
You will be charged interest
on the debt the annual rate is likely to be a percentage
point or so higher than for a similar ordinary mortgage
and is usually set at the beginning for the entire term.
The advantages
The loan does not need to be repaid until you die, and with
most plans you won't even be expected to make monthly interest
repayments, as this will roll up and be added to the original
debt.
Some providers will allow you to draw down cash as you
need it up to the agreed maximum and pay interest only on
what youve taken.
The disadvantages
The downside is that you will be charged interest on the
interest, which means it will soon mount up in fact, in
ten years your debt can nearly double.
If you borrow half your property's value, assuming this
remains static, you or your heirs could be left with
virtually nothing.
Your debt should never be greater than your property's value,
so you won't owe more than this.
But if its value does rise, and you live longer than ten
years, your rolled-up interest bill will continue to eat
into your loved ones inheritance.
