It’s a long-term loan, secured on your home, but there are no monthly repayments. Instead, the interest builds up on the original loan and any interest added to it. Usually the loan and interest will be paid off when the property is sold after you die or move into long-term care, subject to the lender’s terms and conditions.
Most lifetime mortgages are transferrable to a new home. However, if you move to a property which does not meet the provider’s lending criteria, your lifetime mortgage would become repayable. If you or your family believe you are in need of long-term care, your provider may require you to complete a medical assessment or give supporting evidence.
There are certain circumstances in which early repayment charges may not apply (although these will vary between lenders, and terms and conditions will apply), for example:
- If all the borrowers have died or have moved into long-term care
- If you’re moving home and transferring your lifetime mortgage to the new property
- If your loan allows you to make voluntary partial repayments
All lenders who are members of the Equity Release Council subscribe to the no negative equity guarantee. This means that, even if your home sells for less than your loan value, neither you nor your estate will ever have to repay more than the amount received from the sale of your home.
Your chosen provider may offer you the opportunity to safeguard a percentage of your home’s value to leave as an inheritance. This may be called an inheritance guarantee. It means that you can select a percentage of your home’s value which you could choose to leave to loved ones, subject to the product provider’s terms and conditions. This will usually be done when your house is sold.
If, for instance, you come into some money unexpectedly, you may decide you’d like to repay part of your lifetime mortgage to reduce the amount you owe when your property comes to be sold. Some providers will offer the chance to do this, through voluntary partial repayments, with no early repayment charges to pay.