Interest roll-up lifetime Mortgages
An interest only Lifetime Mortgage is similar to an interest only mortgage but you don’t have to make any monthly payments because each month they add the payment to the outstanding balance and is available beyond retirement. The amount you owe gradually increases and as it does the interest being charged increases in line with the higher mortgage amount.
The funds released are tax-free and you still own 100% of the property but the mortgage would need to paid off if the property was sold and you would receive the balance. The interest rate is normally higher than traditional mortgage interest rates, although it will normally be a fixed rate. The amount that you can have is based on your property value and the age of the youngest applicant. You can elect to just draw down additional funds as and when needed and that way you only accrue interest on the amount drawn down.
Home Reversion Schemes
Home Reversion Plans usually provide a higher amount than Lifetime Mortgages but in return you have to sell some or all of your home to the lender but not on a one for one basis. This type of Equity Release scheme is most suitable for those people who are not concerned about preserving their estate and feel comfortable knowing exactly what percentage they have given away.
The funds released are tax free and you do not need to make any payments. You do not own 100% of the property. There is no interest rate being applied to this type you have simply sold part of your home and whatever percentage you did not sell will always be yours. The amount that you can have is based on your property value and the age of the youngest applicant.
Retirement Interest Only Mortgages
A retirement interest only mortgage is a mortgage where you only pay enough each month to cover the cost of the interest and so the amount that you owe remains constant throughout the mortgage which is only paid off when the property is sold, either when the owner moves into a care home or passes away. Quite often you can choose a payment level to suit yourself and your affordability.
The funds released are tax-free and you still own 100% of the property. The interest rate is likely to be lower than a standard lifetime mortgage. The benefit to your estate is likely to be greater with this option than with any of the other Equity Release schemes.