What is a lifetime mortgage?
Unlike conventional mortgages, where interest is charged on an amount that decreases with time, interest on lifetime mortgages is charged on an increasing sum, so your debt can grow quickly.
This is because you don’t usually make any repayments, so the interest on the loan is therefore added to your debt on a continual basis.
Most lifetime mortgages have a fixed rate of interest. Some providers offer variable-rate lifetime mortgages, but these offer less certainty.
You’ll never have to repay more than the value of the property, however, as members of the Equity Release Council, a trade body for providers of the schemes, have guaranteed that people who take out the product won’t ever find themselves in this scenario with the ‘no negative equity guarantee’.