With a lifetime mortgage, you borrow money against the value of your property. The loan is repaid when you die or move into long-term care, and your home is sold.
You do not usually make repayments on the loan while you are alive. However, interest continues to accrue and is added to the loan amount. Potentially this means that if your house sells for less than the amount owed, your beneficiaries may have to pay the difference.
As a result of this risk, most lifetime mortgages have a ‘no negative equity’ guarantee, but it is essential to check. Some equity release plans also enable you to pay off some of the interest and capital in your lifetime.
You can sell all or a proportion of your property to a home reversion company. In return, you will receive regular payments or a lump sum.
With this arrangement, you have the right to live in your home for the rest of your life, rent free. You will be expected to maintain the property, and the provider will carry out inspections at specified intervals.
It is important to know that a home reversion provider will not pay you as much for your property as you would make on the open market.