There are different types of plans and features available to meet a variety of needs and circumstances. The two main types of lifetime mortgage are Lump Sum and Drawdown.
Lump sum lifetime mortgage
The loan is secured against the property to provide a tax-free cash lump sum, with typically no monthly repayments to make.
Compound interest is added to the loan until the plan comes to an end, when you die or move into long-term care. The loan plus interest is paid back when the home is sold.
You can typically release between 5 - 55.5% of the value of your property with a lifetime mortgage, depending on your age, health and lifestyle.
Drawdown lifetime mortgage
Similar to lump sum lifetime mortgages but with added flexibility. After an initial release, you can choose to ‘drawdown’ the cash in stages. The interest is only added on the amount released so it adds up more slowly.
Within these two types of lifetime mortgage there are specific plan features which give you the flexibility to create a plan that works for you;
- Enhanced plans - access a higher LTV if you have specific health conditions or have made certain lifestyle choices such as smoking.
- Capital repayment plans - you can repay a percentage of your lifetime mortgage per year without incurring any Early Repayment Charges (ERCs).
- Interest payment plans - you could pay some or all of the monthly interest.
- Downsizing protection plans - you can move home. The loan can be paid back early without penalty. If acceptable, the loan can be ported to the new property.
- Inheritance protection plans - allows you to guarantee an inheritance by ring-fencing a proportion of your homes value.