A lifetime mortgage allows you to release a lump sum of cash from the value of your property. There is no requirement to make regular monthly repayments as the amount that you have released, plus any interest, is repaid from the money made when the property is sold. Generally this is when you die, or move into long-term care.
Drawdown lifetime mortgage
This is similar to the standard lifetime mortgage. However, with the drawdown lifetime mortgage, you can access your money with more flexibility. Rather than just receiving a lump sum, you have the option to release your cash over time, as and when you need it. Because you only pay interest on the cash that you have taken, these plans can often prove to be more cost-effective.
Interest-only lifetime mortgage
This is like a standard lifetime mortgage. However, you make regular monthly repayments to reduce the effect on the value of your estate. Some plans allow you to make monthly repayments that are equal to or less than the amount of interest that is charged. The balance is paid off from the value of your estate once you have died or have moved into long-term care.
Home reversion plan
A home reversion is a plan only available to those aged 65 or over. This plan allows you to exchange the ownership of some or all of your property for a lump sum of cash, whilst retaining the right to stay in the property, free of charge, for as long as you live. This is also known as a ‘lifetime lease’. Because you can continue living in your home, rent-free, for life, you would generally receive an amount for your property that is lower than its market value.