Lifetime Mortgages Explained

Lifetime mortgages are a type of mortgage that is commonly offered to senior citizens. This type of mortgage can be beneficial, as it will allow you to get equity out of your house while you are still living in it. Here are a few things to consider about lifetime mortgages.

Lifetime Mortgages

With the lifetime mortgage, you are going to be able to get a loan based on the value of your house. The money that you get does not have to be repaid while you are still alive. Instead, the value of the loan is going to be repaid after you pass away. This type of loan is typically reserved for individuals that are over the age of 55. The amount of money that you borrow depends on your age and the value of the property. In most cases, you are not going to be able to take out more than 50 percent of the value of your home. 

Advantages

One of the big advantages of this type of mortgage is that you are not going to have to make any mortgage payments. The interest that is being charged on the loan is simply going to be added to the amount of money that you have borrowed. Therefore, the balance of the mortgage is going to continue to grow, but you do not have to make any payments.

Another advantage is that you are never going to have to move out of your home on account of the mortgage. Regardless of how big the mortgage balance gets, you are not going to have to move out or sell your house. 

In most cases, this type of mortgage is going to have a fixed interest rate. This means that you do not have to worry about fluctuating interest rates in the market.

Disadvantages

Even though this mortgage can be very beneficial, there are a few potential drawbacks as well. Perhaps the biggest drawback is that you are not going to know in advance how much the loan is going to cost you. This means that you really do not know how much debt you are going to be leaving your family members. 

Another disadvantage of this loan is that the interest rates are typically very high. Even though the interest rates are fixed, they are going to be higher than what you can get with a different type of loan. Because of this, the interest on the loan can add up very quickly. This might leave your family with a much larger debt than you anticipated, depending on how long you live.

Roll-Up and Drawdown Mortgages

Roll up and drawdown mortgages are two variations of lifetime mortgages. The key difference between these two types of mortgages is in how much money you take initially. With the roll-up mortgage, you are going to take a large lump sum at the beginning of the loan. With the drawdown mortgage, you are going to take a small initial sum and take several more payments later. 

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