A lifetime mortgage is a type of mortgage product where the borrower can use their home as collateral for the loan and is not required to repay the interest or principal during the loan term. Instead, the borrower can choose to have the interest accumulate onto the loan balance, which is ultimately repaid when the borrower passes away or moves out of the property.
Lifetime mortgages are typically suitable for older borrowers who wish to access cash flow or increase their retirement income using the value of their home. The loan amount is usually based on the borrower’s age, property value, and specific requirements of the mortgage product.
Borrowers have the option to make monthly interest payments or choose to have the interest accumulate onto the loan balance. As the interest is not repaid, the loan balance increases over time. Repayment typically occurs when the borrower passes away, moves out of the property, or enters long-term care, often through the sale of the property. Any remaining value after repayment belongs to the borrower or their heirs.
Specific terms and conditions of lifetime mortgages may vary depending on the financial institution and loan product. Borrowers considering a lifetime mortgage should carefully read and understand the relevant documents and seek professional financial advice when necessary.