A lifetime mortgage is just like a normal mortgage in that it is taken against a property and interest is calculated on it. However, it differs in that it does not have a fixed duration in that it lasts for the rest of your life. Hence the term lifetime! In order to apply and qualify for a lifetime mortgage, you need to be at least 55 years. It is also possible to apply for a joint lifetime mortgage; however, the youngest person applying for the lifetime mortgage needs to be at least 55 years.
The lifetime mortgage differs from a normal mortgage in that you do not need to make a monthly repayment. A normal mortgage calculates a monthly amount based on the initial loan amount and the interest. However, a lifetime mortgage does not calculate any monthly amount with the exception of the interest only lifetime mortgage.
The amount that you are allowed to borrow will be calculated based on your current age and the worth of your property. An equity release calculator is normally used to calculate this amount. In some cases, if your health is poor, you might receive a higher amount. The advantage of the lifetime mortgage is that you can be guaranteed that the initial loan amount will always remain the same and will never become higher than the current value of your property.
There are several types of lifetime mortgages. The rolled-up lifetime mortgage is a mortgage that calculates yearly interest and adds it to the initial loan amount. This lifetime mortgage is sometimes known as the draw down lifetime mortgage because the amount that you receive can either be taken as one immediate cash amount or it can be taken as regular income which is known as a draw down. In both cases, the amount that you receive is free of taxes.
Another type of lifetime mortgage is known as the interest only lifetime mortgage which is the same as all other lifetime mortgages with the exception that you will have to pay the interest every month. The interest is calculated and charged to you per month. The initial loan amount is eventually repaid.
