With Lifetime Mortgages, you take out a loan that is secured on your home.

There are a number of different kinds of Lifetime Mortgages available:

• A Roll-up Lifetime Mortgage

“Rolled up” means interest is added to the loan over a set period of time, for example, every year. The loan gives you a lump sum or regular income and you are charged a monthly or yearly interest, which is added to the loan.

When your home is eventually sold, the amount that you originally borrowed, including the rolled-up interest, is repaid.

• A Fixed Repayment Lifetime Mortgage

With this kind of Lifetime Mortgage you get a lump sum, but do not have to pay any interest. Instead of paying interest, when the home is sold, you have to pay the lender a higher amount than you originally borrowed. That amount is agreed in advance with the lender. The lender then uses this higher sum to repay the mortgage when your home is sold.

• An Interest-only Lifetime Mortgage

With an interest-only Lifetime Mortgage you get a lump sum upfront and pay a monthly interest on the loan, which can be either fixed or variable. The amount that you originally borrowed is then repaid when your home is sold.

• A Home Income Plan

With Home Income Plans the money you borrow is used to buy a regular fixed income for life (also called an annuity). This income is used to pay off the interest on the mortgage and the rest is yours to use as you wish. The amount that you originally borrowed is repaid when your home is sold.

• Shared Appreciation Mortgages

Some Lifetime Mortgages include a shared appreciation element. This means that the lender has a share in the value of your home. These kinds of plan are now less popular and less frequently available.

How does it work?

When taking out a Lifetime Mortgage, you can choose to either borrow a lump sum or to opt for a drawdown facility. A drawdown is suitable if you want to release occasional small amounts rather than one big loan upfront, as it means you only pay interest on the money that you actually need at the time.

Like a normal mortgage, you borrow money that is secured against your home.

Your home still belongs to you and is not sold as part of the Lifetime Mortgage.

With the exception of roll-up schemes and fixed repayment Lifetime Mortgages, you will have to pay interest on the loan each month.

When you die or move out of your home, the property is sold and the money from the sale is used to pay off the loan. Anything left after the loan has been repaid goes to your beneficiaries.

Is it right for me?

This depends on your age and personal circumstances. Lifetime Mortgages can be a flexible way of releasing equity from your home, but you must make sure it suits your particular situation.

There are a number of things to consider:

• With a Roll-up Lifetime Mortgage the interest you owe can increase quickly.

Eventually this might mean that you owe more than the value of your home, unless you have a no-negative-equity guarantee from the lender.

• A Fixed Repayment Lifetime Mortgage is a better deal if you live much longer than the lender thinks you will. But if the home is sold much earlier than you originally planned, you will get a worse deal.

• With Interest-only Lifetime Mortgages with variable interest rates, the interest rate may rise faster than your income.

• A Home Income Plan only results in a small income after the interest has been paid. These kinds of plan are usually only suitable if you are older.

Remember that you will be expected to ensure that your home is in good condition and remains well maintained. You may need to set aside money to do this when first entering into the plan.

What does it cost?

For both Lifetime Mortgages and Home Reversions, you will have to pay for the following:

• An arrangement fee for setting up the plan

• Legal fees

• Valuation fees

• Buildings insurance

With Lifetime Mortgages some of these costs can be added to the loan so you pay less upfront, but you will pay interest on any amounts added to the loan.