Roll Up Lifetime Mortgages are specialist equity release mortgages aimed at those over 55 (or in the case of joint applicants, both are over 55), who want to release some of the equity built up in their home without having to make monthly repayments. Under Roll Up Lifetime Mortgages you keep full ownership of your property but you obtain a secured equity release loan paid as either a lump sum or monthly income (or both) and you pay nothing back during your or the last survivor (if joint application) lifetime, or you finally give up owning a home whichever is the earlier.
The interest which would otherwise be payable per month is rolled up on the loan until the loan is finally repaid by your executors or family, when both the loan plus accumulated interest, are repaid from the sale proceeds hence the term Lifetime Mortgage. You or your representative selling the property still receive the balance between the sale price and the amount required to repay the loan.
The maximum amount you can borrow is a percentage of your home's value being dependent on your age or the youngest age in joint cases. The amount offered by different providers varies depending on your age (or youngest age if joint). Typically schemes offer between 20%-25% at age 60 going up to 60%, if, at outset, the youngest is approximately 90. Roll Up Lifetime Mortgages are widely available from age 60, currently one scheme offers this at 55 and some will only offer it to couples where the youngest is 65. Not only does the amount you can borrow vary, so does the interest. Over a lifetime this can make a significant difference, and is another reason it is worth getting Independent advice.
Flexible Drawdown Lifetime Mortgage Schemes
This variation of a roll up Lifetime Mortgage allows you to set up an agreed maximum facility for a specified period (based on age and house value) but initially take just as much as you need for immediate needs, subject to a minimum (varies with providers), and take further money (up to the maximum agreed facility) when required.
This helps save the debt building up as fast, as interest is only charged on what is actually outstanding at any one time. One drawdown lifetime mortgage scheme will even allow voluntary partial repayments to reduce the debt in the first five years without penalty.
Advantages of roll up Lifetime Mortgages
- Available to younger people (55/60) than other schemes such as reversion schemes were it is typically 65 or 70 if joint.
- Unlike ordinary mortgages you have no monthly repayments to make and the amount available doesn't depend on your income.
- Money is given to you to decide how to spend or invest it.
- You retain full ownership of the property and therefore the right to remain living in your home as long as you want.
- Flexible schemes allow you to control how quickly the debt builds up.
Disadvantages of roll up Lifetime Mortgages
- If you start it whilst young and live a long time, the loan and interest may represent a significant percentage of your home's value, especially if property prices do not increase. However, should you not require the maximum amount available for your age/s we can now offer a protected equity release scheme that will guarantee that a certain minimum percentage (up to 50%) will always remain for you or your family.
- The loan and interest accumulated will reduce what your family inherit.
- As the interest is not received until you die, the interest rate is higher than ordinary mortgages
- If you take the maximum release whilst relatively young and spend all of the money released, you may not be able to borrow further money to provide for yourself later in life, unlike a partial Home Reversion Plan.
- Lifetime mortgages involve borrowing against your home and may work out more expensive in the long term than downsizing to a smaller property, and may affect your entitlement to State benefits and grants.
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“Equity release” includes home reversions plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration.
