An interest only lifetime mortgage is a mortgage that lasts for your lifetime but is only available to people of a certain age. In most cases, it is only available to people who are fifty-five years and above. An interest only lifetime mortgage can be applied for by one person or by more than one person. In cases of a jointly owned interest only lifetime mortgage, the mortgage is valid until all parties have died.
An interest only lifetime mortgage is similar to a normal mortgage in that the loan is taken against the property. However, there is no monthly repayment of the initial loan amount. The initial loan amount is repaid by selling the property which normally takes place when the owner or owners of the interest only lifetime mortgage die or move into long term care. The interest however is repaid on a monthly basis. This is why it is known as an interest only lifetime mortgage. It is a mortgage that lasts for a lifetime and requires only a monthly payment of the interest only.
The advantage of taking an interest only lifetime mortgage is that people in retirement who are in need of an additional source of income can remain in their property while releasing cash from it. This money can be used for other purposes.
In order to qualify for an interest only lifetime mortgage, you need to prove that you would be able to make the monthly interest payment. This means that you need to have an existing source of income which you can use to make the monthly interest payments. The interest rate that is charged can either be a fixed amount or a variable amount. If you are able to make the monthly interest payment, the outstanding balance will remain constant. The initial loan amount will always remain the same so you will always know how much you will eventually need to repay.
This is not the case with other equity release schemes. With other equity release schemes, the amount that will eventually need to be repaid will be a sum of the initial loan amount and the accumulated interest which can either be a fixed or a variable amount.
