Benefits and drawbacks of lifetime mortgages and payment-term lifetime mortgages Like any financial product, equity release has benefits that are designed to help you, but also has drawbacks which are important to consider.
The interest can build up quickly Lifetime mortgages and payment- term lifetime mortgages are loans secured against your home and are subject to compound interest, meaning the amount you owe can grow quickly (see page 14 for an explanation of compound interest) Mandatory payments There’s a period of mandatory payments with a payment-term lifetime mortgage, and your home may be repossessed if you don't keep up with these payments Reduced or no property equity Equity release may leave you with limited or no property equity remaining and will reduce your financial options in the future Effect on estate & means-tested benefits Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits Long-term financial product These are long-term financial products and are not designed to be repaid early. If you do, early repayment charges may apply
Tax-free cash You can unlock cash from your home, tax-free, to help meet your needs in later life Stay in your home With a lifetime mortgage and payment- term lifetime mortgage you'll always own your own home and have the right to stay in your property for as long as you wish, however, with a payment- term lifetime mortgage you must ensure all mandatory payments are met Reduced or no monthly repayments You can make reduced or no monthly repayments with a lifetime mortgage. This is the same with a payment-term lifetime mortgage after the oldest applicant turns 66, and overpayments can be made at any time, subject to criteria No negative equity guarantee You’ll never owe more than your home's worth or pass on any equity release debt to your family, providing you keep to the terms of your plan You can still move house You have the right to move home in the future, subject to criteria
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