What are the different types of lifetime mortgages?

You might have decided that the best financial decision when you retire is to opt for a lifetime mortgage, which enables you to live in your home rent-free while a loan is secured against your property. However, there are several types of lifetime mortgages to choose from.

Before you make your selection, read the following information about the varying lifetime mortgages.

1)      Brief explanation of lifetime mortgages

The way lifetime mortgages work is that the loan – plus any interest added to it throughout the term of the product – is paid when you and your partner die and your home is sold, or if you move into care and you sell your property. While this is the typical format of lifetime mortgages, there are other plans you can sign up to.

2)      Advantages of enhanced plans

Enhanced plans are available depending on you and your partner's lifestyle conditions. The equity release provider might decide you are able to free more money from your home if you fulfil certain criteria according to your general health and wellbeing. Therefore, if you are hoping to borrow as much you possibly can against the value of your property, this is a package you should consider.

3)      Advantages of protected plans

Some people are put off lifetime mortgages, as they think they wouldn't be able to leave money to their children or loved ones when they die. However, this isn't always the case, and those who are concerned about this should consider taking out a protected plan. This guarantees an inheritance for your family, so that the loan that is repaid on your or your partner's death doesn't affect this.

4)      Advantages of drawdown plans

Drawdown lifetime mortgages enable you to release the money you borrow in instalments. Therefore, you don't have to receive one big lump sum, and can instead get the money in different stages. This might suit you better if you don't want to be responsible for a substantial amount of cash at one time and only wish to receive money as and when you need it.

5)      Advantages of interest-payment plans

You might be keen on interest-payment plans if you want to make sure that the amount that is paid back to the equity release provider upon your or your partner's death is as close as possible to the original value you were lent in the first place. They work by allowing you to pay contributions to the interest on the loan throughout your lifetime, so this is kept to a minimum later on.

6)      Advantages of combined plans

If you haven't found a plan that suits your or your partner's needs best, you can always ask for the equity release provider to be as flexible as possible. This is what a combined plan is, where different lifetime mortgages are put together to create an ideal product for you.