Can you pay back a lifetime mortgage?

One of the biggest selling points of a lifetime mortgage is that there are no payments required until you either pass away or enter into a long term care facility.

However what happens if you suddenly come into a large sum of money or you simply decide that you wish to pay off this mortgage? Are you able to pay back the entire loan amount without any problems? 

The best way to ensure that your total loan amount is kept to a minimum is to make regular payments to cover the interest amount. Interest can quickly build up without you realising it. By making these payments, it is only the loan amount that will need to be repaid when you either choose to repay early or you pass away and your home is sold.

What is a lifetime mortgage? 

A lifetime mortgage is a loan that is secured against your home. You still own the house and are able to continue living there as normal. When the time comes that you pass away or leave the property to live in a facility, your house is then sold and the proceeds from the sale are used to pay off your outstanding loan.

Any money left after this is for your beneficiaries. Of course this means that your beneficiaries inheritance is likely to be smaller.

With a traditional mortgage your loan amount is dependent on your income and expenditure, however with a lifetime mortgage these factors do not really come into play and it is based on the value of your home instead. 

NOTE: This loan is subject to interest which can either be rolled up with your loan to be paid once your house is sold or you can make regular payments to cover the interest amounts. 

The two main types of lifetime mortgages 

  • Interest Roll Up Mortgage – Any interest is added to your loan amount. You do not need to make any payments at all. 
  • Interest Paying Mortgage – You are able to make monthly or ad-hoc payments to cover the interest amount. 

What if my home is in negative equity when it is sold? 

Many lenders now offer a negative equity guarantee. This ensures that you will never pay back more than the current value of your home.

I want to move home. Do I need to pay off my lifetime mortgage?

Some lenders will move your lifetime mortgage to your new home, although you should always check as there will be stipulations and they must approve the property beforehand.

For example some lenders will not lend against houses with thatched roofs.

However if your lender will not move the mortgage to your new home you will need to repay the entire amount.

The sale amount must be enough to cover the mortgage including any rolled up interest. If the sale amount does not cover this then you will be responsible for paying the difference. 

Are there fees attached to paying off my lifetime mortgage early?

Many lenders will charge an early repayment fee if you choose to pay your mortgage off early although this amount will vary between lenders.

Before taking out your mortgage it is advised to check your offer of loan to see whether this will apply to you. The early repayment fee is calculated to recover the costs that were incurred by your lender at the time of you taking out your mortgage with them. 

NOTE: Some lenders will scrap the early repayment fee once you reach a certain age. 

Is there any way to keep my total loan amount reduced?

The best way to ensure that your total loan amount is kept to a minimum is to make regular payments to cover the interest amount. Interest can quickly build up without you realising it. By making these payments, it is only the loan amount that will need to be repaid when you either choose to repay early or you pass away and your home is sold. 

As you can see you are able to repay your lifetime mortgage early but be aware that you may incur a hefty fee in doing so. Before committing to your mortgage do be sure to check what these fees would be to ensure that you are not surprised later on. 

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