An increasing number of people are using lifetime mortgages because they cannot afford to pay off their existing loans at their maturity date, says the Times.
With a lifetime mortgage, the interest is not paid but accrues until the owner’s death when the accumulated loan is taken from the sale of the property.
The Times warns that the costs of such loans, at 6% or more, are higher than normal mortgages and that they could eat up capital intended for inheritance. But previous surveys have suggested that a significant slice of ‘equity release’ is used to provide capital for deposits on the homes of the borrowers’ children. Like most financial products, lifetime mortgages can be advantageous if they are used sensibly.