What are Roll Up Mortgages?

Purchasing a home and being able to keep it in the family is the goal of most home owners and as the home gets older and gains equity and the homeowner grows older with the property there may come a time when there may be a need to pay for medical expenses or take that dreamed about vacation. All of that can be done with what is called a lifetime mortgage or roll up mortgages.

Lifetime Mortgage

Lifetime mortgages also called roll up mortgages are equity release programs where the homeowner can get a loan on their home, it can be received in a lump sum or as monthly payments or both. What is different about this equity release program is that the interest is added to or rolled up onto the original loan. The interest is compounded and the homeowner does not have to pay this interest, and when the property is sold the loan and the compounded interest is repaid.

Advantages of Roll up Mortgages

With this equity program the owner is never forced to sell or move from their home. In some cases the owner can be as young as 55 to be eligible for the program. There is the no negative equity guarantee, where the owner is not responsible if the interest becomes larger than the amount of the original loan. This type of loan is also very flexible and there are several providers to choose from which keeps the rates fairly low. Most of these mortgages come with a fixed rate. Lastly the value of the property rises so if the property is sold due to death the beneficiary may inherit a substantial amount.

Disadvantages of a Lifetime Mortgage

The main disadvantage would be if the interest grows to be larger than the original loan and the program does not offer a clause to avoid this. The benefit for this program may not be visible until almost ten years or more into the program. In some cases the value of the home can decrease severely or the program may affect ones state benefits. Taxes could increase and there may be early repayment penalties if for some reason the homeowner needed to pay off the loan early.

Conclusion

A lifetime mortgage and Roll up mortgages are great for those homeowners that are over 60 years of age and have lived in their homes for many years. It can help them to pay for medical expenses or just to travel. The loan that is taken out on their property is interest free in most cases and the value of the home continues to grow.