When considering a lifetime mortgage, one of the key features to look out for is the no negative equity guarantee. This guarantee ensures that you or your beneficiaries will never have to pay back more than the value of your home, even if the outstanding loan amount exceeds the property’s value.
It is a common concern for homeowners taking out a lifetime mortgage that they could end up owing more than the value of their home, leaving nothing to pass on to their loved ones. The no negative equity guarantee provides peace of mind in knowing that this will never happen.
Let’s take a look at an example of how the no negative equity guarantee could come into effect:
John and Mary are a retired couple who own a home valued at £300,000. They decide to take out a lifetime mortgage of £150,000 to supplement their retirement income. Over time, the interest on the loan accumulates, and the outstanding loan amount increases to £200,000.
Unfortunately, due to unforeseen circumstances, the property market crashes, and the value of John and Mary’s home falls to £180,000. If it were not for the no negative equity guarantee, John and Mary would be responsible for repaying the full outstanding loan amount of £200,000, even though their property is now worth less than that.
However, because the lifetime mortgage includes a no negative equity guarantee, John and Mary’s lender will only be able to recoup the value of the property at the time of sale, which is £180,000. This means that John and Mary will not be burdened with any additional debt, and their beneficiaries will not have to worry about inheriting a debt-laden property.
In conclusion, the no negative equity guarantee is a vital safeguard for homeowners considering a lifetime mortgage. It provides protection against falling property values and ensures that you or your loved ones will never be left with a debt that exceeds the value of your home. It is always advisable to seek advice from a later life lending specialist before making any decisions about lifetime mortgages to ensure that you fully understand all the terms and conditions, including the no negative equity guarantee.
Ready to find out more? Visit our dedicated later life lending page to arrange your free 10 minute discovery call!
Mike Jones
Later Life Lending Specialist
Mike Jones is a later life lending specialist who is responsible for the “Mewstone Later Life Lending” service. Mike has years of experience in retail banking as well as extensive knowledge of the later life lending sector.
Choosing to release money from your home is a big decision and it’s important for you to understand all the options available to you. This means that he will always offer you unbiased advice. It doesn’t matter to us which solution or lender is recommend, as long as it is the right one for you.