Option B – Lifetime Mortgage

Mrs Jones could borrow the £20,000 cash lump sum via a flexible lifetime mortgage.

One plan currently available has a lifetime fixed interest rate of 6.64% (The overall cost for comparison is 7.1% APR). No monthly repayments are required with this plan. The initial borrowing and interest will be repaid when the house is sold either as a result of death or the need for permanent long-term care.

Mrs Jones would also have access to a 15 year guaranteed further borrowing facility of £46,000. Future withdrawals are subject to a minimum loan amount of £2,000 and will be charged at the interest rate applicable at the time of the draw down.

If the loan were redeemed after 18 years then the total amount repayable based on the initial borrowing would be £65,867.

On the initial borrowing over 18 years, this plan is £22,178 (£1,233 per year) more expensive than the interest only mortgage in option A, the additional amount is charged by the lender for the benefit of not making any monthly repayments.

This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.