Lifetime Mortgages Explained:
Rolled up interest loans
Rolled up interest loans sometimes referred to as 'roll up loans' work on the basis that you take out a loan against the value of your home and you don't pay off anything until the property is sold. The interest builds up and is added to the amount you borrowed.
These types of loans can be dangerous unless you opt for one with a 'no negative equity guarantee' such as those offered by members of SHIP (Safe Home Income Plans). However you should always seek financial advice to ensure that you avoid any problems that may ensue.
Interest on a rolled up loan is usually charged at a fixed rate rather than a variable rate and this offers some degree of protection from interest rate changes. However you should think carefully and make sure you understand the long term consequences for you and your family before entering into a equity release loan of this type.
Pros: no repayments until your property is sold.
Cons: as the interest builds up over time you may find that it eats into all the equity available in your home and in some cases you could find yourself in a state of negative equity i.e., where the value of your home is not sufficient to cover the original sum borrowed and the interest charges.
Other Types of Equity Release Plans:
Life Mortgages
You may also want to consider a Home Reversion Scheme, clcick the link the to find out more.