Question about equity release

dariop

Not sure if this is the correct forum, apologies if not.

My mother wants to take an equity release loan - a loan against the value of her property which is only repaid when she dies, interest is charged on a compound basis. She asked if she had the option to repay the interest and was told '"Yes", however the projection chart she was given still showed the capital sum owed rising year by year. She asked me why and to be honest I don't know.

Normally if you repay the interest the capital sum remains the same - as with an interest only mortgage for example. I'm guessing the difference with equity release is the way the interest is calculated? Can anyone shed any light on this, why the capital sum will keep rising even though the interest will be paid?

Tixy

Is this product a home reversion scheme? or a lifetime mortgage?

Both are equity release but in the former you actually sell part (or all) of your house to the lender, so I would guess that maybe the capital increase is perhaps meant to reflect a projected increase in the property value?

With a lifetime mortgage you still retain ownership of your home but make no payments (or sometimes just pay interest).