A reverse mortgage, also known as an equity mortgage, can be defined as a type of loan applicable to older people, through which they can convert the value of their home into cash payments. The interesting part regarding a reverse mortgage is that the individual retains ownership of the property when this conversion of house value into cash payments is taking place. You must at least be 62 when applying for a reverse mortgage.

Normally, capital repayment mortgages are best for most people because, although the monthly outgoings on a low-cost endowment mortgage can be comparable to the cost of a capital repayment mortgage, capital repayment mortgages are much more flexible if you have financial difficulties and need to rearrange your finances. Inflation will reduce the value of profits from your endowment policy. For instance, if inflation runs at 4 per cent after 25 years, a $10,000 lump sum would be worth under $4,000 in terms of buying power.

If you have a pension linked mortgage it will work in a similar way to an endowment mortgage and reverse mortgage. You will make two monthly payments. One will consist of interest on the loan, and the other a separate monthly insurance premium that will repay your loan at the end of the term. In addition, provide a pension on your retirement. On retirement you can convert part of your pension to a tax-free lump sum which is used to pay off your mortgage. Pension mortgages are more expensive than endowment mortgages because as well as repaying your loan, they also provide you with a pension. You should also remember that if you use part of your pension to pay off your mortgage then you would obviously have a reduced pension. If you have an interest-only mortgage then you will only be paying interest on your loan. This type of loan is designed for those people approaching or over retirement age who cannot take out a long-term mortgage.