People rarely ask this out loud. They search for it instead, usually late at night, which is why it deserves a proper answer rather than a reassuring sentence.
The short version
The loan is repaid when the property is sold. That normally happens when the last borrower dies or moves permanently into long term care. Whatever is left after the loan and the interest are settled goes to the estate, and your family can never be asked for more than the property sells for.
Now the detail, because the detail is what people are actually worried about.
If there are two of you
Nothing happens on the first death.
The plan continues exactly as it was, in the survivor's name. They stay in the home. Nothing is repaid, nothing is triggered, no lender gets in touch asking for money.
The loan only becomes repayable on the second death, or when the surviving borrower moves into long term care. That is why joint plans are assessed on the younger applicant's age at the outset, because the plan has to be able to run for the longer of the two lives.
If you move into long term care
If you are the only borrower and you move permanently into residential care, the plan comes to an end and the property is sold to repay it.
If there are two of you and only one goes into care, the plan continues. The person still living there is unaffected. It is the last borrower leaving the property permanently that triggers repayment, not the first.
What your family actually has to do
This is the practical bit, and it is less frightening than people imagine.
The executors tell the lender. The lender confirms the balance. The property is then sold in the normal way, and the loan and interest are repaid out of the proceeds.
The time allowed to sell the property after the last borrower dies or moves permanently into long term care varies between lenders. The applicable timeframe and requirements will be set out in the terms and conditions of the lifetime mortgage, and this timeframe is typically twelve months.
If the family would rather keep the house, they can repay the loan from other money instead. Nobody is forced to sell if the debt can be settled another way.
Whatever is left over belongs to the estate and is distributed under the will.
The guarantee that matters most
Your family can never owe more than the property sells for.
This is the no negative equity guarantee, and it is on every plan we arrange. If the loan and the rolled-up interest end up exceeding the sale price, whether through a long life, a fall in house prices, or both, the shortfall belongs to the lender. It cannot be claimed from the estate, from savings, or from your children.
It is the single most important protection in the product and it is the one people most often do not know about.
Being honest about what does happen
The estate is reduced, and by more than was borrowed, because the interest has been rolling up all that time. If a plan runs for twenty five years, the repaid amount will be substantially larger than the amount released.
There may be little or nothing left in the property. For some people that is exactly the intended outcome, and for others it is the reason to borrow less, use drawdown, or pay some of the interest along the way.
None of that is hidden, and it should be discussed with your family before you start rather than discovered by them afterwards.
Two things that make this far easier for your family
A will, so what remains goes where you intend.
A lasting power of attorney. If you lose capacity without one, your family cannot deal with your property or your plan on your behalf without going to the Court of Protection, which is slow and expensive. Setting one up in advance takes very little and saves a great deal.
We have pages on both, and Craig will talk you through why they matter in this context.
Not sure how any of this applies to your own circumstances? Craig is happy to talk it through, free and with no obligation.
If you are the family reading this after a bereavement
Contact the lender, who will confirm the balance and the timescale. If you are not sure who the lender is, the paperwork or the solicitor who handled the original plan will tell you. There is usually more time than you fear, and the guarantee above means there is a limit to what can be asked of you.
Book a call with Craig or call 0113 403 5584.
