Updated: April 22, 2022

Lifetime Mortgages

Considering a lifetime mortgage but unsure if it's the right move? Find out what they are and which type is best for you in our expert guide!

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: April 22, 2022

If you’re considering setting up an equity release arrangement to raise money, you may be wondering which option is best for you. Throughout this guide, we’ll explain the different types of lifetime mortgage available, how to get one, and how to make sure you’re adequately informed to make a decision that’s both safe, and right for you.

What is a lifetime mortgage?

It’s the most popular type of equity release product, as it allows you to access the equity in your home, whilst maintaining full ownership of it. You will usually need to have paid off your original mortgage in order to take out a lifetime mortgage, however, some providers will accept those with small balances remaining, so long as the loan is used to clear this remaining balance.

You can expect to pay associated costs in line with a standard mortgage application, such as legal, valuation, and arrangement fees, which are typically in the region of £1,500 to £3000, depending on how much you borrow, your circumstances, and the individual lender.

Lifetime mortgages are regulated by the FCA (Financial Conduct Authority), and in 1991, the Equity Release Council was created, to ensure that high levels of conduct and safety are maintained within the equity release market. It’s strongly recommended that you only consider lenders who work within these regulations, as they offer guarantees and safety features that keep your home, and the inheritance of your beneficiaries safe.

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How does it work?

Lifetime mortgages are essentially a loan that is secured on your home, however, unlike traditional loans, there are not usually monthly repayments to be made. The loan is repaid from the sale of your home when you either pass away or relocate into long-term care. Until this time, you continue to own and live in your home as usual. Any money remaining from the sale of your home after the loan is repaid will be returned to your estate.

Lifetime mortgages have become quite flexible, and you can choose how and when to receive the loan, as well as how interest will be charged and repaid.

Types of lifetime mortgages

The range of lifetime mortgages available come with a variety of different payment options and the way interest is charged can vary depending on which option you choose…

Lump sum vs. drawdown payments

You can choose to take the loan all at once in a tax-free lump sum payment, or in stages, known as drawdown payments. As interest is charged monthly on the full loan amount, it can be significantly cheaper to opt for drawdown payments.

Sometimes referred to as a flexible lifetime mortgage, the drawdown option gives you more control of your finances and is popular with those applicants looking to top-up their retirement income.

Interest options

The vast majority of lenders offer fixed interest rates, although they are typically fairly high. The good news is, there are a range of ways that you can choose to tackle the interest, depending on your personal circumstances:

  • Rolled-up interest: With this option, you don’t make any repayments during your lifetime, and both the loan amount and accumulated (rolled-up) interest gained over the duration of the loan term are repaid when your home is sold; after you die, or when you go into care.
  • Interest-only: Most lenders also offer the option to fully repay the monthly accrued interest, rather than adding it to the loan. This means that only the capital will need to be repaid from the proceeds of your home’s sale, potentially leaving more inheritance for your beneficiaries.
  • Partial interest repayment: Some lenders offer the opportunity to repay an element of the interest charges each month, to those who are unable to afford, or would prefer not to pay the full amount of interest.

Voluntary repayment plans

A number of lenders now offer lifetime mortgages with the option to make penalty-free, voluntary repayments each year. Borrowers are typically allowed to repay up to 40% of the total amount borrowed, per year.

Enhanced lifetime mortgages

A small number of equity release providers are able to offer enhanced lifetime mortgages to those with significant ill health, or certain life-limiting lifestyle choices, such as smoking. Benefits can range from higher borrowing, to lower interest rates, however, a life expectancy assessment would need to be carried out in order to access this type of offer.

How an equity release broker can help

Taking out a lifetime mortgage is a substantial commitment and one that will not be suitable for everyone. As all equity release products are very much tailored to the individual, finding a provider with criteria that works for you is essential. Not all mortgage brokers are trained in this specialist area of finance, so it’s essential that expert advice is sought from a qualified broker, who operates under the regulations of the Equity Release Council.

Due to the complexity of and duty of care regulations associated with equity release, many providers will not deal directly with individuals, and will only arrange lifetime mortgages via a specialist intermediary. The brokers we work with are duty-bound to ensure that you understand the full implications of this form of finance, and can help you to access every provider on the market, as well as navigate the application process smoothly.

Eligibility criteria

There are typical eligibility criteria that apply, regardless of the provider, which include:

  • Age – You must be over the age of 55, or in some cases over 60, to access a lifetime mortgage. Some lenders also have a fixed upper age limit of around 90-95 years old.
  • Homeownership Status – You must own a UK home worth between £70,000 and £100,000 (depending on the lender), although some lenders will consider applicants with a small outstanding balance on their original mortgage.
  • Affordability – There are no affordability checks necessary unless you opt for a specific type of interest-only repayment option, known as a RIO (retirement interest-only) mortgage in which case your retirement income will need to be assessed.
  • Minimum/Maximum borrowing – Most lenders offer a minimum loan of around £10,000, and a maximum loan to value ratio of around 50% of the value of your property, however, some lenders can offer a little more flexibility, depending on your personal circumstances.
  • Credit score – Unless you’re opting for an interest-only mortgage, your credit score should not impact your lifetime mortgage application.

Whatever your circumstances, speaking to a knowledgeable equity release expert prior to making an application will ensure that you find the provider that is most suitable for you.

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Borrowing limits

There are a number of factors that can influence the amount you’re able to borrow, such as:

  • The value and condition of your property

Providers will expect the valuation of your home to confirm that it’s in saleable condition and that its value is adequate to repay the loan capital, and accumulated interest, where applicable.

  • Your age and health/life expectancy

Unlike traditional mortgages, older borrowers who are in poor health are likely to be able to borrow more than a younger, healthier applicant, however, a health screening is not usually necessary, unless you are applying for an enhanced lifetime mortgage.

To see how much equity you could release, have a look at our calculator below:

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Equity Release Calculator

You can use our equity release calculator to work out how much capital you can release from your home. Simply enter your age and the property’s value and the tool will do the rest.


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For joint applications the amount you can release is based on the age of the youngest applicant
years old

Maximum Equity you could release:

The amount is of your homes value, the maximum most borrowers your age can release.

Get Started with an Equity Release Specialist and find out exactly how much you could release.

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Lenders and rates

There are not as many equity release providers as traditional mortgage lenders, and very few have a high street presence. Some of the most recognisable names are known for their insurance and pensions products, such as Aviva, Legal and General, and LV, as opposed to being major banks.

Some lifetime mortgage lenders have their own criteria that you must meet, in addition to the general eligibility requirements. For example, Nationwide will not accept listed buildings, sheltered accommodation, or properties that are next to, above, or opposite commercial premises, as security for a lifetime mortgage.

Most lenders won’t accept applications from those using government schemes, such as Right to Buy and it can be harder to find a lender if you live in a more remote region of the UK, such as the Channel Islands, or outside of mainland Scotland.

As with all forms of finance, interest rates vary between lenders, however, a lifetime mortgage is typically more expensive than a standard residential mortgage. At the time of writing, it’s unusual to see rates below 5%, and they can be as high as 7%, although they are generally fixed, which is ideal for planning purposes. In order to obtain the best rates, it’s important to seek guidance from an equity release expert.

Things to consider

Before you apply for a lifetime mortgage, it’s advisable to consider the following factors…

Age vs. cost

Although you become eligible for a lifetime mortgage at the age of 55, it’s important to consider that this is still relatively young, and therefore the interest that accumulates over the remainder of your life could be significant. If you’re hoping to leave an inheritance for your family, this is certainly something you should consider, and you may wish to look into providers who allow you to ring fence an element of your equity for this purpose.

Benefit entitlement

Some of the retirement-age benefits in the UK are means-tested, so equity release can impact your entitlement to things such as state pension. This may be manageable through the careful planning of a drawdown lifetime mortgage, however, you should seek advice from an expert in equity release products prior to making this sort of decision.

Moving house

You will never be forced to leave your home, and you retain full ownership of your property until such a time that you die or go into care. If you’re concerned about being tied to the same property forever, however, the good news is that all Equity Release Council approved lenders must allow their lifetime mortgages to be portable, so in most cases, moving to a new home is still possible. Your provider would need to approve a new property to ensure that it is still able to fulfill the criteria of providing suitable security for your loan.

Some lenders, such as Canada Life, even offer downsizing protection, which allows you to move to a lower-valued property and repay the loan, after an initial period, without incurring any penalty.

Could your family be left with a bill?

So long as you use a reputable lender who is a member of the Equity Release Council, your mortgage will be protected by the ‘no negative equity guarantee’. This means that your estate will never be liable to repay any element of your loan, even where the total amount owed has risen above the value of your home, or the value of your home has decreased at the time of sale.

Loan purpose

One of the major benefits of a lifetime mortgage is that there are no restrictions as to how you can spend the money. No matter whether you choose to take the loan as a lump sum, or in drawdowns, the tax-free cash can be used for any purpose, from home improvements to holidays. Some people also enjoy the opportunity to help their loved ones financially, whilst they are still around to see them enjoy it, rather than as a posthumous inheritance.

Get matched with an equity release broker

The qualified equity release brokers that we work with operate under strict recognition of the Equity Release Council’s Statement of Principles, and have in-depth knowledge of the reputable lenders available within the equity release market.

Our free broker matching service will introduce you to an expert that has experience most closely matched with your needs and circumstances, ensuring you find the lender, and deal that’s right for you. Lifetime mortgages are a serious and lifelong commitment, so having guidance from an expert advisor that we have personally selected for you can give you the confidence you need to make the right decision.

Your initial chat is free of charge, and all of the advisors that we work with operate on a success-only fee structure, so you will only pay if they successfully secure you a lifetime mortgage. Call now on 0808 189 0463 or use this form to request our no-obligation service.

FAQs

Can I pay off a lifetime mortgage early?

Most lenders now offer the option to repay your lifetime mortgage early, although there may be steep early repayment charges if you choose to do so.

Can I remortgage my lifetime mortgage?

Yes, it is possible to remortgage to another equity release provider, however, it can be quite complex to determine whether or not this will be financially beneficial in the long run, so it’s important to speak to an equity release specialist before you consider this move. 

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We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Equity Release Mortgages Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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