A lump sum lifetime mortgage gives you a single release of capital when you take out the loan. The amount available depends on your age and the value of your home. When the property is sold, the full lump sum plus any interest is repaid. The total owed will depend on whether you choose to let interest roll up or make repayments.
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Lifetime mortgages
Find a lifetime mortgage right for you
Because lifetime mortgages are complex, it’s essential to seek expert advice before making any decision. Your adviser will compare products from lenders across the whole market, ensuring you have access to the widest range of options tailored to your circumstances.
A lifetime mortgage is a loan secured against your home. It will reduce the value of your estate and could affect your entitlement to means-tested benefits.
What is a lifetime mortgage?
A Lifetime Mortgage is a type of equity release product that allows UK homeowners to unlock some of the equity tied up in their property. It provides a tax-free cash sum that can be used however you wish, without the need to downsize or move home. Monthly repayments are optional, giving you flexibility. You can choose to make regular payments, or let the interest be added to your loan. If you choose not to make payments, the interest will build up over time, increasing the total amount owed. The loan is usually repaid when the last remaining homeowner moves into long-term care or passes away. All members of the Equity Release Council, the UK industry body, include a “no negative equity” guarantee as one of their key standards. This means you’ll never owe more than your home is worth.
How does a lifetime mortgage work?
A lifetime mortgage allows you to unlock some of the equity tied up in your home without having to move. It provides a tax-free cash sum that you can use however you wish, while the loan only needs to be repaid when you pass away or the property is sold.
When you die or go into long-term care, the home is usually sold to repay the loan and any interest that has built up. The amount you can borrow depends on factors such as your age and the value of your property.
You have the flexibility to make optional monthly payments if you’d like to help manage the cost of borrowing. If you choose not to, the interest is added to your loan and will build up over time, increasing the total amount owed. Most lifetime mortgages offer a fixed interest rate, with some variable-rate options also available.
What are the criteria for a lifetime mortgage?
Lenders will only offer a lifetime mortgage if you meet their eligibility criteria. This typically includes:
Being a UK homeowner at least 55 years old
Owning a property in good condition, that is your main residence
Some lenders may also require your property to meet a minimum value, which is typically around £70,000.
Before deciding, it’s important to understand the benefits and risks of a lifetime mortgage and ensure you’re comfortable with them. Seeking advice from a qualified financial adviser can help you make an informed decision.
What are the different types of lifetime mortgages?
Lump sum lifetime mortgage
A lump sum lifetime mortgage gives you a single release of capital when you take out the loan. The amount available depends on your age and the value of your home. When the property is sold, the full lump sum plus any interest is repaid. The total owed will depend on whether you choose to let interest roll up or make repayments.
Drawdown lifetime mortgage
A drawdown lifetime mortgage gives you the flexibility to release money in stages, rather than all at once. You’ll only be charged interest on the amount you’ve used, which can help reduce the overall cost compared to taking the full amount upfront.
What are the different types of lifetime mortgages?
Lump sum lifetime mortgage
Drawdown lifetime mortgage
A drawdown lifetime mortgage gives you the flexibility to release money in stages, rather than all at once. You’ll only be charged interest on the amount you’ve used, which can help reduce the overall cost compared to taking the full amount upfront.
What costs are involved in lifetime mortgages?
Like standard mortgages, lifetime mortgages come with charges that can add up to thousands of pounds. These fees vary between providers, so it’s important to factor them in when comparing deals.
Arrangement or application fee
Some products have no fee, while others can cost several hundred pounds.
Solicitors’ fees
You’ll usually need to pay a fee for a specialist equity release solicitor to handle the legal work.
Valuation fee
The cost of valuing your home depends on the lender and property.
Completion fee
This covers setting up the mortgage and may include the lender’s legal costs and transfer fees.
Adviser fees
These can vary significantly, with some brokers charging thousands of pounds, so it’s worth shopping around.
Lifetime mortgages FAQs
Should I get financial advice before applying for a lifetime mortgage?
Yes. Because lifetime mortgages are complex, you must seek advice from a qualified adviser before taking one out to ensure it is suitable for your circumstances.
Could I end up in negative equity?
Most lifetime mortgage providers should have a “no negative equity guarantee” (Equity Release Council standard), which means you will not be asked to pay back more than your home's sale value. But always check this is the case before applying.
Can you pay off a lifetime mortgage early?
This depends on the lender and the terms of the deal. Some will charge you extra fees if you pay the mortgage off early, so check carefully to see what the rules are before you sign up.
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