A lifetime mortgage is a way of borrowing money secured against a property which is usually only repaid when the borrower moves into long-term care or dies.

Lifetime mortgages allow homeowners to free up some of the equity in their property, providing them with a tax-free cash sum that can be spent however they want, while still living in their home.

Who are lifetime mortgages for?

To be eligible for a lifetime mortgage you need to:

  • Be over 55 years old

  • Have no outstanding mortgage to pay

  • Own a property in good condition - this must also be your main residence

A lifetime mortgage could be an option worth considering if you are retired and need some extra money to supplement your pension in later life.

You can compare lifetime mortgage rates using our comparison.

How does a lifetime mortgage work?

Lifetime mortgages work by securing a loan against your home. Both the loan amount and any interest charged are usually repaid when your home is sold and, depending on the type of lifetime mortgage you choose, you often do not have to make any monthly repayments. Interest rates are usually fixed, though they can also be variable.

The percentage of the property you can borrow against depends on your age and the value of your home, but it will typically be between 25% and 60%. Usually the older you are, the more you'll be able to borrow.

If you take out a lifetime mortgage, you will still own your home and you will still be responsible for maintaining it

What are the risks?

What are the different types of lifetime mortgage?

There are several different types of lifetime mortgage, including:

Interest roll-up lifetime mortgage
Here, you receive a cash sum with no monthly payments. The interest is 'rolled up' over the term of the loan, and both the total amount of interest and the cash sum are repaid when your home is sold.

Interest only lifetime mortgage
With this type of lifetime mortgage you receive a lump sum, but rather than the interest rolling up, you pay off some of the interest each month. The amount originally borrowed is then repaid when your home is sold.

Drawdown lifetime mortgage
This type of later life mortgage lets you release your cash over time instead of receiving it as a lump sum. This allows you to access your cash as and when you need it and interest will only be charged on the amount taken. The overall cost can be considerably lower as a result.

Enhanced lifetime mortgage
Some providers offer enhanced lifetime mortgages to those with lower-than-average life expectancies - for example, if you have a certain medical condition. These let you unlock more cash from your home, and often at better rates too.

Flexible lifetime mortgage
Here, you can choose to make voluntary payments to lower your equity release mortgage loan amount.

What are the risks of a lifetime mortgage?

If you take out a lifetime mortgage, when you die or move into care and the loan is repaid, the amount of inheritance you can leave to your family will be much smaller. Although you will often be given the option to ring-fence a portion of the value of your home as inheritance for your family, the amount you can leave to them will still be affected.

Lifetime mortgages also come with a number of costs and fees you need to pay, including valuation fees, application fees, and legal fees, and interest rates can be higher than on a conventional mortgage.

Applying for a lifetime mortgage can also result in you losing means-tested benefits, including pension credit, council tax support and the Cold Weather Payment.

What are the alternatives to a lifetime mortgage?

If you want to release equity from your home you could also consider a home reversion scheme. These allow you to sell all or part of your home for a lump sum or regular income. You can find out more about how how home reversion schemes work here.

Alternatively, if you'd prefer not to use equity release, you could generate extra retirement income by:

  • Downsizing your home

  • Taking out a secured loan against your property

  • Taking out a personal loan (if you only need to borrow a smaller sum)

Here is how to work out whether you should borrow money against your home.

Lifetime mortgages FAQs

Q

Should I get financial advice before applying for a lifetime mortgage?

A

If you're not sure whether a lifetime mortgage is right for you, it can be worth getting a lifetime mortgage quote from a brokerand seeking advice from an independent financial adviser. They will be able to help you make the right decision based on your personal circumstances.

Q

How much can I get from a lifetime mortgage?

A

The percentage of the property you can borrow against usually depends on your age, your property's value, the scheme you use and how much equity you sell. Typically, lenders let you borrow between 25% and 60%.

Q

Could I end up in negative equity?

A

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.

Q

What are the alternatives to a lifetime mortgage?

A

If you'd prefer to steer clear of equity release, you could consider downsizing and saving money by moving to a smaller home, or you could use a loan to borrow the funds you need. A financial adviser could help you make the right choice for your circumstances.

Q

What types of equity release scheme can I get?

A

There are two different types of equity release scheme. The first is a lifetime mortgage, and the second is a home reversion scheme. You can find out how both of these work in our guide to equity release.

About our mortgage comparison

Q

Who do we include in this comparison?

A

We include lifetime mortgages available through our independent broker, Responsible Equity Release. They are all from lenders regulated by the Financial Conduct Authority. Here is more information about how our website works.

Q

How do we make money from our comparison?

A

We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.
You do not pay any extra and the deal you get is not affected.