Equity release mortgages

Lifetime mortgages are loans secured against the value of your property. Available to homeowners aged 55 or over, these mortgages let you borrow money at a relatively high interest rate, and the money does not need to be repaid until you go into residential care or die. At this point, the full capital is repaid, along with any interest. 

The interest is compounded, which means it grows quickly, but you can choose a plan that allows you to pay it off each month. The best plans have a no negative equity guarantee, which means the debt will be capped at the value of the property. With a lifetime mortgage, you still own your entire home.

A home reversion mortgage involves selling all or part of your home to the provider in return for a lump sum or monthly income. You’ll be paid significantly less than the market rate – typically between 20% and 60% - and the exact deal will depend on how old you are and the state of your health. You'll be able to continue living in your home, rent-free, for the rest of your life. 

At the end of the plan, typically when you die or go into residential care, the property is sold, and the proceeds are divided between you and the lender. This type of equity release scheme is usually limited to those over 65.

With remortgaging, you borrow against the value of your house and repay the amount borrowed over a set time. Just like the mortgage you took out when you first purchased your property, your monthly repayments cover the interest and the original debt. 

Some lenders have age restrictions, so you may be limited in the deals you can access. Check out our remortgage comparison page to see what’s available.

If you’re over 55, you should be able to access money in any defined contribution pensions you have. There are various ways of doing this, and the best approach will depend on your circumstances. You can buy an annuity (a guaranteed income for life) although these tend to offer poorer value. 

Alternatively, you can take up to 25% of your pension as an income tax-free lump sum. You can also forgo the tax-free lump sum and have 25% of your withdrawals tax-free each year instead.

If you live in a large property, you also could consider moving to a cheaper, smaller home. However, make sure you do the maths carefully, as you may not save as much as you think. 

If you want to be in the same area, for example, you might find you need a fairly big budget. And once stamp duty, agent’s fees, and moving costs are factored in, it might be more hassle than it’s worth. 

If you have a spare room in your home, then you can rent out that room as part of the government’s Rent a Room scheme, which allows you to earn up to £7,500 a year in rent tax free. 

The room has to be furnished, but if you don’t mind the idea of living with someone, this can be a nifty way to get an extra income without selling up or taking out loans and mortgages.