Lifetime mortgage explained

A lifetime mortgage gives you access to tax free money that is tied up in what is probably your greatest asset- your home; helping you financially through your later life and retirement years.

What is a lifetime mortgage?

A lifetime mortgage is a mortgage with a difference in that there are no monthly repayments. Instead, the money you have borrowed plus the interest is paid back once you have either died, or moved into a nursing home and the property is sold.

Equity Release interest rates are higher because of this and the loan will affect any inheritance you leave your family, however it does give you the freedom to enjoy the hard earned cash that is locked in your home.

As a result, the equity release mortgage is starting to play a major part in many people’s financial plans for the future.

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How does this type of equity release mortgage work?

  • Based on your requirements, age and value of property, a loan is secured against your home that provides a tax free cash sum.
  • The interest is added to the loan every year however there are no monthly repayments to make.
  • You continue to own your own home and have the flexibility to move, as long as the new property meets the approval of your equity release mortgage provider.
  • Once you have either died or moved into long term care, the property is sold, the lifetime mortgage is repaid and any remaining funds are paid to your estate.

what is a lifetime mortgage

What are the different types of lifetime mortgage?

To cater for our varied lives and requirements, there are several types of lifetime mortgage to choose from:

Lump Sum lifetime mortgage

With this type of lifetime equity release mortgage you get a tax free cash sum in a single payment. There are no monthly repayments to make, instead interest is charged at a fixed rate on the equity loan until you either die or move into long term care, at which point the property will be sold and the loan plus the interest repaid.

Drawdown lifetime mortgage

A drawdown equity release plan gives you the flexibility to release your cash in stages, at a time to suit you. You simply agree an amount with your provider, release an initial amount and then drawdown additional cash sums as and when you need them. The benefit of a drawdown equity release mortgage is that you only pay interest on the money you have actually borrowed, so you won’t be building up interest on the money you haven’t touched.

Interest Repayment lifetime mortgage

An interest repayment plan works in a similar way to a regular lifetime equity release mortgage however you are able to make regular payments on the interest accrued, which will in turn reduce the amount of money paid back when the house is sold.

Enhanced lifetime mortgage

An Enhanced lifetime mortgage is specially designed for people with medical conditions. They can offer greater cash sums and at better rates, so this type of equity release mortgage could work to your advantage if you suffer from certain medical conditions.

Protected lifetime mortgage

With certain types of lifetime mortgage you can guarantee an inheritance for your family by protecting a percentage of the value of the property. 

Take a look at our How does equity release work? page for more information on home reversion plans.

Can I have a lifetime mortgage?

To qualify for a lifetime equity release mortgage you need to:

  • Be at least 55 years of age
  • Own your own home
  • Have property worth at least £60,000
  • Live in the UK or Northern Ireland

You could also be eligible for a lifetime mortgage if you already have an existing mortgage in place, however the outstanding loan would need to be paid off by the equity you have released from your home.

Couples can benefit from an equity release mortgage as long as both are at least 55 years old. The amount of money released will depend on the age of the youngest person.

How much money can I release from my home?

The equity in your home is the value of the property, minus any loans you have against it. For example:

  • Property value - £300,000
  • Outstanding Mortgage - £20,000
  • Equity - £280,000

Therefore in this scenario the equity or the cash would be £280,000, so a lifetime mortgage would let you release up to 50%  of that amount, tax free to use how you want.

The amount of tax free cash you can release from your house with a lifetime mortgage will depend on your age and the value of your home. Our equity release calculator will help you get an understanding of how much this could be.

Don’t forget if you suffer from medical condition, you may be able to get an enhanced lifetime equity release mortgage, so it is worth talking to the experts who can help you choose the right scheme.

See how much cash you could unlock

Is a lifetime mortgage right for me?

An equity release mortgage could help you and your family in many ways, be it to live a lifelong dream or just make life that little bit more comfortable financially.

For example you may want to:

Make home or garden improvements – You may want a new kitchen, conservatory or patio. Maybe you would like to adapt and future proof your home by making it more accessible, so you won’t have to worry about moving in years to come, perhaps when the stairs get a little difficult.

Pay off outstanding debts or loans – If you still have a mortgage outstanding, you may want to choose a lifetime mortgage to clear the outstanding balance. Having an existing mortgage doesn’t mean you won’t be eligible for equity release; you will just need to pay off your mortgage first with the money you have released and then the remaining cash sum will be yours to do what you want with.

Help your family – The cost of living and raising a family can be so expensive these days, so you may opt for a so called ‘early or living inheritance’ by using equity release to help your family get on the property ladder, assist with education, raising grandchildren or perhaps use towards wedding fees.

Enhance your retirement income – As a nation we are living longer lives, which in turn means that our retirement years could be longer too. Using an equity release mortgage therefore could help supplement your income and boost your pension pot or savings, to help make your retirement a little easier.

Enjoy life – You may just decide you want a lifetime mortgage so you can get that one thing you have always wanted or treat yourself to a luxury holiday, new car, caravan or motor home.

Whether a lifetime mortgage is right for you will depend on your personal situation. An equity release mortgage will affect any inheritance you wish to leave for family and could affect any benefits you receive, so it is not a decision to take lightly.

Other options may be available to you that could help such as downsizing but a specialist like Age Partnership can talk you through your options and answer any questions you may have on how to release equity from your home.

How much equity could you release? – find out in seconds

Are lifetime mortgages safe?

Lifetime mortgages are tightly controlled and regulated by the Financial Conduct Authority (FCA). In addition to the FCA, it is important to choose a provider that is a member of the Equity Release Council (ERC), so you can be certain the following safeguards are in place to protect you:

  • All lifetime mortgage interest rates are fixed, or if variable, that there is an upper threshold that is fixed for the life of the loan.
  • You have the right to remain in your property for life, or until you move into long term care.
  • You have the right to move to another property subject to the new property being acceptable to your equity release mortgage provider.
  • You are covered by the all important ‘no negative equity’ guarantee, which means that you will never owe more than the value of your home. Therefore if after the house is sold and the solicitors and agents fees have been paid there are insufficient funds to repay the loan, neither you nor your estate will be liable for any additional payment.

Therefore with the watchful eye of the Financial Conduct Authority and the seal of approval from the ERC, you can be sure that your lifetime mortgage is secure and that you are in safe hands.

To read about other popular lifetime mortgage misconceptions, take a look at our common equity release myths.

Try our free equity release calculator

To see how much money you could release from your home, why not try our free equity release calculator. Its quick and easy to use and will give you a better understanding of just how much tax free cash you could unlock from your home.

Equity Release Calculator

How do I get the best lifetime mortgage advice?

A lifetime mortgage isn’t suitable for everyone, so it’s important to get the right advice from the professionals and to speak to your family, as releasing money from your home will ultimately affect them too.

It is worth speaking to a company like equity release mortgage specialists Age Partnership, as they compare schemes across the whole of the market and can help you look for the best lifetime mortgage based on your personal situation.

In addition, because of their prominent position, Age Partnership has agreed preferential rates with leading lifetime mortgage lenders that may not be available elsewhere. With no obligation they can talk through your options, explain how an equity release mortgage could work for you and help you decide whether it is the right decision.

The Age Partnership Equity Release Service


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We know it's a big decision!

That's why we have teamed up with Age Partnership one of the UK's leading equity release specialists.

Find out how much cash you could release by clicking on the button below.

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