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LIFETIME MORTGAGES
Lifetime mortgages explained
A lifetime mortgage allows eligible homeowners to borrow against the value of their home, usually without making monthly repayments. Find out how they work, what they can cost and some of the implications to consider.
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Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits and your tax position.
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What is a lifetime mortgage?
A lifetime mortgage is a loan secured against your home and is the most common form of equity release. You normally retain ownership of the property. Depending on the product, you may choose not to make regular repayments, allowing interest to be added to the loan. The loan and accumulated interest are generally repaid from the sale of the property when the last borrower dies or moves permanently into long-term care.
A lifetime mortgage is a long-term financial commitment. The amount owed can increase considerably over time where interest is added to the loan.
How does a lifetime mortgage work?
STEP 01
Your property
The amount potentially available will depend on factors including your age, property value and the lender’s criteria.
STEP 02
Choose how to take the money
Depending on the product, money may be available as a lump sum, through a drawdown facility, or a combination of the two.
STEP 03
Interest
Interest is charged on the amount borrowed. Depending on the product, you may make payments or allow it to be added to the loan.
STEP 04
Repayment
The lifetime mortgage is generally repaid when the last borrower dies or moves permanently into long-term care.
How does interest build up?
Interest is charged on the amount borrowed. Where interest is not paid, it is added to the outstanding mortgage. Future interest is then charged on the increased balance. This is compound interest and can cause the amount owed to increase substantially over a long period.
£50,000
Initially borrowed
After 5 years
£66,911
After 10 years
£89,542
After 15 years
£119,828
After 20 years
£160,357
Illustration only, assuming a fixed interest rate of 6% a year and no repayments. Actual interest rates, charges and loan balances will depend on the product selected and individual circumstances.
How much can you borrow with a lifetime mortgage?
There is no single percentage or amount available to everybody. The amount potentially available can depend on several factors.
Age of the youngest applicant · Property value · Property type and location · Existing mortgage debt · Product and lender criteria · In some circumstances, health or lifestyle factors
If you already have a mortgage secured against your home, it would normally need to be repaid as part of the lifetime mortgage arrangement, although individual circumstances vary.
Discuss how much you may be able to release
What can a lifetime mortgage be used for?
Repaying an existing mortgage · Home improvements · Supplementing retirement income · Helping children or grandchildren · Large purchases or expenditure · Creating a financial reserve
These are examples only. Releasing money from your home can have significant long-term consequences, so it is important to consider both the benefits and the alternatives.
Lump sum or drawdown?
Lump-sum lifetime mortgage — An agreed amount is released at the outset and interest is normally charged on the whole amount borrowed.
Drawdown lifetime mortgage — An initial amount may be taken with additional money potentially available from an agreed facility later. Interest is generally charged only on money actually drawn.
Product features and availability vary. An adviser can explain which options may be available and appropriate for your circumstances.
Can you make repayments?
Some lifetime mortgages allow voluntary repayments or regular interest payments. Making payments can reduce the effect of compound interest and therefore reduce the amount ultimately owed, depending on the product. Repayment limits, conditions and early repayment charges may apply, so the particular product terms are important.
Things to consider before taking a lifetime mortgage
A lifetime mortgage can provide useful flexibility in later life, but it is a long-term financial commitment. It is important to understand both what it can offer and the implications for you and your estate.
Why people consider lifetime mortgages
Important considerations
Stay in your home
Access some of the value tied up in your property without necessarily having to sell or move.
Your estate will normally be reduced
The loan and any accumulated interest will normally be repaid from your property, reducing the value remaining in your estate.
Monthly payments may not be required
Some lifetime mortgages allow interest to be added to the loan instead of requiring monthly repayments.
Interest can compound
If interest is added to the loan, the amount owed can increase substantially over time.
Retain ownership
You normally remain the owner of your home while the lifetime mortgage is in place.
Flexible ways to take the money
Depending on the product, money may be available as a lump sum, through drawdown, or a combination of both.
Moving home can affect the arrangement
Moving home may be possible, but this will normally be subject to the lender’s criteria and the suitability of the new property.
Repayments may be possible
Some products allow voluntary repayments, which can help reduce the effect of compound interest.
Early repayment charges may apply
Repaying a lifetime mortgage early can result in charges depending on the product and circumstances.
Other options may be more appropriate
Downsizing, other mortgage borrowing, savings or other assets may sometimes provide an alternative to equity release.
CONSUMER PROTECTION
No negative equity guarantee
Lifetime mortgages that meet the Equity Release Council’s product standards include a no negative equity guarantee. Subject to the terms of the plan, this means you or your estate will not have to repay more than the value of your home when it is sold.
An adviser can explain the features, risks and alternatives relevant to your individual circumstances.
What are the alternatives to a lifetime mortgage?
A lifetime mortgage is not suitable for everyone. Before deciding whether to release equity from your home, it is important to consider other ways of achieving what you need. Downsizing, using savings or investments, retirement interest-only mortgages, other mortgage borrowing, support from family, and using other income or assets may be relevant alternatives.
Which alternatives are realistic will depend on your individual circumstances. An adviser can help you understand the options available to you.
When is a lifetime mortgage repaid?
A lifetime mortgage is generally repaid when the last borrower dies or moves permanently into long-term care. The property will commonly then be sold and the mortgage repaid from the proceeds. Arrangements can vary according to the mortgage and individual circumstances.
Would you like to discuss your options?
Mortgage Website Limited can review your enquiry and, where appropriate, introduce you to a selected adviser who can discuss lifetime mortgages and other options that may be available to you.
Find a lifetime mortgage adviser
No obligation to proceed.
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits and your tax position.
Lifetime mortgage FAQs
What is the minimum age for a lifetime mortgage?
Do I still own my home?
Do I have to make monthly repayments?
Can I move home after taking a lifetime mortgage?
Can I repay a lifetime mortgage early?
Can I leave an inheritance?
Will a lifetime mortgage affect my benefits?
Can I take a lifetime mortgage if I already have a mortgage?
How long does a lifetime mortgage take to arrange?
Is a lifetime mortgage the same as equity release?
Learn more about equity release
Equity release explained
Coming soon: How much equity can I release? · Equity release costs and fees · Equity release: things to consider · Alternatives to equity release
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