Lifetime mortgages

A lifetime mortgage — also called a lifelong mortgage or lifetime equity release — lets you take out a loan against your home in later life. It’s important to understand the risks for you and anyone who may inherit from you. Our guide explains how lifetime mortgages work and some things to consider before applying.

What is a lifetime mortgage?

A lifetime mortgage lets you borrow against your home. You don’t have to repay the lender until you die or go into long-term care. When this happens, the lender sells your home to get its money back.

How does a lifetime mortgage work?

A lifetime mortgage is a type of equity release — put simply, it’s a way to get cash from your home without selling it. The way you’re paid can vary. Some lifetime mortgages give you a lump sum when you take them out. Drawdown lifetime mortgages pay smaller regular amounts. Some mortgages give you both.

You’ll still own and live in your home. When you die or go into long-term care, your lender takes what it’s owed from the sale of your home. If there’s money left over, it can fund your long-term care or go to the people who inherit from you (often family).

Depending on the type of lifetime mortgage, you may pay interest during the mortgage or when it ends. There’s more on this below.

What if I owe more than my home is worth?

It’s possible the sale of your home won’t be enough to pay what you owe. This can happen if property prices drop for example. Check to see if your lifetime mortgage has a ‘no negative equity’ guarantee — this means the lender can’t take more than the value of your home. Otherwise, it may take the rest of what you owe from savings or belongings you leave behind.

Who can get lifetime equity release?

Typically, you need to be at least 50-55 years old to apply for an equity release lifetime mortgage. Some lenders also have an upper age limit. The property you want to release equity from needs to be your main home and may need to be worth more than a certain amount depending on the lender.

Can I get a lifetime mortgage with someone else?

Yes, it’s possible to get a lifetime mortgage as a joint mortgage. In this case your home is usually sold when the last person on the mortgage dies or goes into long-term care. A joint mortgage creates a financial association — make sure you understand how this affects your credit report before you apply.

When do I pay interest on a lifetime mortgage?

It depends on the type of lifetime mortgage you have. Two common types are:

• Interest-paying lifetime mortgage — where you make monthly or one-off payments to pay off some or all of the interest before your mortgage ends.

• Interest roll-up lifetime mortgage — where the interest you’re charged each month is added to the total amount you owe and paid off at the end of your mortgage.

Lifetime mortgages have compound interest, meaning they’re more expensive overall if you allow interest to build up. This is because you’ll be charged interest on any interest you still owe from previous years, as well as on the original amount you borrowed.

How much does a lifetime mortgage cost?

Lifetime mortgages charge interest each month. Interest is calculated as a percentage of what you owe, meaning you’ll pay more overall if:

• You have a higher lifetime mortgage interest rate
• You borrow a larger amount
• Interest builds up, increasing the total amount you owe
• Your mortgage lasts for longer, meaning you pay interest for longer

There are also some one-off costs when you take out a lifetime mortgage, like:

• A fee to release equity (usually between £1,500-£3,000)
• An arrangement fee to set up the mortgage
• Legal and valuation fees
• Buildings insurance
• A completion fee when your mortgage ends

There may also be added costs if you have a leasehold property with a short lease.

How much can I borrow with a lifetime mortgage?

The amount lenders are willing to offer you can depend on things like:

• Your age, health and lifestyle
• How much your home is worth
• Whether your home is leasehold or freehold
• How you want to receive the cash

If you want to see what’s available you can compare mortgages with Experian — it’s free, takes less than two minutes and won’t affect your credit score. Select the ‘remortgaging’ filter to search for equity release and other mortgages from trusted lenders.

Can I pay my lifetime mortgage back early?

Yes, it’s possible. Paying off your lifetime mortgage early may help you lower the overall cost of interest and leave a larger inheritance. But you’ll have to pay an early repayment fee which can be costly — it’s often around 1-5% of the amount you owe.

What are the drawbacks of a lifetime mortgage?

For some people, an equity release lifetime mortgage is a convenient way to free up cash from their home. But it doesn’t suit everyone. The disadvantages can include:

• A lifetime mortgage affects how much you have to fund your long-term care or to leave as an inheritance when you die
• Getting cash from your home may make you ineligible for certain grants and benefits like Pension Credit
• Your lender may have rules about how you maintain your home and whether you can move
• Unless you have a ‘no negative equity’ guarantee on your lifetime mortgage, it’s possible to end up owing more than your home is worth

How do I apply for a lifetime mortgage?

You can only take out a lifetime mortgage with the help of a specialist equity release adviser. One place to find an adviser is the Equity Release Council's directory .

Prepare for your mortgage application by gathering details and proof of your income, monthly spending, savings, current borrowings, and any benefits you get from the government. Use HM Land Registry to get an idea of how much your home is worth.

What are the alternatives to a lifetime mortgage?

If you don’t want to use your home as security, consider borrowing a lump sum with a personal loan. You typically need a good credit score to get approved.

Looking for another way to borrow against your home? Consider taking out a secured loan or a different type of mortgage.

If an interest-only lifetime mortgage doesn’t suit you, you may be able to release equity with a repayment mortgage. These mortgages are paid off in monthly payments over a set number of years. To find out how much it will cost, use our mortgage calculator and we’ll crunch the numbers for you.

Search mortgages with Experian today — it’s free, takes around two minutes and won’t affect your credit score.