What is a lifetime mortgage?

*Updated September 2024*

Lifetime mortgage guide

A lifetime mortgage is a long-term loan secured on the value of your home. If you're a homeowner aged 55 or over, an equity release lifetime mortgage allows you to convert some of the equity in your home into tax-free cash, while continuing to live in it just as before. A lifetime mortgage differs from a traditional mortgage in that it doesn't have a set date to repay the loan and you don't need to make monthly repayments. Instead, the loan amount plus all the interest that has built up over the years, is paid off when you die or leave your home to go into long-term care.

You can choose to take the loan as a single lump sum or an initial lump sum with a cash facility to draw down on.

If you've owned your home for a long time, it's probably risen significantly in value over the years. Value that could be unlocked to make your life that bit easier.

Of course equity release is a big decision and will not be the right choice for everyone. For this reason, lifetime mortgages are only available through qualified equity release advisers whose job it is to ensure you understand all the pros and cons before committing to anything.

To help decide if a lifetime mortgage could be an option for you, we've created this straightforward guide.

Lifetime mortgages explained

This lifetime mortgage guide will help you understand:

1. How a lifetime mortgage works
2. What types of lifetime mortgage are available?
3. The lifetime mortgage lending criteria 
4. The costs of a lifetime mortgage 
5. How safe are lifetime mortgages?
6. How long does it take to set up a lifetime mortgage?

2. Types of lifetime mortgage

There are five types of lifetime mortgage, although names will vary between lenders:

1. Roll up lifetime mortgage

With a roll up lifetime mortgage, you make no monthly repayments and interest is charged on the total amount of the loan, which includes all the interest that has already built up. The amount you originally borrow plus all the rolled-up interest is repaid when you die or move into long term care.

2. Repayment lifetime mortgage

With a repayment lifetime mortgage, you make voluntary monthly or ad-hoc payments to reduce the impact of interest roll-up. Some lenders allow you to pay off some of the capital, but there are usually limits to how much you can repay without penalty and how often you can make repayments. The remaining balance is repaid when you die or move into long term care.

3. Interest only lifetime mortgage

With a interest only lifetime mortgage, you repay the interest each month so the amount you borrow never goes up. You can stop making repayments if you wish, in which case the interest will be added to the loan. The remaining balance is repaid when you die or move into long term care.

4. Drawdown lifetime mortgage

A drawdown lifetime mortgage is a lifetime mortgage with a cash reserve. This facility gives you the flexibility to access your cash when you need it rather than taking it all in a lump sum at the start. You only pay interest on the cash you withdraw, not the cash in reserve.  The amount you have withdrawn plus interest is repaid when you die or move into long term care.

5. Enhanced lifetime mortgage

With an enhanced lifetime mortgage, if you or your partner are living with certain medical conditions, you may be able to release a larger amount from your home and could be eligible for a reduced interest rate.

For more information on the types of equity release available visit the Equity Release Types page.

3. Lifetime mortgage lending criteria

You could be eligible for a lifetime mortgage if:

• You own your home.
• It is worth at least £70,000.
• The youngest applicant (i.e. you or your partner or co-owner) is at least 55 years old.
• You have paid off all or most of your existing mortgage. Any outstanding mortgage balance will need to be paid off as a condition of your lifetime mortgage – you can use some of the money you release to do this.
• Your home is in the UK (not the Channel Islands or the Isle of Man) and is your main residence.

Read more about property ownership criteria for a lifetime mortgage.

4. How much does it cost to set up a lifetime mortgage?

The cost of setting up a lifetime mortgage is around £2,000 to £3,000, which usually includes:

• A fee to the equity release adviser
• The lender’s arrangement fee
• Solicitor costs for independent legal advice
• The valuation of your property

Some lifetime mortgage deals may include lender and valuation fees, alternatively these costs can be added to the loan amount.

Your equity release adviser will ensure you understand all the costs involved and work out what the right solution is for you over the longer term. For example, higher set up costs and a lower interest rate may work out cheaper in the long run.

From Ashley Shepherd, our equity release expert's advice on lifetime mortgages:

It’s important to speak to a qualified equity release specialist as part of your decision-making.

Be aware that some equity release advisers only represent one or a few lenders, so may not be equipped with enough choice to find the right solution for your personal situation.

Therefore speaking to an adviser or broker who can search a wide range of equity release market providers on your behalf can help you find the best plan to suit your needs.

We’ve chosen to work with Age Partnership because they compare the UK’s leading equity release providers and offer preferential terms to customers.