Lifetime mortgage guide 2024

*Updated January 2024*

What is a lifetime mortgage and how does it work?

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.

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.

A summary of how a lifetime mortgage works:

    • A lifetime mortgage has no fixed term or end date, hence the name.
    • You take a percentage of the equity in your home as a loan secured against the property, while continuing to live in it.
    • The money you release is tax free.
    • You still own your home and will benefit from any increases in its value over the years.
    • How much you can borrow depends on your age and your home's value. Minimum age is usually 55 years. Most lenders stipulate a minimum loan amount, typically around £10,000. You may be able to borrow more if you have a serious health condition.
    • You can choose to take all the cash as a lump sum or hold some in reserve and draw on it as and when you need it. You are only charged interest on the amount you withdraw.
    • You are not required to make any repayments. Instead, compound interest is added to the loan plus all previous interest, so the amount to be repaid grows over time. To lessen the impact of this, many lenders allow you to repay the interest each month or make partial repayments along the way.
    • A lifetime mortgage is repaid when the last surviving mortgage holder dies or moves into long-term care. At this point, your home is usually sold and the loan paid off from the sale proceeds (although it can be paid off by other means). Any money left over will go to your beneficiaries.
    • If the proceeds of the sale are not enough to pay off the lifetime mortgage, your beneficiaries will never have to pay back more than the value of your home. This is an Equity Release Council standard known as the no-negative equity guarantee.
    • If your financial circumstances change and you choose to pay off a lifetime mortgage early, you may have to pay an early repayment charge, which could be considerable.
    • You can choose to ring-fence some of the value of your property as an inheritance for your family.
    • Lenders will have different criteria, so it is worth understanding these before you start looking for a new property

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. What types of lifetime mortgage are available 
  2. The lifetime mortgage lending criteria 
  3. The costs of a lifetime mortgage 
  4. What is a lifetime mortgage
  5. How safe are lifetime mortgages

1. 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.

2. 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.

3. 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.

4. What is a lifetime mortgage?

A lifetime mortgage is a loan secured on your home. Available to UK homeowners aged 55 or over, it is the most popular kind of equity release.

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.

5. Are lifetime mortgages safe?

Yes, lifetime mortgages are safe. Equity release comes under a high level of scrutiny to ensure customers’ interests are protected.

All equity release schemes are regulated by the Financial Conduct Authority (FCA), so lenders, brokers and advisers must be authorised and follow the FCA’s strict codes of conduct. It also means their customers have access to the Financial Ombudsman and the Financial Services Compensation scheme should issues arise.

The Equity Release Council oversees the industry and demands the highest standards of its members who commit to a strict set of principles designed to protect the customer.

Simply Equity Release is a member of the Equity Release Council as is our chosen partner, Age Partnership.

Ashley, 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.

For frequently asked questions about Lifetime mortgages please visit our FAQ page.

Next steps

To discuss your plans and your options, call Age Partnership on 0800 368 8466 for a free, no-obligation consultation.

Or try our lifetime mortgage calculator to see how much money you may be able to release from your home.

Try the lifetime mortgage calculator

Ways to contact us

Call 08001337380
Call 0800 368 8466
Arrange a callback
Arrange a callback
Try the calculator
Try the calculator
Email us
Email us

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We work with

Age Partnership

We are members of

Equity Release Council

Part of the Over50choices group

Over 50 Choices

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