What is a lifetime mortgage?

8 minutes


A lifetime mortgage is a type of equity release product. It allows you to unlock equity you have built up in your home over the years by taking out a mortgage that doesn’t need to be paid back until after you pass away or move into long-term care.

With a lifetime mortgage, you’ll most likely start by speaking to a financial adviser or retirement advice specialist. They’ll look at your existing financial circumstances as well as understand what your plans and needs are for retirement. Following this, you’ll know what the best options are to fund your retirement, which could be a lifetime mortgage.

The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please make sure you speak to a financial adviser.

Who is eligible for lifetime mortgages?

To get a lifetime mortgage you must be a minimum of 55 years old, although individual providers may vary. If you are applying as a couple, then the youngest person in the couple must be over 55 years old.

As well as this, you also have to own a certain type of property. Some properties like houseboats, listed properties, and those with non-standard construction, such as older timber frame properties, may not be eligible for equity release. This is because at the end of the lifetime mortgage, the provider will regain the money from the sale of your home. They need to be confident that the money they lend you can be made back, and certain types of homes might have limited saleability in the future.

How lifetime mortgages work

Lifetime mortgages are a type of equity release. They work by lending you a sum of money against your home through a secured loan. Lifetime mortgages don’t require any monthly repayments. However, you can make repayments if you wish. Lifetime mortgages also use compound interest, meaning your interest is calculated based on the cost of the loan plus any interest accrued. This means that the amount owed can add up quite quickly, especially without repayments.

A lifetime mortgage is repaid in full when the last borrower passes away or moves into long-term care. 

Need help with equity release?

Releasing equity from your home isn’t an easy decision, and there are lots of things to consider. For an impartial, commitment-free chat, speak to one of our friendly advisers.
You can also order a free Equity Release brochure.

What are the advantages of lifetime mortgages?

The main advantage for many people is the access to tax-free cash, using their home as security. Unsecured loans, such as ones you get from the bank, are often lower in value and come with strict repayment rules. A lifetime mortgage means you can often borrow more than with an unsecured loan and the loan is repaid once the last borrower passes away or moves into long-term care.

With a lifetime mortgage, you also remain in your home with no additional costs. Often, the only requirement is to maintain the home and building’s insurance.

One of the other advantages of a lifetime mortgage is that some providers offer inheritance protection, where a percentage of the home’s sale can be ring-fenced for inheritance. This is often capped, and not all providers will offer this. If inheritance protection is important to you, make sure you make this clear when you speak to an equity release adviser, as they’ll be able to find the right products for you.

Disadvantages of lifetime mortgages

Lifetime mortgages aren’t right for everyone. Retirement is one of the biggest financial periods in a person’s life, so having the best option for you and your circumstances is key.

One of the biggest disadvantages of lifetime mortgages is the compound interest. This means that the interest is calculated based on the loan plus interest accrued. Over time, this can get very expensive and can impact the amount of inheritance you’re able to pass on.

If you have taken a product out that isn’t under the Equity Release Council, then you may also be at risk of negative equity if the sale value of your home is less than the amount owed. Equity release providers who have signed up to the Equity Release Council standards agree to offer a no-negative equity guarantee. This means you’ll never have to repay more than the value of your home, even if the amount owed is more.

Types of lifetime mortgages

There are two main types of lifetime mortgages which are lump sum and drawdown. If you have certain medical conditions or lifestyle choices then you may be eligible for an enhanced lifetime mortgage with some providers.

Lump sum lifetime mortgage

Lump sum lifetime mortgages give you all the money in one go. You can then use the money as you wish, whether that’s debt consolidation, home renovations, or providing an income.

Drawdown lifetime mortgage

A drawdown lifetime mortgage doesn’t release all the money at one go, instead you can release the cash over time, as and when you need it. As you only pay interest on the cash you have released, some find this a more effective way to fund larger purchases. This option could also be a more cost effective way of funding things that are needed in future, rather than taking a lump sum and holding the funds in a bank account.

Enhanced lifetime mortgage

Some providers may offer an enhanced lifetime mortgage if you meet certain criteria, such as being diagnosed with a life-limiting illness or meeting certain lifestyle conditions. With an enhanced lifetime mortgage, you may be eligible for an increased loan amount or a lower interest rate than the standard market. 

What fees are involved with a lifetime mortgage?

A lifetime mortgage does have fees associated with it, like a standard mortgage. These fees  often vary depending on the provider you choose, and whether you use a financial adviser or equity release adviser in the process. You could be charged for:

  • arranging the policy,
  • solicitors,
  • a valuation, or
  • advice.

These fees will fluctuate, and could be paid upfront, or once a product has been taken out.

Applying for a lifetime mortgage

To apply for a lifetime mortgage, you’ll need to go through a qualified equity release adviser. This is mainly because lifetime mortgages aren’t always the best option for you. Instead, there may be an alternative retirement product that works better for you and your circumstances.

If a lifetime mortgage is the right option for you and you choose to proceed with one, then you’ll first go through regulatory checks with the lender. If the regulatory checks are approved, then a surveyor will be sent out to the property to value the home and ensure there are no major concerns with the structure of the property. Then, the survey will be sent to the lender and if they approve, it will go to a solicitor who will arrange the transfer of money.

FAQs on Lifetime mortgages

While you’ve probably got lots of questions, here’s some of the most popular ones we get asked.

Can you pay back equity release products early?

If your product is under the Equity Release Council and was taken out after the 28th March 2022, then you are able to make voluntary partial repayments of up to 10%. Older lifetime mortgage plans may have a charge associated with partial repayments. Read our guide on paying back equity release products for more.

Are you still the registered owner with a lifetime mortgage?

Yes, you are still the registered owner with a lifetime mortgage. Similarly to a traditional mortgage, you own the home but the money to finance the home is from a bank or lender.

Are you looking for advice on lifetime mortgages?

At LV= we offer impartial, FCA-regulated advice that will help you to understand what the right options are for you in your retirement. Why not get in touch with one of our equity release advisers today to receive a free, no-obligation call?