Lifetime mortgage

• Uses your property as security to borrow money.
• You continue to own and live in your home.  
  
• Offers flexible payment options (including the option to pay nothing). 
  
• If you choose to pay nothing, monthly interest is ‘rolled up’ and added to the loan.  
  
• The loan is paid back by selling the property when the last borrower dies or goes into long-term care.  
  
• Any money left after paying the loan goes to your beneficiaries (friends and family), unless it is needed for your long-term care. 
  

Most lifetime mortgages backed by the Equity Release Council (ERC)Opens in a new window have a no-negative-equity guarantee where you won’t repay more than the value of your home.   

You must be told if your lifetime mortgage does not have the no-negative-equity guarantee. If it doesn’t, your estate is used to pay off the rest of the loan.

With this mortgage the monthly interest is ‘rolled-up’ and added to your final loan amount. 

• Receive a lump sum or ‘drawdown’ smaller, regular payments (or both). 
  
• Optional monthly repayments. 
  
• Mortgage, including rolled-up interest, is repaid when you sell your home. 
  
• Includes compound interest. 
  

It’s important to remember that with compound interest you will repay far more than you borrow.  

In the first year, the interest is based on the amount you borrow. This interest is then added to the balance of the mortgage. Each following year, the interest is calculated on the loan balance at the end of the previous year.  

With an interest-serviced (or interest-paying) mortgage, you make monthly or one-off payments to reduce or stop the impact of the interest rolling-up. 

• Receive a lump sum. 
  
• Some plans will allow you to pay off part of the capital. 
  
• Mortgage is repaid when your home is sold. 
  

The fee to release equity varies and can be between £1,500 and £3,000. 

Buildings insurance and legal advice are expenses you should also plan for, as well as: 

• an arrangement fee to the lender
  
• legal and valuation fees
  
• advisers’ fees to set up the scheme, or 
  
• a completion fee, which can be paid at the point of completion or added to your mortgage. 
  

There might also be ‘early repayment charges’ for paying off your loan early.

You must hire a solicitor. This is required by the ERCOpens in a new window. Your provider can’t release the money unless you’ve taken out legal advice.  

Your solicitor goes over the details of your equity release plan and checks that you understand the risks. Then, they confirm to your provider that you can accept the offer.  

Read our guide to help you find the right solicitor.

Whether a lifetime mortgage is suitable depends on your age and personal circumstances.  

Always get advice on your options and consider these points before taking out a lifetime mortgage. 

• It reduces any inheritance you leave. 
  
• Interest roll-up mortgages can mean the debt grows quickly due to compound interest. 
  
• Cash you get from your home could mean you’re ineligible for certain means-tested grants, benefits like Pension Credit and local authority support for care. 
  
• You must keep your home in good condition, so you’ll need to budget for this.   
  
• There may be added costs if you have a leasehold property with a short lease. 
  
• The earlier you take out the mortgage, the larger the final debt will be to repay. 
  

If any of these things could be a problem, a lifetime mortgage is probably not right for you, so you could explore alternatives to equity release.

• Can you transfer the lifetime mortgage if you move home? 
• What happens if you die soon after taking out the lifetime mortgage? 
  
• How would the lifetime mortgage affect your state or local authority benefits? 
  
• What fees are payable if you decide to repay the loan? 
  
• Would you qualify for a grant to help you pay for home repairs or alterations? 
  
• What conditions does the lifetime mortgage put on you when you carry on living in the home? 
  
• What happens if you end up owing more than the home is worth? (Does the lender provide a no-negative equity guarantee?) 
  
• What happens if your partner passes away or goes into long term care? 
  

A specialist adviser will help you understand your choices and make the right decision for your circumstances. 

• Find an adviser using the ERC directoryOpens in a new window 
  
• Use our Retirement adviser directory.
  
• For peace of mind, check any adviser is registeredOpens in a new window with the Financial Conduct Authority (FCA).