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Lifetime mortgage

There are three main types of Lifetime Mortgages available: Interest roll-up mortgage, Interest only mortgages and Fixed Repayment Mortgage.
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Lifetime Mortgage

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration

We will explain all the pros and cons of each option to help you make the best decision for your family.

Our fully qualified advisers with decades of experience will search the whole of market with access to all equity release lenders.

Types of Lifetime Mortgages

1. Interest roll-up mortgage

With a roll-up mortgage, you do not make any payments. Interest is added to the loan which is repaid when your home is sold. If you take a lump sum of £45,000 and the interest rate is 5%, after 25 years the amount you owe is £152,387.

2. Interest-only mortgages

You get a lump sum, but like a normal interest-only mortgage you pay the interest monthly. Unlike a normal mortgage, there is no fixed term, you can continue to borrow the original amount until your home is sold. With some lenders, it may be possible to pay part-interest and the balance roll-up.

3. Fixed Repayment Mortgage

At the outset of this loan, the full amount to be repaid is agreed. You do not make any payments. The loan is only repaid when your home is sold. This type of Equity Release can work in your favour if you live longer than expected, but this is a much worse deal than a roll-up mortgage should you die sooner than expected.

Lending Criteria

Providers have strict lending criteria such as minimum age, percentage of your property you can borrow and minimum loan amounts.

All lifetime mortgage products offer a no-negative-equity guarantee which means that you will never repay more than the value of your property.

Benefits of Lifetime mortgages over Home Reversion Plans

  • Monthly income or large lump sum
  • You keep ownership of your home
  • Loan is only repaid when your property is sold
  • Potential benefit from any future increased in the value of your home
  • Fixed interest rates
  • No-negative-equity guarantee

Drawbacks to consider with Lifetime mortgages

  • If you own a leasehold property the lease is expected to be 80 years or more in most cases
  • The inheritance you leave is greatly reduced
  • Early repayment charges may apply
  • Loss of means-tested benefits: you may no longer be eligible for pension credit and council tax benefit
  • Arrangement and Valuation fees
  • You may not be able to transfer the debt if you choose to move home

Lifetime Mortgage Examples

The following Lifetime Mortgage example is based on borrowing £45,000 and an interest rate of 6.5%

The example shows how the debt accumulates up to 15 years, however a lifetime mortgage will continue until death or sale of your property. All lifetime mortgages have no-negative-equity guarantee, which means you will never repay more than the value of your propery when it is sold.

Roll-up Mortgage Interest-only Mortgage Fixed Repayment Mortgage
You Receive Lump Sum £45,000 Income £250 per month Lump Sum £45,000 Lump Sum £45,000
You Pay Nil Nil £243.75 / month
Interest only		 Nil
After 5 years £45,000 + £16,654
TOTAL DEBT £61,654		 £15,000 + £2,764
TOTAL DEBT £17,764		 £45,000 + £0
TOTAL INTEREST PAID £14,625		 You pay the sum agreed at the outset of the loan
After 10 years £45,000+£39,471
TOTAL DEBT £84,471		 £30,000+£12,329
TOTAL DEBT £42,329		 £45,000 + £0
TOTAL INTEREST PAID £29,250
After 15 years £45,000+£70,733
TOTAL DEBT £115,733		 £45,000+£31,297
TOTAL DEBT £76,297		 £45,000 + £0
TOTAL INTEREST PAID £43,875
NOTES Interest on £45,000 is accumulated from the start of this mortgage Interest is charge on the amount you have borrowed to date The outstanding amount to repay will remain at £45,000 whilst interest is repaid It’s your challenge to live as long as possible to get value for money

At Bright Money Independent, our qualified equity release advisers will explore all of your circumstances to ensure that equity release is the right decision for you. If they don’t agree it is in your best interest they will advise alternative options.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

FAQs

for
Lifetime
Mortgages

A lifetime mortgage is a type of equity release that allows homeowners to borrow against the value of their property while continuing to live in it. The loan, plus interest, is usually repaid when the property is sold, often after the homeowner dies or moves into long-term care.

 

With a lifetime mortgage, interest is added to the loan over time. Repayment is typically deferred until the property is sold, although some plans allow voluntary repayments to help manage the balance.

 

Eligibility usually depends on age, property value, and property type. Most lifetime mortgages are available to homeowners aged 55 or over, although criteria varies between providers.

 

Yes. With a lifetime mortgage, you remain the legal owner of your home. The lender places a charge against the property, but ownership does not transfer.

 

The amount available depends on factors such as age, property value, and lender criteria. Older applicants may be able to release a higher percentage of their property’s value.

 

Some lifetime mortgages allow voluntary repayments, either on a regular or ad-hoc basis. This can help reduce the amount of interest that builds up over time, subject to plan terms.

 

Yes. Unless voluntary repayments are made, interest is usually added to the loan balance over time. This is known as compound or rolled-up interest.

 

Yes. Lifetime mortgages are regulated by the Financial Conduct Authority. Many plans also follow standards set by the Equity Release Council, including a no negative equity guarantee.

 

A lifetime mortgage can reduce the value of your estate, as the loan and interest are repaid from the sale of your home. Some plans offer inheritance protection options, which may limit how much can be borrowed.

 

In many cases, yes. Most lifetime mortgages are portable, allowing the loan to be transferred to a suitable new property, subject to lender approval.

 

Early repayment may be possible, but early repayment charges often apply. These charges vary by provider and may reduce over time or be linked to interest rates.

 

Not always. While lifetime mortgages can provide flexibility and access to funds, they are not suitable for everyone. Other options such as downsizing or alternative borrowing should also be considered.