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- What Is A Lifetime Mortgage, And How Do They Work?
Lifetime mortgages
If you’re thinking about releasing equity from your home, a lifetime mortgage could be an option worth exploring. It’s one of the most popular ways for homeowners aged 55 and over to access funds later in life without having to sell up or move out.
Below, we’ll walk through what a lifetime mortgage is, how it works, and the key things to consider before making a decision.
What is a lifetime mortgage?
A lifetime mortgage is a type of equity release that allows you to borrow money against the value of your home while continuing to live in it. Unlike a traditional mortgage, there’s no requirement to make monthly repayments unless you choose to.
The loan, along with any interest that has built up, is repaid when the last homeowner enters long-term care or passes away. Importantly, you remain the legal owner of your home throughout.
This flexibility means you can stay in your home for the rest of your life if you wish, and in many cases, with the option to be able to move to another property later, provided it meets your lender’s criteria.
How do lifetime mortgages work?
Lifetime mortgages are designed to give you financial freedom in later life. You can use the money for almost any purpose – home improvements, helping family onto the property ladder, or simply enjoying retirement. There are two main ways to access funds:
Lump Sum - You receive a one-off, tax-free payment of the full amount you’re able to release.
Drawdown - You take a smaller initial lump sum and keep the rest in reserve, drawing on it as and when you need it.
The drawdown option can be more cost-effective because interest is only charged on the money you’ve actually taken. However, any funds released later will be subject to the interest rate at that time, which could be different from your initial rate.
Interest and Costs
Interest on a lifetime mortgage works differently from a standard mortgage. It is compounded, which means interest is added to your balance and then interest is charged on that interest. Over time, this can make the total amount you owe grow quickly if you don’t make any repayments.
You don’t have to pay anything during your lifetime, but if leaving an inheritance is important to you, paying some or all the interest can make a big difference.
In addition to interest, there may be set-up costs such as arrangement fees, solicitor fees, and advice fees. Many lenders offer free property valuations, and some advisers provide free initial advice, only charging a fee if you proceed. For example:
Arrangement fees: Also known as an application fee or product fee, which is usually charged at a set rate or a percentage of your loan size
Solicitor fees: Specialist equity release solicitors usually charge in the region of £650 but can vary
Valuation fees: Many lenders offer free valuation fees on this type of product, but they may apply
Advice fees: Some lifetime mortgage advisers charge for their advice, typically around 1-3% of the loan value, however, it is possible to obtain free advice. Our partner Royal London Equity Release Advisers can provide you with free expert advice, only charging a fee if you take out a lifetime mortgage with their help
Am I eligible for a lifetime mortgage?
Most lenders require:
Must be a UK homeowner
All applicants to be 55 or over
A property worth at least £70,000, which is your main residence
Minimum borrowing of £10,000
Important safeguards
If you decide to go ahead, make sure your lender is approved by the Equity Release Council the UK’s industry body. This gives you vital protections, including fixed or capped interest rates, the right to stay in your home for life, and a no-negative-equity guarantee. You’ll also have the option to move your mortgage to another property if you relocate, provided the new home meets the lender’s criteria.
What are the advantages?
A lifetime mortgage gives you access to tax-free cash without the need to sell your home or downsize. You can stay in your property for life, and you’re not obliged to make repayments unless you want to. Many products offer features such as inheritance protection, downsizing options, and a no-negative-equity guarantee, which means you’ll never owe more than the value of your home when it’s sold.
What should you consider?
While lifetime mortgages can be a great solution for some, they’re not right for everyone. Interest builds up quickly if unpaid, and the amount you owe will reduce the value of your estate, which means less for your beneficiaries. It can also affect entitlement to means-tested benefits, and early repayment charges may apply if you decide to pay off the loan sooner than planned.
A lifetime mortgage can provide you with more financial freedom in your later years, however, it's important to understand that it will reduce the value of your estate and may affect means-tested benefits. Always seek advice from an Equity Release Council registered adviser.”Laura Hamilton, Mortgage Expert
Lifetime mortgages FAQs
Can I pay off my lifetime mortgage early?
You can choose to repay a lifetime mortgage early, but there are likely to be strict ERCs (early repayment charges) involved with doing so, so it’s important to consider how much impact this cost would have on your plans.
Do I own my home with a lifetime mortgage?
Yes, with a lifetime mortgage, you are still the owner of your property.
What's the difference between equity release and a lifetime mortgage?
There is no difference, a lifetime mortgage is a form of equity release, with the alternative equity release product being a home reversion plan. The latter are not very popular in modern times, as they are much less flexible and you don't retain ownership of your home, although you are able to stay in it.
Are there any alternatives to a lifetime mortgage?
The home reversion plan is another form of equity release. It involves selling your home at a below-market rate to a home reversion provider, who will then allow you to remain in the property until you die or go into long term care.
With a home reversion plan, you are only likely to be offered 20-60% of the current value of your home, you will not be able to move to a new property if you want to, and you will not be able to leave an inheritance from the value of your home, as the lender will own it outright.
Depending on why you are choosing to release equity, there could also be a number of non-equity release options that would help you to raise the funds needed, if equity release is not for you.
For example:
Downsize to a more affordable property
Remortgage your home – many lenders can help older and retired borrowers
Take out a retirement interest-only mortgage (RIO) – Similar to a lifetime mortgage, but interest must be repaid each month
Taking in a lodger – you can earn up to £7,500 a year tax-free from letting a room
Maximise your existing savings and investments with the help of a financial adviser
Could I end up in negative equity with a lifetime mortgage?
Negative equity is where you owe more than the current value of your home. So long as your equity release provider is a member of the Equity Release Council, you will be covered by their ‘no negative equity guarantee’.
This means that you (or your estate) will never owe money more than the value of your home when the loan is repaid, as the most any lender could take is 100% of the proceeds of the sale of your home.
What is the Equity Release Council?
The Equity Release Council (ERC) is a voluntary trade body which oversees the equity release sector. They are fully regulated by the Financial Conduct Authority (FCA) and all lenders that have membership to the council have a responsibility to uphold values and standards of conduct through customer safeguarding.
If you’re considering a lifetime mortgage, it’s vital to ensure that you opt for an Equity Release Council approved lender, as this will offer you the following legal and financial protections:
All interest rates are fixed for life (or capped if you choose a variable rate), no matter when the money is accessed
Retained ownership of your home and a right to stay in it for your lifetime
The right to transfer your lifetime mortgage to another property, so long as the property meets lender criteria
A no-negative-equity-guarantee, meaning you (or your estate) will never repay more than the value of your home
The right to make voluntary contributions towards repaying the interest
How do I compare lifetime mortgages?
Taking out any form of equity release carries potential risks, so it’s incredibly important to seek advice from a Equity Release Council approved adviser before you make any permanent decisions.
They will also be able to help you to compare deals from across the market, so that you don’t miss out on products offered by lenders that are perhaps less accessible to the general public.
It’s important to look at all of the product benefits alongside the interest rates, to see if they align with your needs. For example, securing a ring-fenced figure for your beneficiaries could be an important element of the plan for some borrowers.
How much can I borrow with a lifetime mortgage?
This will depend on a few factors, including how much you want to borrow, you are certainly not obliged to take the full amount available to you, your age and health status, and the value of your property.
Lenders will typically offer a higher loan to value (LTV) to older borrowers or those with serious or terminal illnesses. For example, a healthy fifty-five year old is likely to be offered a smaller loan than an eighty year old with cancer.
There are online equity release calculators that may give you an idea of how much you could borrow, but it’s worth bearing in mind that these are not set up to take into account personal circumstances. It’s usually best to confirm your findings with an expert adviser.
Are there risks involved with lifetime mortgages?
As mentioned above, there are potential disadvantages and risks involved with lifetime mortgages, however, it will depend on your circumstances whether they apply to you and how much you are affected.
So long as you seek advice from a broker or advisor who is registered with the Equity Release Council, and you fully understand the potential risks involved, however, you will be in a strong position to make the right decision for you.
Last updated: 23 January 2026