Lifetime mortgages: equity release
A simple guide to unlocking cash from your home in later life - without having to move out.
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What are lifetime mortgages?
If you're a homeowner over the age of 55 and looking for extra money in retirement, you might have heard about lifetime mortgages, which is a popular type of equity release. Simply put, it's a way of borrowing money against the value of your home - without needing to sell it or move out.
Many people across the UK are using lifetime mortgages to top up their pension, help their children buy a home, or simply enjoy a better quality of life in retirement.
How does equity release work?
A lifetime mortgage is a type of equity release - a way of accessing the money that's tied up in your home. Over time, with higher house prices and paying off your existing mortgage, your property may be worth quite a bit. But unless you sell it, the money essentially sits there. A lifetime mortgage lets you unlock some of that money.
With a lifetime mortgage, you borrow money against your home's market value, but you don't have to make monthly payments. Instead, the initial loan (plus interest) is paid back when you pass away or move into long-term care. The amount you can borrow depends on your age and your property's value.
For example:
Let's say you're 65 and your home is worth £300,000. You might be able to release tax-free cash of £90,000. You could take the maximum loan available or smaller lump sums over time. It's yours to use however you like - maybe home improvements, a new car, or helping the grandkids.
The pros and cons of lifetime mortgages
Before you commit to this type of equity release, let's look at the main upsides and potential downsides:
Advantages:
- Stay in your home: You don't need to move out or downsize - you can stay in the place you love.
- Tax-free cash: The money you receive isn't taxed, so you get to keep every penny.
- Flexible options: Many lifetime mortgages let you choose how you take the money and even let you make voluntary payments if you wish.
Disadvantages:
- Compound interest: Because you're not paying interest regularly, it adds up over time and can grow quickly.
- Less inheritance: The more money you borrow, the less you leave for your family. It's worth having open conversations with loved ones about this.
- Impact on benefits: If you receive means-tested state benefits, a cash lump sum might reduce your entitlement.
Lifetime mortgages and your children's inheritance
Taking out a lifetime mortgage will likely reduce the amount your family inherits. Since the loan (plus any unpaid interest) is repaid from the value of your home when you die or move into care, there may be less left over for your beneficiaries.
That said, many people choose to use equity release to help their children now, rather than leaving it all later. Some plans also offer inheritance protection to set aside a portion of your home's value.
Tip: Ask your broker about how inheritance tax (IHT). The amount your heirs pay can depend on your home's value, the outstanding mortgage, gifts you've made in the last few years, and the latest tax laws and allowances.
Who is a lifetime mortgage right for?
A lifetime mortgage can be a solution for many, but it's not one-size-fits-all. It's best suited to people who:
- Own their home (usually mortgage-free or with a small mortgage)
- Are aged 55 or over
- Don't plan to move house again
- Need access to money in retirement
- Understand and are comfortable with the impact on their estate
If in doubt, talk to a broker
It's always a good idea to seek help from a qualified equity release advisor or financial advisor. They can help you understand the whole process, from inheritance protection options to early repayment, as well as lifetime mortgage interest rates (fixed or variable).
Tip: Brokers will often offer a no obligation chat (though there's sometimes an advice fee) or help you devise a full equity release plan.
Alternatives to lifetime mortgages
If you're not convinced, there are other options to consider. You could downsize, which involves selling your current home and moving to a smaller property. This can provide you with the cash you need without having to borrow. If you still have a stable retirement income, remortgaging might also be a viable option.
Tip: Family help could be an avenue to explore - sometimes children or other relatives are willing to provide funds in exchange for a future share in the property.
Summing up
A lifetime mortgage can offer financial freedom in later life, giving you access to money by releasing equity in your home without having to sell it. It's flexible, tax-free, and you can stay in the home you love. But it's also a big decision. Take your time, talk to your family, and speak with a specialist to make sure it's right choice for you.
Frequently Asked Questions
Do I still own my home with a lifetime mortgage?
Yes, you do. Even after taking out a lifetime mortgage, you remain the full legal owner of your home. The lender simply places a charge on the property, which means they'll be repaid when your home is eventually sold - usually after you pass away or move into permanent care.
Will I have to make monthly repayments?
Not if you don't want to. One of the key features of a lifetime mortgage is that there are no required monthly repayments. Instead, the interest is added to the loan and paid off when your home is sold. That said, many plans now offer flexible repayment options - so if you'd like to make monthly interest payments to reduce the build-up, you can. It's up to you.
How much can I borrow with a lifetime mortgage?
The amount you can release depends on your age, how much equity you've built up, your financial situation, and sometimes your health. Typically, the older you are, the more you'll be able to borrow. For example, someone aged 65 might be able to unlock around 25–30% of their home's value, while someone in their 70s may be eligible for more.
Can I move house later on?
Yes, moving is usually still possible. Most lifetime mortgages are portable, which means you can transfer the loan to a new property if you decide to move. The new home will need to meet the lending criteria - for example, it must be in good condition and of a certain value. If you're moving to a cheaper property, you may also have to repay part of the loan.
Are lifetime mortgages safe and regulated?
Yes, it's a well-regulated financial product in the UK. Lifetime mortgages are overseen by the Financial Conduct Authority (FCA), which ensures lenders meet strict standards. You should also look for members of the Equity Release Council. Their safeguards include the right to stay in your home for life and a no-negative-equity guarantee, so you'll never owe more than your home is worth.
Can I repay my lifetime mortgage early?
Yes - like a traditional mortgage, you can repay a lifetime mortgage loan early, but you may face early repayment charges unless your plan includes features like downsizing protection or allows partial repayments without penalties. It's important to check your specific terms and speak to your lender before proceeding.
About the author
Lawrence Howlett
Lawrence Howlett brings a results-driven mindset to his writing, shaped by over a decade of experience across finance, legal, and energy sectors. As the founder of Moneysavingadvisors, he’s built a reputation for turning complex financial concepts into clear, actionable insights for consumers. His writing stands out for its clarity, structure, and focus on delivering value.
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