A lifetime mortgage is a type of equity release. In simple terms, it’s a loan secured against the value of your home that allows you to release tax-free cash without needing to move out.
A lifetime mortgage is a type of equity release. In simple terms, it’s a loan secured against the value of your home that allows you to release tax-free cash without needing to move out. You retain ownership, can still live in the property, and it doesn’t need to be repaid until you die or move into long-term care.
By releasing equity from your home, you can plan for retirement, holidays, and home improvements. Or help a family member financially.
The eventual sale of your house is used to pay off the loan. But you can often set aside some of your property’s value as inheritance for your family. You can either borrow a lump sum or several smaller amounts over time (known as a drawdown).
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The amount you can borrow on a lifetime mortgage depends on factors like your age, the value of your property, and your health.
(If you don’t want to take on extra monthly commitments or deplete your savings, you might want to explore equity release as a means of accessing funds. However, getting the right advice is crucial. For some people, a lifetime mortgage is not the best route to take, so getting the right advice is crucial – we can help you weigh up the options.)
Age: The older you are, the more you can typically borrow. Most lifetime mortgage lenders have a minimum age requirement, usually between 55 and 60. Generally, the older you are, the higher the percentage of your home’s value you’ll be able to borrow.
Property Value: Lenders typically allow you to borrow a percentage of your property’s market value. Most lifetime mortgages allow you to borrow between 20% and 60% of your home’s value, with the exact amount based on your age and other factors. High-value properties might qualify for larger loans.
Health and Lifestyle: Some lenders offer enhanced lifetime mortgages, which allow you to borrow more if you have certain health conditions or lifestyle factors (like smoking). Health assessments may qualify you for a higher borrowing amount if they reduce life expectancy, as this shortens the loan term.
Interest Rates and Loan Type: Interest rates on lifetime mortgages are typically higher than on traditional mortgages, and the type of lifetime mortgage you choose (such as a lump-sum, drawdown, or flexible lifetime mortgage) can impact the loan amount. Drawdown options, for example, allow you to take smaller amounts as needed but may limit the overall loan size.
Loan-to-Value (LTV) Ratio: The LTV ratio indicates the percentage of your home’s value that the lender will loan you. For example, a 60% LTV means you could borrow up to 60% of your property’s value. Age and health factors influence the LTV a lender will offer.
For example, a 65-year-old with a home worth £400,000, a typical lifetime mortgage might allow borrowing around 25–35% of the property’s value, meaning approximately £100,000 to £140,000. A 75-year-old with the same property might qualify for closer to 40% or 50%, which would be around £160,000 to £200,000.
