Lifetime Mortgages:
How to Unlock Equity in Your Home

Lifetime Mortgages: How to Unlock Equity in Your Home

If you’ve worked hard to pay off your mortgage but find your retirement income limited, a lifetime mortgage could help. This guide will explain how lifetime mortgages work, how much you could borrow, and whether they’re the right choice for you.

What is a Lifetime Mortgage, and How Does It Work?

A lifetime mortgage is a type of equity release, where you borrow against the value of your home without needing to make repayments until you die or move into long-term care. The loan, plus any interest, is repaid from the sale of your home. Some lifetime mortgages allow you to ring-fence a portion of the equity for inheritance purposes, ensuring something is left for your beneficiaries.

Lending Criteria for Lifetime Mortgages

Eligibility for a lifetime mortgage typically depends on a few factors:

• You must be over 55 (both applicants in joint applications).

• The property must be your primary residence.

• You need to own the property outright or be able to pay off any remaining mortgage as part of the equity release.

Credit history is less important, as lenders focus on the property’s value to secure the loan.

Types of Lifetime Mortgages

There are different ways to structure a lifetime mortgage, depending on how you take the loan and repay it:

• Lump Sum vs. Drawdown: You can take all the money at once or opt for a flexible drawdown facility to release funds as needed, which can reduce the amount of interest accrued over time.

• Interest Roll-Up: With this option, you make no monthly repayments, and the interest builds up over time, to be repaid with the loan when your home is sold.

• Interest Payment: Alternatively, you can choose to pay some or all of the interest, reducing the overall amount owed when the loan is repaid.

Enhanced Lifetime Mortgages

For borrowers with certain health conditions or lifestyle factors (like smoking), an enhanced lifetime mortgage may allow you to borrow more or secure a lower interest rate. Common qualifying conditions include hypertension, diabetes, heart disease, and cancer, among others.

How to Get a Lifetime Mortgage

To get started, it’s a good idea to:

1. Discuss with family: Equity release can impact inheritance, so it’s worth talking to family members to explain your decision and discuss how it could affect them.

2. Consult a broker: Speak with a specialist broker who can assess your circumstances and guide you to the right lenders, ensuring you get the best possible deal.

How Much Could You Borrow?

The amount you can borrow depends on your age and the value of your home, typically between 20% and 60%. Older borrowers can generally access larger amounts since lenders have less time to accrue interest. Use Mortgage One’s equity release calculator to get an estimate based on your home’s value and age.

Which Lenders Offer Lifetime Mortgages?

Specialist equity release lenders and certain mainstream providers offer lifetime mortgages. Working with Mortgage One can help you find the right lender, as not all lenders offer the same terms, and your eligibility may depend on specific factors.

Are Lifetime Mortgages a Good Idea?

A lifetime mortgage can provide the financial flexibility you need to enjoy retirement without downsizing. However, it’s essential to consider the potential impact on your estate and inheritance. Consulting a financial advisor can help you weigh the pros and cons based on your personal circumstances.

Alternatives to Lifetime Mortgages

Before committing to a lifetime mortgage, consider alternatives such as downsizing, remortgaging, or looking into other types of equity release products like home reversion plans.

Mortgage One - Lifetime Mortgage Specialists

The best way to ensure you get the right deal is by speaking with a broker who specialises in lifetime mortgages. Mortgage One are experts who understands the intricacies of equity release and will help you navigate the process with confidence.