What is a lifetime mortgage? Everything you need to know

Turning your home into money to help you get buy in retirement doesn’t have to involve selling it, moving out, or making monthly repayments. Esther Shaw explains everything you need to know about lifetime mortgages and how they work

Lifetime mortgages are popular with older homeowners (those aged 55+) looking to boost their income. 

They are a type of ‘equity release’ product which allow someone to release tax-free cash from their property while remaining in their home.

While these mortgages can certainly be worth considering if you’re in need of money later in life – perhaps for a holiday, home improvements, or to help out a family member with a property purchase – they need to be used with caution, as they aren’t an arrangement that suits everyone. 

As people can often find them confusing, in this guide we’re going to walk you through exactly how Lifetime Mortgages work, who they are for and the key benefits and drawbacks. 

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What is a lifetime mortgage in simple terms?

Equity release is an arrangement which enables older homeowners to unlock tax-free cash from their property’s value without having to sell up and move out. The most popular type is a lifetime mortgage. 

• One of these products is designed to last until you pass away, or until you move into permanent care
• You can choose to pay interest each month, or not pay any interest and have it ‘rolled up’ and added to the loan
• When the property is sold, the loan is repaid in full

A lifetime mortgage allows you to take out a loan secured against your home. Unlike a ‘standard’ mortgage, you are not required to make monthly payments. Instead, interest often rolls up, and the loan is only repaid when you due or move into long-term care and your property gets sold.

How does a lifetime mortgage work?

Most equity release is structured as a lifetime mortgage. With these:

• You keep ownership of your home
• You get a property valuation and find out how much you can borrow
• You don’t have to make any monthly repayments (unless you choose to do so)
• The interest rolls up over time 
• The loan is only repaid upon death or when the owner moves into long-term care and the property is sold

One element of a lifetime mortgage that can often cause confusion is ‘interest accumulation’. This refers to the way that interest rolls up over the life of the loan and means that the longer it lasts, the more costly it will be. (Though you can also opt to make repayments so as to minimise the roll up of interest).

As a rough guide, say you released £150,00 at around 6% and made no repayments, you could see the balance roughly double in about 12 years. Over longer periods – say, 10, 15 or 20 years – the effects of compounding become increasingly significant.

Who can get a lifetime mortgage? Eligibility explained

When deciding to offer you a lifetime mortgage and how much you can borrow, lenders look at:

• Age: typically, you need to be aged 55 or over
• Property ownership: you must own your own property in the UK
• Property type: homes usually need to be of ‘standard’ construction; note that some lenders may restrict lifetime mortgages on ex-local authority, leasehold properties, or non-standard builds
• Property value: to apply for equity release you need to own a home worth at least £70,000
• Usage: the property must be your main residence (not a buy-to-let property or holiday home)
• Joint applications: may be possible provided both applicants are listed as owners of the property. The youngest applicant must be at least 55

*Note that eligibility criteria may vary from one lender to the next. Be sure to check the Ts and Cs carefully, and if in doubt ask.

What are the pros and cons of a lifetime mortgage?

PROS

• Lets you access tax-free cash
• Means you can stay in your home without needing to sell up
• There are no mandatory monthly repayments
• No risk of negative equity [this is when your property is worth less than the amount you have left to pay on the mortgage]
• You can help financially support your children while still living in your home

CONS

• Interest will roll up over time if left unpaid, and means your total borrowing is more expensive
• Opting for a lifetime mortgage can reduce the inheritance you have to leave behind for loved ones
• Equity release can affect your entitlement to means-tested benefits now or in the future
• There are early repayment charges and these can add up

Is a lifetime mortgage right for me?

A lifetime mortgage enables you to free up some cash while continuing to live in your home. 

But what you need to realise is that compounding interest can chip away at the value of your estate. 

With this in mind, this type of equity release arrangement can work well if you’re looking to support wider plans for your family. It won’t be the solution if you want to safeguard your future inheritance. 

Equally if you do decide a lifetime mortgage isn’t right for you, there’s no need to panic. There are plenty of alternatives – and we can help you find the one best suited to you.

What are the alternatives?

Here are the main options you have to raise cash if you decide a lifetime mortgage isn’t for you:

• Retirement interest-only mortgages – this option is related to the lifetime mortgage, once again enabling homeowners to borrow against their property. In this case, however, borrowers are required to make interest payments each month. The loan is then usually repaid when the owner dies or goes into long-term care, and the property is sold
• Downsizing – moving to a smaller home is a good way to free up cash without extra borrowing. However, you need to be aware that moving costs such as stamp duty, agent fees and legal fees can be costly
• Remortgaging – if you have a decent amount of equity in your property, remortgaging is another way to release cash, especially when rates are low. Just be aware that later-life borrowing comes with risks, including higher repayments, tighter lending limits as you approach retirement, and additional costs. You need to be sure you can comfortably afford this option before going ahead and trying to switch lender
• Using savings or investments – you may be in the fortunate position of already having readily-available funds in savings accounts or investments that you can use at this point in life to boost your income. If so, you won’t need to worry about remortgaging, downsizing, or finding an equity release solution.

At BeCleverWithYourCash we are here to help you explore all the options – and to find the one that best suits your needs. 

Lifetime mortgage FAQs

How much does a lifetime mortgage cost?

It’s tricky to put a precise figure on the costs, as with these mortgages, interest rolls up over time, reducing inheritance. You also need to factor in fees such as valuation and arrangement charges, as well as the cost of using an adviser; these costs could end up totalling several thousand pounds overall.

What happens to your home and inheritance?

With a lifetime mortgage, you get to keep your home, but the loan – and the accumulated interest – need to be repaid from its sale. As a result, this can reduce the value of the estate you leave behind. Given this ‘downside’ of this arrangement, a lifetime mortgage may not be right for you if you’re looking to safeguard future inheritance.

What are the pitfalls of a lifetime mortgage?

As interest mounts up over time with a Lifetime Mortgage, this can impact the inheritance you leave for loved ones. These products can also come with early repayment charges and may affect your eligibility for certain means-tested benefits. You need to weigh up all the pros and cons carefully before making the decision to go ahead.

Are lifetime mortgages a good idea?

A lifetime mortgage can be an option worth exploring if you’re a homeowner needing cash in later life – perhaps to support children. But as interest can mount up, and the inheritance left to loved ones can get diminished, you need to tread carefully. Equity release is a complicated area, so one of these products is only a good idea if you’ve done your research and taken professional financial advice. 

Explore your home-buying options

If you want to find out more about how much you could borrow more generally – with a ‘conventional’ mortgage – make use of our Mortgage Affordability Calculator. This can help you see how much you could borrow and the monthly repayments you could expect to pay. At the same time, if you want to compare rates on ‘conventional’ mortgages, then make use of our comparison table tool. 

Just be aware that things may work a little differently if you’re considering a Lifetime Mortgage or another type of equity release arrangement. If you are, you need to speak to a professional, to ensure it’s the right option for you – and that you understand exactly what you’re getting into.

Important

*Your home may be repossessed if you do not keep up repayments on your mortgage. Be Clever With Your Cash may receive a payment from Tembo Money if you complete a mortgage through the link provided. This will not affect the amount you pay for the service.

This broker fee discount of up to £499 is applicable for standard mortgages and remortgages only, more complex cases including guarantor, buy-to-let, adverse credit, and equity transfer may be liable for a fee. The fee you are required to pay will be clearly outlined by your adviser prior to an application being submitted on your behalf. The offer does not cover any other potential fees that may arise during the mortgage process.

Tembo Money Limited (12631312) is a company registered in England and Wales with its registered office at 18 Crucifix Lane, London, SE1 3JW. Tembo is authorised and regulated by the Financial Conduct Authority under the registration number 952652. Tembo Money was awarded Best Mortgage Broker at the British bank awards in 2022, 2023, 2024 and 2025. Rates are not guaranteed and may change by the time you come to apply. Eligibility criteria may vary by lender.

Our calculator is only an estimate of how much you are able to borrow and does not constitute mortgage advice