For many Britons, owning a home they are proud of is one of life’s greatest milestones.
After years of hard work, that home may be their most valuable asset as they approach retirement.
For those looking to unlock some of the equity they’ve built up without having to move, borrowing with a lifetime mortgage could be a practical way to supplement their retirement income.
But what does that mean, and how does this form of equity release work?
We spoke to Sophie Chiswell, head of equity release advice at Royal London Equity Release Advisers, to uncover what prospective borrowers should know before deciding to release equity from their home
Lifetime mortgage: This type of equity release can allow borrowers to unlock some of the money tied up in their property, without the need to move home
What is a lifetime mortgage?
A lifetime mortgage is the UK’s most popular type of equity release. It is available to homeowners over the age of 55 and allows them to access some of the wealth tied up in their home while maintaining 100 per cent ownership of the property.
The loan is secured against the borrower’s home, with no mandatory repayments required until the last borrower either passes away or moves into long-term care. However, voluntary repayments can be made at any time to help reduce the compounding of interest.
When the plan ends, the loan plus any accrued interest is repaid. The total amount owed will depend on the interest rate, the terms of the plan, and how long the loan has been in place.
Chiswell says: ‘A lifetime mortgage is a flexible way for UK homeowners over 55 to access some of the wealth tied up in their property without needing to move.
‘Lifetime mortgages now account for over 99 per cent of the equity release market, reflecting the progress made in product safety, choice, and consumer confidence. For many of our customers, it’s a practical way to enjoy a more comfortable retirement.’
The other main type of equity release is a home reversion plan. Unlike a lifetime mortgage, customers do not retain full ownership of their property.
Instead, they sell all or part of the property and, in return, receive a cash lump sum and the right to stay in their home. Some plans may also charge a monthly rent, subject to the lender’s criteria.
Criteria: Lifetime mortgage borrowers must be aged 55 or over, and have either paid off their existing mortgage, or agree do so using the funds released
Who can get a lifetime mortgage?
To qualify for a lifetime mortgage, borrowers must be aged 55 or over.
Homeowners will need to have either fully paid off their existing mortgage or agree to repay it in full using the funds released.
Lenders will also carry out a survey to ensure the property meets their criteria for value and condition.
Unlike traditional mortgages, lifetime mortgages do not require affordability or income checks, as repayments are optional.
However, it is important for borrowers to understand that taking out a lifetime mortgage will reduce the value of their estate and, consequently, the inheritance they can leave to family or friends.
It may also affect your entitlement to means-tested benefits.
What do customers spend the money they release on?
Lifetime mortgage customers can either take their funds as a lump sum or choose a drawdown plan, allowing them to access from their equity in stages.
Each option has its advantages and disadvantages, which your adviser will explain during the application process.
Last year, one of the most popular reasons for releasing equity among Royal London Equity Release Advisers customers was home improvements, with borrowers looking to make their properties as comfortable as possible for later life.
Other customers use their tax-free cash to pay off an existing mortgage, travel, or provide an early inheritance to family.
Chiswell says: More people are turning to lifetime mortgages because they offer flexibility and control in later life.
‘Whether it’s helping children onto the property ladder, repaying an existing mortgage, or simply enjoying a more comfortable retirement, today’s products are built to support a wide range of goals.’
‘More than £665 million has already been released across the market in the first quarter of this year, a clear sign that more homeowners are recognising how the wealth tied up in their property can help to build financial resilience in later life.’
Renovation: Home improvements were one of the most popular ways to spend equity release money last year, according to Royal London
How are lifetime mortgage borrowers protected?
Most equity release lenders and advisers are members of the Equity Release Council.
Borrowers who take out a lifetime mortgage with a council member can be assured that their product meets each of its six standards.
These include having your interest rate fixed for life; having the right to move home subject to lender approval; having a ‘no negative equity guarantee’ and being able to make voluntary, penalty-free repayments up to an agreed limit.
How to decide if a lifetime mortgage is right for you
Before taking out a lifetime mortgage, it’s essential to speak with a qualified adviser.
They will help you understand your reasons for releasing equity, review your financial situation in detail, and explore whether other options might be better suited to your needs.
This personalised advice ensures you make an informed decision with confidence.
‘Lifetime mortgages aren’t the right choice for everyone, which is why tailored, expert advice is essential’, says Chiswell.
‘At Royal London Equity Release Advisers, we take the time to explain how a lifetime mortgage could impact the customer’s estate, benefits, and future plans.
‘We also offer whole-of-market advice meaning we’re not tied to any single lender. This gives our customers access to a wider range of options and helps ensure they get a product that truly suits their circumstances.
‘Transparency, clear communication, and ongoing support are at the heart of what we do. For those it’s right for, it can be a genuinely life-enhancing product.’
Royal London’s equity release calculator can give you an indication of how much you may be able to borrow.
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