A Guide to Lifetime Mortgages (Equity Release)
At Friends Capital, we often speak with homeowners who are asset-rich but cash-poor. You may have built up significant equity in your home over the years, but if you’re over 55 and on a limited income, it can be hard to access that wealth, especially if affordability checks or age limits rule out a traditional mortgage.
A lifetime mortgage, the most common form of equity release in the UK, is one way to unlock some of the value tied up in your home without having to sell it and move out. This guide explains how lifetime mortgages work, who they suit, and what to think about before deciding.
How we work: we refer equity release to a specialist partner
Friends Capital does not advise on equity release. If a lifetime mortgage looks like the right route for you, we refer you to a qualified equity release partner who specialises in this area, and they advise you directly. Their fee is capped at a maximum of £1,795 and is payable only on successful completion. You’ll never be asked for an upfront payment for that advice, and your first conversation with us is free.
We can advise you directly on the alternatives, including retirement interest-only mortgages and standard mortgages that run to age 80 and beyond. Often one of these turns out to be the better fit, and we’ll tell you plainly if it is.
What Is a Lifetime Mortgage?
A lifetime mortgage lets you borrow money secured against your home while you keep full ownership of it. You don’t have to make monthly repayments unless you choose to. Instead, the loan, plus any interest added to it, is repaid from the sale of your home when you die or move into long-term care.
Key features
- Available to homeowners aged 55 or over
- You remain the legal owner of your home
- You receive a tax-free lump sum, smaller amounts over time (drawdown), or both
- No repayments are required during your lifetime, unless you choose to pay some or all of the interest
- The loan is repaid when the property is sold, usually when you die or move into long-term care
Paying the interest, or letting it roll up
Some plans let you pay the interest each month to stop it building up. Others let the interest roll up, which means it’s added to the loan each year and interest is then charged on the new, larger balance.
Benefits of a Lifetime Mortgage
- You stay in your home
- No monthly affordability checks if you choose to let the interest roll up
- Flexibility in how you receive the money: a lump sum or drawdown
- Many plans let you protect part of your home’s value to leave as an inheritance
Things to Be Aware Of
- The loan and the interest added to it reduce the value of your estate
- Compound interest can significantly increase the amount owed over time
- Early repayment charges may apply if you pay the loan off early
- A lifetime mortgage may affect your entitlement to means-tested benefits
Who Can Apply?
Each provider has its own rules, but you’ll generally need to:
- Be aged 55 or over
- Own a home in the UK, usually worth at least £70,000
- Want to stay in your home rather than sell it
Providers will also look at your property’s condition, location and construction type before agreeing to lend.
Why People Choose a Lifetime Mortgage
- Supplementing retirement income
- Paying off an existing mortgage or other debts
- Funding home improvements or adaptations
- Helping children or grandchildren financially
- Covering care costs
- Enjoying travel or experiences in later life
Risks and Considerations
- Compound interest: if you don’t pay the interest, the amount owed can grow quickly
- Impact on inheritance: a lifetime mortgage will reduce what you leave behind
- Effect on benefits: receiving a lump sum could affect means-tested benefits such as Pension Credit or Council Tax Reduction
- Long-term commitment: it’s a loan secured against your home for the rest of your life, so it’s important to be sure it’s right for you
How Much Could You Release?
The amount depends mainly on:
- Your age (generally, the older you are, the more you can release)
- The value of your home
- Your health (some providers offer enhanced terms for certain health conditions)
Example
- Home value: £250,000
- Age 65: you may be able to release around £60,000 to £90,000 with a lifetime mortgage
Your partner adviser will give you a personal illustration showing exactly how much you could release and what it would cost over time.
Safeguards: the Equity Release Council
Our partner only recommends lifetime mortgages from providers that are members of the Equity Release Council, which means you benefit from key protections:
- You will never owe more than the value of your home (the no negative equity guarantee)
- You have the right to stay in your home for life, or until you move into long-term care
- You can move to another property, as long as it meets the provider’s criteria
- All plans are regulated by the Financial Conduct Authority (FCA)
Is a Lifetime Mortgage Right for You?
Equity release isn’t for everyone. It can be the right answer in the right circumstances, but it’s essential to look at all your options first. Alternatives to consider include:
- A retirement interest-only mortgage (also called later life interest-only): you pay the interest each month, so the debt doesn’t grow. We advise on these directly.
- A standard mortgage: many lenders now lend on a standard basis to age 80 and beyond. We advise on these directly.
- Downsizing to a smaller or cheaper home
- Using savings or investments, or help from family
How Friends Capital Can Help
We offer a friendly, no-obligation conversation to explore your needs and work out whether a lifetime mortgage is worth considering at all, or whether one of the alternatives would serve you better.
- We advise you directly on later life mortgages, including retirement interest-only and standard mortgages to age 80 and beyond
- We talk through honestly whether equity release is the right direction for your circumstances
- If it is, we refer you to our qualified equity release partner, who advises you directly (fee capped at £1,795, payable only on completion)
- We keep the conversation jargon-free, and tell you plainly when the answer is no
Friends Capital is authorised and regulated by the Financial Conduct Authority (FRN 650114). Equity release advice is provided by our partner, not by Friends Capital.
Find out more on our later life lending and equity release page, or get in touch to book your free consultation.
