A lifetime mortgage is the most common in the UK and is basically a loan secured on the home which releases tax free cash for the applicant to spend as they wish. The tax free cash can be released in the form of an income or more commonly a capital lump sum. With a lifetime mortgage, the original amount borrowed is charged a fixed rate of interest which is then added annually by the lender.

However, unlike a conventional mortgage there are no monthly repayments to make. This process continues for the duration of the occupant’s life, until they die or move into long term care. At that point the beneficiaries will sell the property. The sale proceeds will then pay off the lender, with the remaining balance distributed in accordance with the estates wishes.


There are different types of lifetime mortgages and costs. It can be a roll-up mortgage through which you get a lump sum or regular income and are charged a monthly or yearly interest which is added to the loan. The amount you originally borrowed, including the rolled-up interest, is repaid when your home is eventually sold. Another type is a fixed repayment lifetime mortgage. You get a lump sum, but don’t have to pay any interest. Instead, when the home is sold, you have to pay the lender a higher amount than you borrowed. That amount is agreed in advance. The lender uses this higher sum to repay the mortgage when your home is sold.

There is also an interest-only lifetime mortgage under which you get a lump sum, and pay a monthly interest on the loan, which can be fixed or variable. The amount you originally borrowed is repaid when your home is eventually sold. Another option is a home income plan. The money you borrow under this mortgage is used to buy a regular fixed income for life. This income is used to pay the interest on the mortgage and the rest is yours. The amount you originally borrowed is repaid when your home is eventually sold.


Some lifetime mortgages include a shared appreciation element. This means the lender has a share in the value of your home. When taking out a lifetime mortgage, you can choose to borrow a lump sum or to opt for a drawdown facility. This is suitable if you want to take occasional small amounts rather than one big loan, as it means you only pay interest on the money you actually need.

The suitability of the lifetime mortgage loan depends on your age and circumstances. With a roll-up mortgage the interest you owe can grow quickly. Eventually this might mean that you owe more than the value of your home, unless you have a no-negative-equity guarantee. A fixed repayment mortgage becomes a better deal if you live much longer than the lender thinks you will. But if the home is sold much earlier than you planned, you will get a worse deal. An interest-only mortgage with variable interest rates may not be suitable, because the interest rate may rise faster than your income. A home income plan only results in a small income after paying interest. It is only suitable if you are older, perhaps around 80.