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What is a lifetime mortgage?

A lifetime mortgage is a type of equity release which lets homeowners aged 55-95 release cash tied up in the value of their home, tax-free and either as a single lump sum or, following an initial release, in smaller amounts. It’s a loan secured against your home that’s typically repaid when you pass away or go into long-term care. With a lifetime mortgage you retain full ownership of your home.
  • Available for homeowners aged 55-95
  • A lifetime mortgage lets you release tax-free cash tied up in your home
  • You retain full ownership of your home
  • It's typically repaid when you pass away or move into long-term care
  • You can’t take out a lifetime mortgage without taking advice first

How lifetime mortgages work

You must take advice from a qualified equity release adviser to apply for a lifetime mortgage; there’s no other way to do it.

The amount of cash you can release depends on things such as your age and the value of your home. With a lifetime mortgage, you can take either a lump sum, where interest accrues on the full amount from day one, or following an initial relase in a number of smaller amounts, known as a drawdown. This could save you thousands in interest if you don’t need all the money straight away.

There are typically no payments to make as the loan, plus roll-up interest, is repaid when the plan ends, usually when you either pass away or move into long term care. The interest typically accrues, then rolls up and is added to the loan. This is also known as compound interest.

The money released with a lifetime mortgage can be used on anything you like – see how our customers used theirs.

There are various additional plan features that may be available. It depends what’s important to you. For instance, some plans allow you to guarantee a percentage of the future value of your home is protected for your loved ones’ inheritance.

Other features include the option to pay the interest monthly or protection against unknown early repayment charges, if you’d like to pay the loan off early.

You or your estate could benefit from any house price rise that is over and above the amount you owe the loan provider.

Drawdown lifetime mortgage

A drawdown lifetime mortgage offers more freedom to release money when you like. Your lender agrees an overall sum of money you can borrow. You can take an initial lump sum and then, following an initial release, withdraw smaller amounts when you need it (subject to minimum amounts).

As interest only accrues on the money you've released, you could potentially save a considerable amount in interest over the lifetime of the mortgage.

In addition to the features and considerations of a lifetime mortgage, the details of a drawdown lifetime mortgage are as follows:

  • You could potentially reduce the cost of equity release by only taking as much as you need from your home at any one time
  • These plans are more flexible than lump sum plans, meaning you can adapt to your changing needs in retirement
  • These plans can help you organise your finances so you don’t miss out on means-tested benefits
  • You can use the money you release for any purpose and can cover specific expenses, including home improvements or to pay university fees


 

Comparison between a lump sum lifetime mortgage and a drawdown option

Comparison between a standard lifetime mortgage and a drawdown option of £64,000 released over 15 years with an interest rate of 6.1%. For illustrative purposes only. The interest rate applied to drawdowns will be the interest rate at the time of the drawdown.

Swipe

Options Initial advance Drawdown year 5 Drawdown year 7 Drawdown year 9 Drawdown year 10 Interest charged (15 years) Total owed (15 years)
Single advance £64,000 n/a n/a n/a n/a £91,565 £155,565
Drawdown £20,000 £15,000 £8,000 £7,000 £14,000 £53,388 £117,388
SAVING £38,177

Protected plans

If you want to guarantee an inheritance for your family this is possible with some lifetime mortgages. Your adviser will guide you through the plans that can help you achieve this.

Combined options

Flexibility within lifetime mortgages means that you could benefit from a combination of options to not only save your estate money but also tailor your plan to your current and future needs.

Interest payment plans

Interest-payment lifetime mortgages work like a standard plan, however you are able to make regular payments on the interest that accrues over the lifetime of the loan.

Enhanced Plans


An enhanced lifetime mortgage plan could mean that you're able to release more equity from your home due to your health or lifestyle circumstances.

In circumstances of poor health or certain lifestyle choices, you may be entitled to increased lump sums or a lower interest rate.

You or your partner may be eligible for an enhanced lifetime mortgage plan based on a number of factors, including but not limited to:
  • High blood pressure
  • On-going medical problems
  • Taking regular medication
  • Smoking regularly
  • History of heart issues
  • Being overweight

If you believe you may be eligible and are interested in applying for an enhanced lifetime mortgage, please speak to your equity release adviser.

Lifetime mortgage advice

The advice process

You have to get advice from a qualified equity release adviser in order to apply for a lifetime mortgage. Our friendly advisers explore all of your options with you. If they don’t think equity release is the best option for you, they’ll tell you!

Your first consultation is free and can be done from the comfort of your own home at a time to suit you. Alternatively, chat to one of our specialists today for a no-obligation discussion.

Lifetime mortgage calculator

See how much cash you could release from your home with our free to use and no-obligation online lifetime mortgage calculator.

Calculate Now

Want to find out more?

Our advisers explore equity release with you. If they don’t think equity release is right for you, they’ll tell you! Book a free consultation.

Arrange Advice

Mythbuster

We debunk common equity release myths and explain why they should be a thing of the past; test your knowledge with our quick fire quiz!

Take our quiz

Things to consider

When comparing the whole equity release market, our independent specialist advisers will explain:

  • You have to get advice before releasing equity. Please read all our information and make sure it's right for you
  • The plans we recommend have a no negative equity guarantee, so you’ll never owe more than your home’s value
  • Equity release reduces your estate's value and may affect any means-tested benefits you're eligible for
  • The initial consultation is free with no obligation and if you proceed with an equity release plan our advice fee, usually 1.99% of the amount released (£1,499 minimum), payable on completion
  • A lifetime mortgage, which is a loan secured against your home, is the most popular form of equity release and you will still own your home