We use some essential cookies to make our website work properly.
We’d also like to set additional cookies to help us improve our website, tailor marketing and provide a more personal experience.
Am I eligible?
ⓘ What's in this guide?
- What is a lifetime mortgage?
- How does a lifetime mortgage work?
- Benefits and drawbacks of a lifetime mortgage
- Who is eligible for a lifetime mortgage in the UK?
- How much could I borrow with a lifetime mortgage?
- How much does a lifetime mortgage cost?
- What are typical lifetime mortgage interest rates?
- How does compound interest work?
- How could a drawdown lifetime mortgage reduce my cost of borrowing?
- How does the advice process work?
- How to release equity from your home
- Why choose Key?
- What if I already have a lifetime mortgage?
- Lifetime mortgage FAQs
Lifetime mortgages explained: A lifetime mortgage is a type of equity release and is a loan secured against your home. It allows homeowners aged 55 or over to release tax-free funds tied up in their homes.
The amount you could release with a lifetime mortgage depends on your age and the value of your home. When you take out a plan, the interest accrues then rolls up and is added to your loan. This is also known as compound interest. Typically, the loan is repaid through the sale of the property when the last remaining applicant either passes away or moves into long-term care.
A member of our experienced team will be able to chat you through your options. Read more on lump sum vs drawdown lifetime mortgage.
As a trusted lifetime mortgage provider, all of our plans meet the Equity Release Council standards, meaning you'll:
If you're looking for ways to release funds from your home, you may be wondering: is equity release the same as a lifetime mortgage? A lifetime mortgage is a type of equity release, allowing you to free up tax-free funds in later life.
The other type of equity release is a home reversion plan, which involves selling all or part of your home to a provider in exchange for a lump sum. We offer lifetime mortgages only, where you keep full ownership of your home.
Read more about lifetime mortgages vs equity release.
We understand it's important you have all the information you need about equity release through lifetime mortgages to make an informed decision in your own time. Rest assured, though; if equity release isn’t right for you, we’ll tell you.
Lifetime mortgage benefits
Your specialist lifetime mortgage adviser will explain:
Lifetime mortgage drawbacks
Your lifetime mortgage adviser will also outline the following important things to think about:
If you’re a homeowner aged 55 or over, you could use a lifetime mortgage to release equity from your home to help boost your later life finances.
To take out a lifetime mortgage with Key, you must be a UK homeowner:
- Aged 55+ (including all joint applicants)
- With a property worth £70,000+
Our friendly professionals are on hand to answer any questions you might have and to chat through the options available with you.
If you currently receive or are eligible to claim means-tested benefits, taking out a lifetime mortgage may affect your eligibility as it will change your financial situation. Our advisers can review your current position and discuss your options moving forward including how a lifetime mortgage plan may affect any benefits you receive.
Read more about how a lifetime mortgage can affect your eligibility for benefits.
Our latest research shows Key lifetime mortgage customers had access to an average of £78,334 from their properties (Key Market Monitor, 2023.). You'll just need to release a minimum of £10,000.
The amount you could release from your home depends on:
-
The value of your property
-
Your age
As each application is unique, use our calculator to get a tailored estimate of how much you could release.
Use our lifetime mortgage calculator
The tax-free funds you release through lifetime mortgages can be used in a variety of ways including:
-
Clearing an existing mortgage, loan, credit card balance or other debt - though you should always think carefully before securing a loan against your home to repay existing debt
-
Helping loved ones buy their first home, get married or go to university
-
Making home improvements, such as a new kitchen, allowing you to live comfortably for longer
-
Generally enjoying a more comfortable retirement
The overall cost of your lifetime mortgage borrowing will depend on a few factors.
These include:
-
The amount you want to release in tax-free funds
-
Your interest rate - your interest will be added, rolled up and compounded for the lifetime of the mortgage. See our latest lifetime mortgage interest rates below
-
Whether you take a lump sum, with interest charged on the full amount from day one, or a drawdown lifetime mortgage, where you only pay interest on the amount you release
-
Other costs involved with setting up lifetime mortgages including solicitor's and advice fees
Read more in our detailed guide to how much equity release costs.
You may wish to repay some of your lifetime mortgage early and reduce the size of the loan you accrue interest on. Subject to criteria, we may be able to help you personalise your plan with the option of making ad-hoc repayments of up to 10-12% of the initial amount you've borrowed each year.
Additional repayments, including repaying in full, may incur early repayment charges. Your adviser will explain these terms clearly so you know what your options are.Lifetime mortgage rates vary depending on the plan you take out and your circumstances. Our lifetime mortgage calculator will give you an illustrative rate based on the details you put in.
With a lifetime mortgage, the interest accrues, then rolls up and is added to the loan, meaning the amount you owe can grow quickly. As a result, equity release will reduce the value of your estate and may leave you with limited or no property equity remaining.
This is also known as compound interest. The interest rate you get will be specific to your circumstances and is fixed for the life of the loan.
Representative example
Interest rates explained
-
AER stands for Annual Equivalent Rate. It shows what the interest rate would be if the interest was compounded each year.
-
APR stands for Annual Percentage Rate. It's the cost you pay each year to borrow money, including fees, expressed as a percentage.
Our equity release calculator will give you an idea of how much you could release. Your equity release adviser will be able to give you more information on interest rates.
Calculate now
Back to "What's in this guide?"
Unless you choose to do so, there are no repayments to make on a lifetime mortgage until the plan comes to an end. As a result, you pay interest not only on the loan itself, but also on the interest that’s already been added to the loan. But there are ways you could reduce the total cost of borrowing of your lifetime mortgage, which we outline in this guide.
Whether interest is added to your lifetime mortgage on a monthly or annual basis is dependent on your plan. During that first period, though, the interest is charged and added to the original loan amount - the sum of tax-free cash you unlock from your home’s value.
An example of how compound interest accrues over 15 years
| Year | Balance at the start of the year | MER¹ | Interest added² | Balance at the end of the year³ |
|---|---|---|---|---|
| Year 1 | £81,703 | 6.74% | £5,681 | £87,384 |
| Year 2 | £87,384 | 6.74% | £6,075 | £93,459 |
| Year 3 | £93,459 | 6.74% | £6,497 | £99,956 |
| Year 15⁴ | £209,360 | 6.74% | £14,555 | £223,915 |
This example is for illustrative purposes only and uses the average release amount of £81,703 and MER (monthly equivalent rate) of 6.74% - Key Market Monitor, Q1 2023..
¹ With all Key lifetime mortgages, the interest rate is fixed throughout the life of the plan
² Interest is charged on balance as at the start of the year, not the original amount
³ The balance at the end of the year including compound interest
⁴ This cycle continues throughout the life of the plan
Back to "What's in this guide?"
You could potentially save thousands over the course of your plan with a drawdown lifetime mortgage. This is because you only pay interest on the funds you release. It's important to keep in mind that future drawdowns are subject to the prevailing interest rate at the time and aren't guaranteed. Here's an example to help you understand how this could work for you.
ⓘ Illustrative example
This example is for illustrative purposes only and uses the average release amount of £81,703 and monthly equivalent rate of 6.74% (future drawdowns will be charged at the prevailing interest rate) - Key Market Monitor Q1, 2023.
Mrs Lewis and Mr Davies both want to release £81,703, but opted to take it out in different ways to meet their requirements.
Over the same 15-year period, borrowing the same amount of money, Mr Davies saved almost £32,851 in interest charges compared to Mrs Lewis.
Releasing equity with a lifetime mortgage is a big decision and the team at Key understand that you’ll need to consider it carefully, so you will receive transparent advice before you apply.
ⓘ Did you know...
You have to get advice from a qualified equity release adviser before applying for a lifetime mortgage - it’s a regulatory requirement.
After you book a free callback for a time that suits you, one of our qualified advisers will get to know you and your needs to recommend the most suitable solution for your circumstances. And if they don’t think equity release is the right option for you, they’ll tell you. It’s part of our company ethos to be open and transparent with all of our customers.
Keep in mind that all our equity release advice only relates to our range of Key lifetime mortgages, a loan secured against your home. You'll only pay our fixed advice fee of £1,299 on completion of taking out the lifetime mortgage.
Keep in mind that all our equity release advice only relates to our range of Key lifetime mortgages, a loan secured against your home. You'll only pay our fixed advice fee of £1,299 on completion of taking out the lifetime mortgage.
Applying for a lifetime mortgage is a decision you should think carefully about, and it is a regulatory requirement to get financial advice before doing so. If you're eligible and decide to go ahead, you can expect the process to take between 8-12 weeks from application to completion. This timescale can't be guaranteed, however.
Read more about how long equity release takes.
ⓘ If another product is more suitable, we'll refer you to a different adviser within Key Group who can help. If you go ahead, you'll only be charged the same £1,299 advice fee you'd pay with us, even if their fee is usually higher.
Equity release is a big decision and we understand that you’ll need to consider it carefully. When you come to Key, we will ensure you receive transparent advice before you apply. Find out more on why you should choose Key as your lifetime mortgage provider.
Expert tailored advice
We've won 80+ awards and we are rated 'Excellent' on Trustpilot with 17,000+ reviews. Making us the UK's most trusted equity-release specialist.
Trusted and award-winning
All our plans meet the Equity Release Council standards. Plus, we have over 17,000+ Trustpilot reviews giving us a 5-star rating and 80+ industry awards.
Customer stories
We've helped over one million people decide if equity release is right for them. Check out the great things our customers have to say about our professional advice and tailored plans.
John's story
69, Retired
“I sat down with the adviser and he went through every single detail and concerns, plus a lot more which I didn’t know about. They took care of everything… it’s so uncomplicated… the process is so easy.”
Watch more of our customer stories
Back to "What's in this guide?"
If you already have a lifetime mortgage, over time you may decide you would like to release more funds or switch to a different plan. Your qualified equity release adviser can assess your options and talk them through with you so you know where you stand. They will discuss any early repayment charges that may be payable when switching plans.
Lines open 9am-8pm Monday-Thursday, 9am-5:30pm Friday and 9am-5pm Saturday.
Find out if a lifetime mortgage is right for you
Find common questions about lifetime mortgages explained below. If you are still unable to find the information you're after, we are just a phone call away.
A key benefit of lifetime mortgages is that you retain full ownership and can continue living there for as long as you like.
A lifetime mortgage is a loan secured against your home. Usually, when you or the last surviving applicant pass away or move into long-term care, your home will be sold to repay the loan. Any remaining funds from the sale will be passed on to your estate or your nominated beneficiaries.We're proud members of the Equity Release Council and provide lifetime mortgages that meet their standards, including the no negative equity guarantee. This is an important protection which ensures you'll never owe more than the value of your home when your plan comes to an end.
This means there's no risk that you'll pass on debt accrued through equity release to your loved ones. In the unlikely event that your home decreases in value enough to leave a shortfall between the sale proceeds and the amount you owe, the no negative equity guarantee writes off the remainder of your loan.However, it’s important to remember that a lifetime mortgage may leave you with limited or no property equity remaining, and it’ll reduce your financial options in the future.
For various reasons over time, you may decide that you want to move from the property you initially released equity from. You're free to sell your home and move to a new property as long as it meets our lending criteria at the time.
Your lifetime mortgage will be transferred to your new home. Bear in mind you may have to repay some of the funds you initially released if your new property is worth less than your current one. If the new property doesn't meet the lenders criteria then it will need to be repaid and an early repayment charge may be payable.Lifetime mortgages are designed to be secured on your main residence, so they're not suitable if you intend to rent out your property. A buy-to-let mortgage could be more appropriate in this case. You may be able to let out individual rooms while still living there, however, subject to approval from your lifetime mortgage provider, though this isn't guaranteed.
As the name suggests, a lifetime mortgage is designed to last for life. It usually ends when you or the last remaining applicant pass away or move into long-term care. The home you released equity from will then be sold, with the proceeds used to repay the lender and any remaining funds going to your estate.
A lifetime mortgage isn't something you should rush into. Read our RetireWise articles to learn more about how it works and whether it's right for you.
Page last updated: Wednesday 11 September 2024