Lump sum

The basic form of lifetime mortgage is a lump-sum loan, where the interest payable is ‘rolled up’ over the full term. There’s nothing to pay for the rest of your life, but interest is compounded year on year until you die (or move into a residential care home). For most lump-sum deals, interest rates are fixed at the outset.



Some firms offer a flexible lifetime mortgage, where you take a smaller amount at the outset, then draw down further borrowings as required. Since you pay interest only on the money you’ve taken, the overall cost can be considerably lower.

Interest repayment

Another way to reduce the cost is to allow borrowers to pay off some, or all, of the interest during the life of the loan. Hodge Lifetime, Stonehaven and More2Life all offer this option.

Enhanced lifetime mortgages

Some providers offer more money to those with lower-than-average life expectancies. Aviva, More2Life and Just Retirement all offer these mortgages.


Lifetime mortgages: drawbacks to consider
While equity release offers the chance to draw on the value of your home, there are several drawbacks to consider:

Cost: This can be very high. In some cases, it may drain almost all the value of your home, with little left over for your heirs.
Early repayment penalties: Most equity release schemes don’t allow you to pay off the loan and are based on interest building up over the full term. If you decide to end the deal prematurely, providers demand an early-repayment charge. Rates are often based on prevailing government bond (gilt) rates and lack transparency.
Problems moving: Although loans arranged with members of providers’ trade body the Equity Release Council (ERC) are ‘portable’ – meaning that you can move from one property to another – moving can be difficult if the new property is more expensive than the equity remaining in your old one. Some properties, such as sheltered housing, are not always acceptable to lenders, as they can prove hard to sell.
Loss of means-tested benefits: Drawing extra money from housing equity may mean you lose eligibility for pension credit and council tax benefit.


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