What’s a Later Life Mortgages and How Does It Work in the UK in 2024?

Are You Considering a Later Life Mortgage to Fund Your Retirement? Discover How Much You Can Borrow and if You Qualify for a Later Life Mortgage in 2024. Keep Reading to Find Out More.
  • Last Updated: 30 Jan 2024
  • Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.


Francis Hui

Key Takeaways

  • Later life mortgages can provide financial flexibility in retirement by allowing homeowners to unlock the equity in their homes while remaining residents.
  • In the UK, they typically involve the homeowner borrowing a portion of their home's value, the loan and interest are repaid upon the sale of the property or the homeowner's death.
  • The potential risks include decreasing the value of your estate, higher interest rates than other types of loans, and possible impacts on eligibility for means-tested benefits.
  • In the UK you can apply for it after 65, provided you meet the lender's eligibility criteria.
  • A later life mortgage may reduce the value of your estate and hence the inheritance you can leave to your heirs, as the loan and accrued interest are repaid from the sale proceeds of your home.

Have you heard of a later life mortgage? 

If not, you could be missing out on accessing a life-changing amount of tax-free money tied up in your home!

More than £6.2bn1 worth of property value has been unlocked through later life mortgages in the last year alone, and you could be next. 

Could you do with the extra money?

In This Article, You Will Discover:

    At Every Investor, we pride ourselves on bringing you the most relevant and concise information from across the financial sector. 

    Want to know how to release tax-free cash from your home?  

    Read on to find out!

    What Are the Key Features of Later Life Mortgages in the UK?

    Later life mortgages in the UK, also known as lifetime mortgages, are an essential financial tool for individuals aged 55 and over. They are designed to help homeowners unlock the equity in their homes without needing to sell.

    Key features include the ability to draw down additional funds if required, interest roll-up where interest is added to the loan, and an optional no-negative equity guarantee ensuring that the debt will never exceed the property's value.

    These mortgages also offer flexibility. You can choose to make repayments to manage the debt or let the interest roll up to be repaid when the property is sold. Importantly, the house remains in your possession until you pass away or move into long-term care.

    Another unique feature of later life mortgages in the UK is the potential to protect a percentage of your property's value as an inheritance for your loved ones.

    What is a Later Life Mortgage?

    A later life mortgage is a way for you to borrow money against the value of your home without having to sell up or move out - provided you are 55 or older.

    Options include lifetime mortgages, retirement interest-only mortgages, and retirement repayment mortgages.

    The most popular choice is a lifetime mortgage, which allows you to unlock the value of your house as a tax-free cash lump sum. 

    The best part is that you can choose whether or not to make any monthly repayments. 

    The capital, plus interest, is only due when you pass away or move to long-term care facilities and the house is sold. 

    How Is a Later Life Mortgage Different to a Regular Mortgage?

    A later life mortgage differs from a regular mortgage as it is only available to people over the age of 55 and is used to release cash from your home.

    On the other hand, a regular mortgage is open to people of all ages and is used to purchase a home. 

    The borrowing fundamentals are the same. 

    With a regular mortgage, the bank will want to ensure that you have the finances to make the monthly repayments. 

    However, with a retirement mortgage, the bank will check that there is enough value in your property to settle the loan once it is sold. 

    Why Might I Need a Later Life Mortgage?

    You may need a later life mortgage to pay off your debts, help loved ones with large purchases, or supplement your everyday living during retirement.

    It is an unfortunate reality that 17% of UK retirees2 do not have any savings, let alone enough money to provide for themselves through their retirement. 

    Luckily, later life mortgages can provide some relief. 

    Do I Qualify for a Later Life Mortgage?

    To qualify for a later life mortgage, you would ‌need to comply with the following requirements. 

    • The youngest borrower must be over 50, although some products require a minimum age of 55.
    • There is no more than 2 people on your property title deed.
    • The property you wish to borrow against must be your primary residence.
    • You must live in the UK.

    Be aware that some lenders may have additional qualifying criteria.

    Later Life Mortgage Options

    With various later life products available to you, it is essential to make the right choice. 

    Let us look at your options. 

    Lifetime Mortgage

    A lifetime mortgage enables you, as a retiree of 55 years or more, to access some of the value of your home in the form of a tax-free lump sum. 

    The most important point to remember is that you will retain full ownership of your home.

    You will not be required to make any monthly repayments unless you choose to do so. 

    The capital loan, plus interest, is only due to be repaid once you pass away or enter a long-term care facility.  

    Lifetime Mortgage With Voluntary Repayments

    A lifetime mortgage with voluntary repayments allows you, as the name suggests, to make ad-hoc payments as and when you choose to do so. 

    The payments are entirely voluntary and not a requirement. 

    You may choose to repay part of the loan or just the interest. The repayments may be subject to a minimum or maximum amount, depending on your provider. 

    Home Reversion Scheme

    Although a home reversion scheme is not technically a mortgage, it is a form of equity release3

    In essence, it allows you to sell part of your home to a provider ‌for a tax-free lump sum or regular installments. 

    Although, in this case, you do not retain full ownership of your home, you may live there rent-free until you pass away or move into a permanent care facility. 

    The lender will recoup their percentage share of your home when the house is sold. 

    Retirement Interest-Only Mortgage (RIO)

    Retirement interest-only mortgages allow you to pay off the interest on your loan every month. 

    Although you will not be paying anything towards your capital, you will be saving on interest that would otherwise roll over and compound over the term of your loan. 

    Retirement Repayment Mortgage

    Unlike other later life mortgage options, a retirement repayment mortgage must be paid in full by the end of your agreed term. 

    These retirement mortgages often have a higher age limit and require you to pay back a portion of the capital and interest monthly.  

    What Are the Benefits of a Later Life Mortgage?

    Some ‌benefits of a later life mortgage include living a more comfortable life, staying in your home past retirement, and being able to afford larger purchases that would otherwise be impossible. 

    Let us look at these in more detail. 

    Live More Comfortably

    A later life mortgage can supplement your retirement and give you peace of mind knowing you will not have to worry about your finances. 

    Whether you need help with day-to-day expenses or want to book that once-in-a-lifetime dream holiday, a later life mortgage can help you. 

    Stay In Your Home

    Later life mortgages can help you avoid downsizing and selling your beloved family home. 

    You can retain ownership and will not have to move away from your friends, family, and all the things you love. 

    Accessible Finance

    Conventional mortgages become harder to qualify for as you get older. and their repayment terms may not be achievable for you. 

    You will not be expected to make any monthly repayments with later life mortgages, giving you stress-free access to much-needed cash. 

    Lending Options

    The later life mortgage market is booming. With all the different products available, you are bound to find an option that suits you. 

    We recommend ‌you look at the advantages and disadvantages of each of the plans to find the best fit for your circumstances.

    How Much Could I Borrow With a Later Life Mortgage?

    The amount you can borrow with a later life mortgage will depend mostly on your circumstances. 

    A retirement mortgage calculator can help you determine how much you are eligible for.

    Factors that could affect the amount you release include:

    • Your age
    • The total value of your home
    • The later life mortgage option you choose
    • Your health 
    • Your general lifestyle

    At What Age Can I Get a Later Life Mortgage?

    You can apply for a later life mortgage from 55, although retirement interest-only mortgages are available to applicants 50 or over. 

    An upper age limit is determined by lenders on a case-to-case basis, with some lenders not imposing one at all. 

    How Can I Apply for a Mortgage in Later Life?

    To apply for a later life mortgage, you can contact a qualified equity release adviser or a whole-of-market financial adviser. 

    Make sure that the adviser you choose is a member of the Equity Release Council4.  

    They will ‌run through all the available options and give you the best advice ‌on which product would suit your needs. 

    Be sure to have a file with your personal information available at your meeting. 

    This should include details of any pension or income you are receiving, your savings figures, information on any outstanding debts, and insurance policies you may have in place. 

    The more financial information you can provide, the better advice your adviser will ‌give you. 

    What Are the Risks of Later Life Mortgages?

    The risks of borrowing later in life include not leaving behind an inheritance to your loved ones, affecting your benefits, and it can be expensive. 

    Let us look at the top 4 risks of a later life mortgage. 

    Below Market-Value Offer 

    Whether you opt for a home reversion plan or a lifetime mortgage, lenders will offer you less for your home than what it is worth on the open market. 

    Little to No Inheritance 

    The money from the sale of your home will ‌pay off your later life mortgage. 

    Your loved ones could receive little to no inheritance, depending on the owed amount.

    Impact on Benefits and Grants 

    Releasing a lump sum could disqualify you from receiving means-tested benefits or government grants5

    Compound Interest 

    Interest is added to your capital every month, so your capital grows by the amount of interest charged. 

    If you decide not to pay the interest on your lifetime mortgage, it can quickly become costly. 

    What Are the Alternatives to Borrowing in Later Life?

    Alternatives to a later life mortgage include:

    • Digging into your savings
    • Borrowing money from friends or family
    • Taking out a personal loan
    • Taking out a credit card
    • Downsizing to a more affordable home
    • Checking your eligibility for means-tested benefits and government grants
    • Assessing your budget
    • Finding a part-time job
    • Starting your own business

    Common Questions

    How Do I Know Which Later Life Mortgage Option Is Right for Me?

    Are Later Life Mortgages Safe?

    What Percentage of My Property Value Can I Unlock with a Later Life Mortgage?

    What are the benefits of later life mortgages?

    How do later life mortgages work in the UK?

    What are the potential risks of later life mortgages?

    Can I apply for a later life mortgage after 65?

    How can a later life mortgage impact my heirs?

    In Conclusion

    Retirement can be scary if you have not planned for it properly, but there are options to ease your burdens. 

    As with any life-changing decision, it is imperative to contemplate all angles to make an informed choice. 

    Whether you are looking at a lifetime mortgage or a home reversion plan, educating yourself is the first step to gaining the financial freedom you deserve. 

    That multi-generational family holiday you have been dreaming of could be closer than you think.

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