Later Life Mortgages

Are You Looking To Unlock Capital With Later Life Mortgages?
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
Are You Considering a Later Life Mortgage to Fund Your Retirement? Discover How Much You Can Borrow & if You Qualify for a Later Life Mortgage in 2022. Keep Reading to Find Out More.

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 £4.8bn 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?

As experts in our field, we discuss the following in this article:

    At EveryInvestor, 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!

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    What’s 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’re 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’s a Later Life Mortgage Different to a Regular Mortgage?

    A later life mortgage differs from a regular mortgage as it’s 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’s enough value in your property to settle the loan once it’s 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’s an unfortunate reality that 17% of UK retirees don’t have any savings, let alone enough money to provide for them 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.
    • 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’s essential to make the right choice. 

    Let’s 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 won’t be required to make any monthly repayments unless you choose to do so. 

    The capital loan, plus interest, is only due to being 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 isn’t technically a mortgage, it’s a form of equity release1

    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 don’t 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. 

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    Retirement Interest-Only Mortgage (RIO)

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

    Although you won’t be paying anything towards your capital, you’ll 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 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’s 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 won’t 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 won’t 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 won’t 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’re 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. 

    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 Council².  

    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’re 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’s 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’s 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 & Grants 

    Releasing a lump sum could disqualify you from receiving means-tested benefits or government grants³

    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?

    In Conclusion

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

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

    Whether you’re 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’ve been dreaming of could be closer than you think.

    How Much Can You Release?

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    Editorial Note: This content has been independently collected by the EveryInvestor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.