4 Types of Lifetime Mortgages You Should Know About in 2024

The various lifetime mortgage options include drawdown, lump sum, interest-only, and voluntary repayment plans, catering to diverse homeowner needs. Each type boasts unique features to suit different financial scenarios.
Lifetime Mortgage Types
  • Last Updated: 18 Sep 2024
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What Are the Different Types of Lifetime Mortgages in the UK? Discover the Difference Between a Drawdown, Lump Sum, or Enhanced Plan. We Have the Full Breakdown Here.

Key Takeaways…

  • Lifetime mortgages come in a number of different varieties, each suited to different financial needs and personal circumstances.
  • Lump sum plans provide borrowers with a large payment; drawdown plans allow ad hoc withdrawals, interest-only plans require monthly interest payments, and enhanced plans offer more cash to those with certain health issues.
  • Switching mortgage types might be possible, subject to lender conditions and potential fees.

If you are looking into different lifetime mortgage types, you may be interested to know that in 2022, the average amount borrowed through equity release was £133,216. 

That is enough to boost the average single pensioner’s income to support twelve years of modest living or five years of comfortable living.1

Whether you are looking for a single large withdrawal or the option to borrow more in the future, the options can feel overwhelming.

We are here to help.

In This Article, You Will Discover:

    The EveryInvestor team is dedicated to providing trustworthy, comprehensive information about different lifetime mortgage types. 

    What Exactly Is A Lifetime Mortgage?

    A lifetime mortgage is a loan available to UK homeowners over 55 who would like to borrow against their home equity without necessarily making repayments during their lifetime.

    This kind of loan allows you to live in your home whilst accessing a portion of its value in the form of cash.

    The most notable characteristic of this kind of loan is the optional repayment feature.

    How does that work?

    The loan and interest are typically repaid from the sale of your home after you have passed away or moved into care.

    Learn More: How Do Lifetime Mortgages Work?

    What Are the Different Types of Lifetime Mortgages?

    The different types of lifetime mortgage in the UK include lump sum, drawdown, interest-only, and enhanced plans.

    To choose the best type for your needs, find out more about the unique features of each.

    Lump Sum

    With a lump sum lifetime mortgage, you receive a relatively large amount in one payment.

    During the second quarter of 2023, 48% of lifetime mortgage clients selected a one-time lump sum payment — a drop from the second quarter of 2022, when 55% opted for this type.2

    Why choose a lump sum plan?

    You may prefer a lump sum lifetime mortgage if you are planning a large expenditure, like home renovations.

    Drawdown

    With a drawdown lifetime mortgage, you have the freedom to access your home’s equity in stages, keeping some in reserve for later use.

    According to ERC statistics, new and existing drawdown clients took larger upfront amounts in the second quarter of 2024 than a year ago, but reserved smaller amounts for future drawdowns.3

    Why choose a drawdown plan?

    The beauty of this type of lifetime mortgage lies in the fact that interest is only charged on the money you withdraw and not on the entire amount kept in reserve. 

    Interest-Only

    Interest-only lifetime mortgages differ from classic lifetime plans in one important aspect: they require regular interest payments.

    Why choose an interest-only plan?

    If you want to keep your lifetime mortgage debt as low as possible, this kind of plan may allow you to do so, as your interest will not roll up (and therefore will not accrue more interest every year).

    Enhanced Lifetime

    An enhanced lifetime mortgage is a specialised later-life mortgage that takes into account certain health and lifestyle factors when deciding how much you can borrow.

    If you suffer from certain health conditions or lifestyle factors that may affect your lifespan—like smoking, high blood pressure, or multiple sclerosis—you could potentially borrow more money than with a standard lifetime mortgage. 

    You may also be eligible for lower interest rates instead of a higher loan amount.

    Common Questions

    Can I Switch Between Different Types of Lifetime Mortgages?

    Which Lifetime Mortgage Is Right for Me?

    What Is a Lifetime Mortgage for Over 60s?

    What Is a Hybrid Lifetime Mortgage?

    Can I Take Out a Lifetime Mortgage if I Have an Existing Mortgage on My Property?

    What Happens if the Value of My Home Decreases?

    What Are the Different Types of Lifetime Mortgages?

    Which Type of Lifetime Mortgage Is Right for Me?

    How Does Each Type of Lifetime Mortgage Work?

    What Are the Risks and Benefits of Different Lifetime Mortgage Types?

    Can I Switch Between Different Lifetime Mortgage Types?

    In Conclusion

    Lifetime mortgages present a spectrum of choices for those looking to unlock the equity in their homes during their retirement years. 

    These mortgage solutions offer significant financial flexibility, enabling homeowners to access funds without selling their properties or committing to routine repayments. 

    It is essential to consult with an equity release advisor or broker before making a decision. 

    Given the diverse array of lifetime mortgage types on offer, borrowers can select the one that aligns most closely with their financial circumstances and goals.

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