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.

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

How Does a Lifetime Mortgage Work? Lifetime Mortgages Over 60s

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?

Understanding Lifelong Mortgages: Are They Right for You?

A “lifelong mortgage” is often used interchangeably with “lifetime mortgage,” though it simply refers to mortgages designed to last the homeowner’s lifetime.

Lifelong mortgages provide a solution for those seeking to use home equity for retirement expenses, offering stability and products including fixed interest rates and flexible access to funds.

Lifetime Mortgage Maximum: How Much Can You Get?

The maximum loan available with a lifetime mortgage depends on factors such as your age, property value, and lender’s criteria; generally, older borrowers can access more, with typical loan-to-value (LTV) ratios ranging from 20% to 50% for those over 60.

Some providers may offer enhanced terms based on health or lifestyle factors.

Whole Life Mortgage: How Does It Differ from Lifetime Mortgages

Whole life mortgages are designed for individuals seeking long-term financial solutions, often with monthly repayments lasting throughout life.

Unlike lifetime mortgages, which require no monthly payments, whole life mortgages function more like traditional mortgages but with terms that extend indefinitely.

Whole life mortgages are not as common as lifetime mortgages but can be useful for those wanting to manage debt over time rather than rely on compound interest.

Difference Between Lifetime Mortgage and Equity Release Explained

Lifetime mortgages are a type of equity release, but not the only kind—equity release includes both lifetime mortgages and home reversion plans.

Understanding the options available to you can help you decide which equity release option best suits your needs and future plans.

What Are the Different Types of Lifetime Mortgages, and Which Is Right for You?

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

To choose the best type for your needs and decide which is right for you, it’s important to look at and understand the unique features of each.

Here’s what you need to know:

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.

Frequently Asked Questions

Conclusion: Key Insights on Lifetime Mortgages

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.