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The Best Lifetime Mortgage Providers – Overview & Best Options

best lifetime mortgage providers

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

What is a lifetime mortgage equity release and which lifetime mortgage providers should you consider? 

We have the important facts for you to know before considering equity release plans in the UK, as well as a rundown of some of the most popular lifetime mortgage providers. If you’re weighing up equity release right now, then this is just for you!

Equity release – who, how and why!

An equity release scheme is a way for senior homeowners over the age of 55 to borrow money against their property and only repay the debt once they die or move into long-term care. It is usually chosen to help the senior homeowner improve the quality of later life and to fund their retirement with tax-free cash – but not exclusively. 

The loan is only repaid when the homeowner dies or moves out of their home and into long-term care. This is done by selling their property and using some or all of the money raised to pay off the debt in a single payment. The most common type of equity release plan in the UK is called a lifetime mortgage. 

You should only take out a lifetime mortgage from lenders that are authorised and regulated by the Financial Conduct Authority. And you must get personalised equity release advice before proceeding. 

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What is a standard lifetime mortgage?

The standard lifetime mortgage – there are some variations! – works by providing a lump sum loan based on the value of your home. You may be able to get as much as 60% equivalent to the value of your home as a lump sum. 

The loan is subject to a fixed interest rate that gets charged monthly but does not have to be repaid each month – so there are absolutely no monthly repayments to make. The debt is only repaid after you die or move into care using the sale of your property to repay. 

Estate beneficiaries may be able to use cash to repay the debt and keep the family home, or they could even buy it themselves when it goes to market. Stamp Duty may be owed if they purchase it on the open market or pay cash into the estate to clear the debt. 

What’s the difference between a lifetime mortgage and equity release?

Lifetime mortgages are a type of equity release plan, but there is one other type called a home reversion plan. Therefore all lifetime mortgages are equity release but not all equity release plans are lifetime mortgages. Because lifetime mortgages are far more popular and widely advertised than home reversion plans, the two terms often get treated as the same thing. 

Can I get a lifetime mortgage?

To get a lifetime mortgage you first need to receive personalised equity release advice from a financial adviser who has experience in the equity release sector. 

The adviser will assess your suitability for an equity release plan as well as try to look for alternative options that result in having to eventually sell the family home. Equity release can be especially expensive to repay, which we will illustrate shortly, so it is good to look for better alternatives from the outset. 

You will also need to meet the lender’s application eligibility criteria, and your property will be assessed by surveyors on behalf of the lender to advise whether the property will remain valuable in the future and is not at risk from things such as flooding. 

Who qualifies for a lifetime mortgage?

To qualify for a lifetime equity release mortgage you will usually need to:

  1. Be at least 55 years old (applies to the youngest applicant in joint applications)
  2. Be younger than 85 (applies to the oldest applicant in joint applications)
  3. Be a homeowner with no debts secured against it, including residential mortgages and other loans
  4. Be taking equity from your main residence with a minimum property value of around £80,000
  5. Be of sound mind to make the decision 

What is the maximum you can borrow on a lifetime mortgage?

The amount you can borrow using a lifetime mortgage is determined by a number of factors, including your home equity, your age, details about your property and the lender. 

Most of the time, the absolute most you could possibly borrow using a lifetime mortgage is around 60% of your equity (or 60% of your property value because you should own it outright to apply). This means owning a £200,000 home could get you a £120,000 lump sum at most.

If you need a bigger lump sum than the loan you have been offered and you have poor health, you may want to consider one of the other types of equity release lifetime mortgages designed to allow bigger borrowing. This is called an enhanced lifetime mortgage. 

What is the interest rate on lifetime mortgages?

The average lifetime mortgage rates can vary between 2-8% on average. Lifetime mortgages can become very expensive loans when held for long durations, so it is important to find the lowest lifetime mortgage interest rates.

For example, someone who takes out £65,000 as a lifetime mortgage loan on a fixed 6.4% rate will end up paying around £137,000 back after just 12 years. This will significantly impact how much inheritance you can pass on to family and friends. 

Can I buy a house with a lifetime mortgage?

You can use a lifetime mortgage to buy investment properties or to help family members get on the property ladder themselves. 

Many senior homeowners choose to help their sons and daughters buy property by releasing equity. Just be aware that giving some of your loan to other people, this money can be subject to inheritance tax if applicable and if done within seven years of your death. 

Who are the lifetime mortgage providers?

Homeowners will find lifetime mortgages advertised through specialist companies that only offer equity release plans and nothing else. However, there are some other companies that offer lifetime mortgages along with insurance and investment products. 

Remember to only consider options from companies that are authorised and regulated by the Financial Conduct Authority. 

Do banks do a lifetime mortgage?

Very few banks offer lifetime mortgages in the UK, and the banks that do offer equity release usually only advertise these products but redirect customers to one of the respected equity release companies (probably taking a commission from the company). There are some exceptions of course, such as Nationwide. 

Prioritise these lifetime mortgage providers

Along with ensuring that the lender is FCA regulated, it is highly recommended to only consider companies that are members of the Equity Release Council. 

The Equity Release Council has created a list of rules and guidelines and invites lenders to become members and abide by these rules. The rules are implemented to offer senior homeowners some additional reassurances and protection, which makes lenders that are members more attractive options. 

What is the negative equity guarantee?

One of the Equity Release Council’s rules is the negative equity guarantee, a guarantee that homeowners will never be chased for any debt that is not repaid through the sale of their property. 

For example, if you die or move into care and your property sells for less than expected because its value decreased, the amount raised may not be enough to cover all of the lifetime mortgage debt. Another reason this may be the case is if you held the lifetime mortgage for a very long time, causing the debt to grow substantially. 

When this happens, whatever cannot be repaid from the property sale will never have to be repaid by the homeowner, their estate or their beneficiaries. 

Some of the best lifetime mortgage providers

Below are some lifetime mortgage providers at the time of writing. These are providers we’ve researched, but there are much more available. Always do your own up-to-date research.

#1: Pure Retirement 

Pure Retirement is renowned for their exceptional customer service, and they only deal with applications from independent financial advisers on behalf of clients. This is a sign that they act professionally. They offer some competitive rates. 

#2: More 2 Life

More 2 Life is known for the flexibility of its equity release plans. The fees to add or remove people to a plan are lower than standard, and they offer downsizing protection so moving to a smaller home will not be as expensive. 

#3: LV

LV have some of the lowest early repayment charges on the market. In fact, if you have a lifetime mortgage for ten years you will not be charged anything to get out of your equity release loan. 

#4: One Family

One Family offers in-house equity release advice for a fixed fee of £950 (inc VAT). Most advisers charge a percentage of your loan, so LV’s advice can be cost-effective if you want to access a larger loan amount. 

#5: Aviva

Aviva is a household brand and a respected company. When you choose them you can rest assured you are dealing with a legitimate lender with exceptional customer service. One drawback is that their early repayment charge currently stands at 25%. 

#6: Nationwide Bank

Nationwide offers free equity release advice and does not charge you early repayment fees if you need to pay off some of the loan to downsize in the future. They’re currently offering £1,000 cashback to successful applicants. 

There’s lots more to know about lifetime mortgages!

There is so much more to know about lifetime mortgages, such as how to use an equity release calculator, variations of a standard lifetime mortgage such as a drawdown lifetime mortgage, and understanding how taking a lump sum can affect any means-tested benefits you receive. Learn more about all of these things and more for free at MoneyNerd!