Can I Buy A House With A Lifetime Mortgage? (Learn How With A Top Guide for 2023)

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Author Paul Murphy

April 2023


How To Use A Lifetime Mortgage To Move Home

A lifetime mortgage is a popular way for homeowners to release equity from their property to help finance their retirement or to achieve financial goals. 

But can you use a lifetime mortgage to buy a house? The short answer is yes, you can use a lifetime mortgage to purchase a property, but there are a few things you need to know before you decide if this is the right option for you.

Firstly, it’s important to understand what a lifetime mortgage is. A lifetime mortgage is a type of equity release scheme that allows homeowners aged 55 and over to access some of the equity in their property. This can also be done to buy a new home. 

The amount you can borrow depends on your age, the value of your property, and your health. You don’t need to make any repayments, but the loan plus interest is repaid when you die or sell the property. We can hep you calculate how much equity you can release, and explain which lifetime mortgage company provides the most suitable solution for your requirements. 

So, how can you use a lifetime mortgage to buy a house? There are three main ways to do this:

  1. Release equity from your existing property to buy a second home

If you already own a property, you can release equity from it using a lifetime mortgage to fund the purchase of second home. This can be a good option if you have a lot of equity in your current property and want to downsize to a smaller, more manageable home. You can use the money you release to pay for the new property outright, or to put down a deposit and reduce your mortgage repayments. Take out a lifetime mortgage on the new property

  1. Release equity with a lifetime mortgage to buy another home

If you don’t already own a property, you can still use a lifetime mortgage to buy a house. In this case, you would take out a lifetime mortgage on the new property, using the equity in the property as security for the loan. This can be a good option if you don’t have enough cash to buy the property outright, or if you want to keep your cash invested elsewhere.

  1. Sell your current home and use a lifetime mortgage to enable you to buy your new one

Many people aren’t aware a lifetime mortgage can be used to purchase a new home, combined with the equity in the existing home which is used as a deposit when you sell.

For example, if you had a home worth £200,000 and wanted to move to a a higher value property, a lifetime mortgage could be used to achieve this.

Once a buyer had been found for your current home, you can apply for a lifetime mortgage for the balance of money required to buy the new property. 

Bear in mind that lenders will only lend a certain percentage of the value of the property, therefore you will need to discuss your requirements with a lifetime mortgage adviser to establish how much you can raise. 

There are some important things to consider before using a lifetime mortgage to buy a house:

  • You will need to pay for a solicitor and other legal fees associated with buying a property, as well as any stamp duty or other taxes.
  • The interest rate on a lifetime mortgage can be higher than a standard mortgage, which means you could end up paying more in interest over the long-term.
  • Taking out a lifetime mortgage will reduce the amount of equity you have in your property, which could impact your ability to release more equity in the future.
  • If you take out a lifetime mortgage on the new property, you will be responsible for maintaining the property and paying for any repairs or renovations.

Modern lifetime mortgages allow voluntary interest payments to maintain control of the balance owing, which can help preserve funds for an inheritance or for future additional borrowing purposes, as certain lenders will allow more money to be taken out of the plan later on. 

In conclusion, using a lifetime mortgage to buy a house can be a viable option for some homeowners, but it’s important to carefully consider the pros and cons before making a decision. As with any financial product, it’s important to seek professional advice from a qualified advisor to ensure you fully understand the implications of your decision.



Can You Transfer A Lifetime Mortgage To A New Property?

Moving a mortgage to a new property when you move home is known as porting. This is a common feature with homeowners especially when downsizing is common. 

The process of transferring an existing lifetime mortgage from one property to another is done typically when a homeowner moves to a new home. Essentially, porting allows homeowners to keep their existing mortgage terms and conditions, such as interest rate and loan amount, when they sell their current property and purchase a new one.

When you port your mortgage, you avoid paying any early repayment charges that may apply if you were to end your existing mortgage early. Additionally, you may be able to avoid any arrangement fees associated with taking out a new mortgage. This can be particularly advantageous if you have a favorable mortgage rate that you would like to keep, or if you have a mortgage that includes special features or benefits that you would like to retain.

It’s worth noting that lifetime mortgage lenders have certain conditions that must be met before the transfer can take place. For example, the new property you’re purchasing may need to meet certain lending criteria, and your lender may require you to undergo a new affordability assessment to ensure that you can afford the mortgage on the new property.

best company equity release to buy a new home with a lifetime mortgage
A senior couple discussing their options for gifting equity release funds to reduce their inheritance tax

Can You Use Equity Release for Gifting?

Retirement & Lifetime Mortgages can provide a cash injection and a tax-efficient alternative to pensions, assets and investments for raising capital.  

What Happens When Your Interest-Only Mortgage Ends?

When your mortgage term is ending, your current mortgage lender will require a repayment plan. Assuming there are no repayment methods available, firstly, they will discuss the option of converting your lending to a repayment mortgage, however this option can prove expensive compared with interest mortgage payments.

Secondly, mortgage lenders will ask you whether you have considered downsizing, and thirdly they may suggest considering a later life mortgage, such as a lifetime mortgage.

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