What are Lifetime Mortgages For The Over 60s? (Lets Find Out)

Over 60's lifetime mortgage could transform your retirement with financial security. We explain the different options, what's important to consider and the best later life mortgages available.

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Updated July 2023 – Author Paul Murphy -Later Life Finance Ltd

Short Summary

Over 60s’ Lifetime mortgage schemes are a type of later life mortgage and have become increasingly popular among homeowners aged 55 and over.

They offer a way to access funds tied up in property without the burden of monthly repayments, although payments can still be made on a voluntary basis.

But before diving in, it’s crucial to understand how over 60’s lifetime mortgages work, the interest rates, and how the plans can be arranged to suit your individual requirements for longer term flexibility and security in your home for the years to come.

Many homeowners are asking what is a lifetime mortgage, and what is the application process? We can help you with this process, contact us for more information on 0800 2465228 or calculate your equity release figures and arrange a free call back.

Let’s start by exploring the basics of the lifetime mortgage.

Understanding the Over 60's Lifetime Mortgage-What are they?

Understanding the over 60’s lifetime mortgage options is key before taking the plunge, so make sure to assess your needs and compare rates from different providers. Our experts can help you with this.
Taking out an over 60’s lifetime mortgage can have an impact on both inheritance and benefits, so research carefully before proceeding.
Seek professional advice on equity release for finding the best over 60’s lifetime mortgage that suits your needs in 2023!

Later Life Finance limited are a specialist lifetime mortgage broker authorised and regulated by the financial conduct authority (FCA). As experts in later life mortgages we review the world of the lifetime mortgage and the important points to consider when deciding whether it is right for you. Access our free equity release cost calculator for more figures.

How does an over 60’s lifetime mortgage compare with typical mortgages, and which option is more suitable?

We review and compare to ensure you find the best deal for you.

Let’s explore further…

What are Lifetime Mortgages for over 60s?

Over 60’s lifetime mortgage schemes have become increasingly popular among homeowners aged 55 and over.

They offer a way to access funds tied up in property without the burden of monthly repayments. But before diving in, it’s crucial to understand how the mortgages work, their interest rates, and the potential impact on your financial future.

Let’s start by exploring the basics of the over 60’s lifetime mortgage.

How much can i borrow on an over 60's lifetime mortgage?

The amount you can borrow on an over 60’s lifetime mortgage, also known as an equity release mortgage, depends on various factors such as your age, health, the value and type of property you live in, and the lending criteria of the provider.

Lifetime mortgages are typically available to homeowners who are aged 55 or older.

What specific criteria are these lenders actually considering when you apply for an over 60’s lifetime mortgage?

Lets find out:

Age: Generally, the older you are, the more you can borrow. Lenders use actuarial calculations to estimate your life expectancy, and as a result, they offer larger release amounts to older borrowers.
Property Value and type: The value of your property is a significant factor; the higher the value of your home, the more you can borrow. However, lenders usually cap the maximum percentage of the property’s value that they will lend. This is to ensure there is sufficient equity remaining in the property to cover any interest that accrues over time. Houses and flats have different rules, with houses generally having a higher loan to value than flats.
Loan-to-Value (LTV) Ratio: Lenders use the loan-to-value ratio to determine the percentage of your property’s value that they are willing to lend. The LTV ratio varies between providers, but it typically ranges from around 20% to 50%. Some lenders may offer higher LTV ratios for older borrowers.
Health and Lifestyle: Some lifetime mortgage providers offer enhanced borrowing options for individuals with certain health conditions or lifestyle factors. These factors may affect your life expectancy and can influence the loan amount.
Interest Rates: The interest rate applied to your lifetime mortgage will affect how much you will repay. Higher interest rates usually result in larger loan amounts.
Inheritance Protection: If you choose to protect a portion of your property’s value as an inheritance for your beneficiaries, the amount you can borrow will be reduced, to ring fence the percentage you wish to protect.
Provider’s Criteria: Each lender has its own underwriting criteria and eligibility requirements. Different lenders have varying loan amounts and criteria.

It’s important to note that with a lifetime mortgage, the loan amount, along with the accumulated interest, is repaid when you pass away or move into long-term care.

Therefore, before considering a lifetime mortgage, it’s crucial to seek independent equity release advice and carefully consider the impact on your estate and inheritance for your beneficiaries.

Additionally, consider alternative options like downsizing or other forms of equity release to determine the best solution for your financial needs.

What is an over 60's lifetime mortgage?

An over 60’s lifetime mortgage is a long-term loan secured against a borrower’s property, allowing you to access a portion of their property’s value without making monthly repayments, although repayments are allowed on a voluntary basis.

To be eligible, you need to be over 55 years old, have little or no mortgage left to pay, and own a property in good condition that is also your main residence.

Most lifetime mortgage schemes come with a negative equity guarantee, ensuring that the debt will never exceed the value of your home. This comes under the equity release council codes of conduct protection for homeowners.

How do over 60's lifetime mortgage work?

Lifetime mortgages for over 60’s work by allowing homeowners to borrow a portion of their property’s value, with interest accruing over time and repaid upon death or moving into long-term care. If no voluntary repayments are made, the compounding interest can grow rapidly, so it’s essential to be aware of the total amount that will need to be repaid in the future.

Drawdown lifetime mortgages allow you to stage the borrowing over a longer timeframe which reduces the amount of interest charged on the money borrowed.

So, what if you want to pay off the loan early?

Can you pay off an over 60's Lifetime Mortgage early?

Yes, early repayment of a lifetime mortgage is possible, but keep in mind that you may be charged fees depending on the provider and plan. It’s essential to understand any potential early repayment fees before proceeding with a lifetime mortgage.

Now, let’s discuss interest rates, the concept of accrued compound interest, and the average interest rate.

How much do you pay back with an over 60's lifetime mortgage?

Compound interest means the sum borrowed will accumulate over time and cause the sum borrowed to double in around 10 years.

Due to this effect, voluntary interest repayments are popular with homeowners looking to unlock their equity without having to lose it all to effects of compound interest accruing.

For example, if the interest is repaid on a lifetime mortgage each month, this will stop any compound interest being applied to the mortgage meaning they can be run in a similar fashion to an interest only mortgage.

Since the repayments are voluntary, there is no risk of default with a lifetime mortgage, making the plans much safer in retirement years for homeowners.

For example, in a joint ownership structure, if one homeowner passes away the survivor could opt to stop or reduce the voluntary repayments when their income reduces as a result of losing their partner.

The flexibility makes the lifetime mortgage a safe and acceptable solution to consider when raising cash from your home.

Over 60's lifetime mortgage interest rates

Interest rates for equity release lifetime mortgage schemes vary, with current average rates around 6.3%. The interest rate you’ll receive depends on several factors, such as the amount you want to borrow and the type of plan you choose. Other factors like your age, property value, and loan-to-value ratio also come into play when determining the interest rate.

With that in mind, let’s explore the factors affecting lifetime mortgage rates.

What is an over 60's lifetime mortgage plan?

A lifetime mortgage plan is the scheme your adviser recommends based on your circumstances.

As mentioned earlier, factors such as the borrower’s age, property value and type, health and loan-to-value ratio affect lifetime mortgage rates. Understanding these factors can help you choose the right mortgage and secure the best possible rate.

Our expert advisers will leave no stone unturned when it comes to sourcing the best plan for your specific circumstances.

Let’s delve deeper into each of these factors.

Borrowers age & health

The borrower’s age and health plays a significant role in calculating the interest rate on a lifetime mortgage. Any health issues can provide access to enhanced terms, potentially providing a higher level of borrowing, although this can also come with higher interest rates too.

Property Value & type

The value of your property and whether it’s a house or a flat can influence the range of options available to you.

Higher property values can result in lower interest rates due to lower loan-to-value ratios, depending on the level of money borrowed.

Loan to Value Ratio

The loan-to-value (LTV) ratio is the amount of the loan compared to the value of the property. Generally, a lower LTV ratio can lead to lower interest rates, as the lender takes on less risk.

The LTV ratio’s impact on interest rates is based on various bands of interest rates which tend to increase as the level of borrowing as a percentage of the property value does.

Types of Lifetime Mortgages

Different types of lifetime mortgages offer varying interest rates and repayment options, such as lump sum, drawdown, and interest-only mortgages. Understanding these types can help you choose the best option for your needs.

Let’s explore each type in more detail.

Lump Sum over 60's Lifetime Mortgages

Lump sum lifetime mortgages provide a single payment, with interest accruing over time if you do not make any voluntary repayments to the plan.

This type of mortgage allows you to access a large sum of money at once, based on your age and the property value.

Our expert advisers will also consider whether a drawdown lifetime mortgage may be more suitable.

Drawdown Lifetime Mortgages

Drawdown lifetime mortgages offer more flexibility, allowing borrowers to access funds as needed, with interest only charged on withdrawn amounts. This type of mortgage can be an attractive option for those who want to access funds gradually while minimising interest charges.

The funds in the drawdown (or reserve facility) are charged at the prevailing interest rate at the time of borrowing, which makes this option an efficient route compared with taking the funds in one lump sum.

Interest only lifetime mortgage

Interest-only lifetime mortgages require monthly interest payments, keeping the loan balance constant.

This type of mortgage can help homeowners protect a larger portion of their property for inheritance or maintain a steady loan balance.

The advantage of an interest only lifetime mortgage is the payments are voluntary and can be rolled up, which protects homeowners from defaulting on the mortgage in the event payments were stopped for any reason. This can be beneficial in the event of either spouse passing away or going into long term care, and protects the surviving homeowner.

Consider whether making monthly interest payments aligns with your financial goals and capabilities.

Top over 60's lifetime mortgage providers in 2023

In 2023, top lifetime mortgage providers offer lifetime mortgages with competitive rates, flexible terms, and exceptional customer service for enhanced lifetime mortgages.

Let’s take a closer look at some of the best providers in the market.

Legal & General Lifetime Mortgages

Legal & General are known for their exceptional customer service and as they funds their own mortgages, they make fast decisions and are flexible. Applications can only be made through independent financial advisers, ensuring that borrowers receive personalised guidance from qualified professionals.

This ensures that customers receive the best advice and guidance when making decisions about their retirement plans. Legal & General also offer a wide range of later life mortgages making it an attractive option for finding the best solution for your needs.

Legal & General are a member of the Equity Release Council. To explore your options further, consider using a free equity release calculator.

Aviva Lifetime Mortgages

Legal & General are a member of the Equity Release Council. To explore your options further, consider using a free equity release calculator.

More to Life Lifetime Mortgages

More 2 Life offers flexible lifetime mortgage plans from several funders providing borrowers with access to a wide range of solutions available through your equity release adviser.

it’s worth noting that More 2 Life is a member of the Equity Release Council. To explore your options further, consider using our free equity release calculator.

Canada Life Lifetime Mortgages

Canada Life offers flexible lifetime mortgage plans and also provide downsizing protection, allowing borrowers to switch to a smaller property and pay off their lifetime mortgage without extra fees.

This means that borrowers can move to a smaller property without having to pay additional fees or charges. This is a great benefit for those who may need to downsize in the future, and

Standard Life Lifetime Mortgages

Standard Life offer some of the most competitive lifetime mortgages in the market. With tapered early repayment charges their plans offer a good level of flexibility for homeowners.

Tips for choosing the best over 60's lifetime mortgage

Choosing the best lifetime mortgage involves assessing your personal needs, comparing rates and terms from various providers, and seeking professional advice from a financial advisor.

Let’s break down these tips to help you find the best lifetime mortgage for your unique situation.

Assess your needs

Before selecting a lifetime mortgage, consider your financial needs and goals. What do you want to achieve with the equity release? Are you looking for a lump sum to cover a significant expense, or would you prefer a drawdown mortgage for ongoing expenses?

Understanding your needs will help you narrow down the most suitable mortgage options.

Compare rates and terms

Take the time to compare interest rates, fees, and terms from multiple providers to find the best fit for your needs. Consider factors such as early repayment charges and any additional fees that may apply.

Comparing rates and terms will help you secure the most favorable lifetime mortgage for your situation.

Seek professional advice

Consulting a financial advisor for personalised guidance on choosing the right lifetime mortgage is crucial.

Our experienced professional can help you navigate the different products, assess your needs, and find the best plan with the most competitive interest rates and features.

Don’t underestimate the value of expert advice in finding the perfect lifetime mortgage.

Impact of lifetime mortgages on inheritance & benefits

Lifetime mortgages can impact inheritance and means-tested benefits, so it’s important to consider these factors before taking out a loan.

Let’s explore the potential effects of lifetime mortgages on both inheritance and benefit eligibility.

Inheritance considerations

Lifetime mortgages may reduce the value of an estate, affecting inheritance for beneficiaries. However, some lifetime mortgages, such as interest-only mortgages, allow monthly interest payments, which can help preserve the equity in the property.

Consider the potential impact on your estate and discuss your options with a financial advisor.

Effects on means tested benefits

Borrowing through a lifetime mortgage can affect eligibility for means-tested benefits. The cash you receive could increase your savings and capital to a level that exceeds the eligibility threshold.

It’s essential to understand the potential impact on your benefits before proceeding with a lifetime mortgage.

Downsizing protection

Some lenders provide a beneficial feature called downsizing protection, which grants you the ability to repay your equity release early without incurring any early repayment charges when you relocate to a new home.

Should I take a lump sum or a drawdown plan?

The decision between a lump sum or drawdown lifetime mortgage should be based on your specific needs and requirements.

Opting for a drawdown lifetime mortgage can offer certain advantages, which include:

Interest is applied only to the amount withdrawn, rather than the entire approved loan. This can potentially save you money on interest charges.
Drawdown allows you to plan and budget for specific projects and your retirement more effectively, as you have the flexibility to access funds as needed.
By choosing a drawdown lifetime mortgage, you may be able to maintain eligibility for means-tested benefits, as you have control over the amount and timing of the withdrawals.

Ultimately, it is important to carefully consider your individual circumstances and seek professional advice to determine which option, lump sum or drawdown, aligns best with your financial goals and requirements.

Summary

There are many factors to discuss when considering whether an over 60’s lifetime mortgage is suitable for your plans.

Various aspects of equity release, including the option to transfer a lifetime mortgage to a new property, the protection against negative equity, considerations for early repayment, and the choice between a lump sum or drawdown lifetime mortgage are all important factors to consider when exploring equity release.

Later Life Finance provide a comprehensive review of all your equity release options. Our expert advisers provide detailed illustrations and projections to assist you with understanding the effect of raising money from your home on your estate.

We provide professional insight into how to manage the optional interest payments, and how this will affect your estate in comparison with making no payments.

Lifetime mortgages allow homeowners over 55 to borrow against their property. With optional repayments the mortgage is settled when the homeowners pass away or go into long term care.

Voluntary repayments mean compound interest can be avoided or reduced to help preserve more equity for your beneficiaries, or for downsizing and settling the mortgage and buying another home.
No negative equity guarantee for Equity Release Council members ensures you will never owe more than your home’s sale proceeds; protecting you and your family.
Possible to port (move) the lifetime mortgage when moving to a suitable property, or sell property and repay debt with sale proceeds (subject to exit fee’s)
Downsizing protection to repay without any exit fees if you move home and settle early
Access professional equity release advice with Later Life Finance. We help you determine if a lifetime mortgage suits your needs and review lump sum or drawdown options, voluntary repayments and exit fees when considering over 60’s lifetime mortgages.

Lifetime mortgage FAQs

What percentage can I borrow on a lifetime mortgage?

The amount you can release on a lifetime mortgage is usually between 20% and 50% of the home's valuation. This is based on the age of the youngest homeowner and the property type.

Can you borrow more on a lifetime mortgage?

If you need to raise more money and have no remaining Drawdown (reserve) Facility, you may be able to take a Further Advance from your lifetime mortgage. This is additional borrowing on top of your existing lifetime mortgage and is subject to the valuation of your home and the balance on your lifetime mortgage.

Can I move home with a lifetime mortgage?

Equity release companies who adhere to the Equity Release Council codes of conduct offer the option to transfer your lifetime mortgage to a new property if you decide to move. However, certain conditions must be met for the new property to be considered "suitable." A suitable property refers to one that is deemed marketable by the equity release company in the future. For instance, if the new property is located in a flood-prone area, the transfer of the lifetime mortgage may not be permitted. In the case of downsizing to a property of lesser value, you might be required to repay a portion of your lifetime mortgage to facilitate the transfer.

How much do you pay back on a lifetime mortgage?

In the case of a lifetime mortgage, you generally do not need to make monthly repayments since the loan, along with the accumulated interest, is settled when your home is eventually sold. Your lifetime mortgage adviser will provide detailed projections of how much you will pay back based on whether you opt to make payments or not.

What happens when you die shortly after taking out a lifetime mortgage?

In the event of you passing away shortly after obtaining a lifetime mortgage, the interest accrued would not have significantly accumulated, resulting in a smaller growth of the debt. If no other homeowner is listed on the lifetime mortgage, the lender requires the mortgage to be settled within 12 months of you passing away. The executors of your will sell the property and utilise the proceeds to settle the debt. The beneficiaries of your estate may opt pay off the debt using cash or a new mortgage and retain ownership of the property. This will depend on factors including your wishes set out in your will, and on whether the property is to be retained or sold, with any remaining equity divided by your beneficiaries.

Can you end up owing more than your home is worth with a lifetime mortgage?

Equity release lenders who are a member of the Equity Release Council provide a no-negative equity guarantee. This ensures you will never be required to repay more than the proceeds from the sale of your home to settle the debt. In other words, the lender cannot pursue you for any shortfall between the debt amount and the sale proceeds. This protection is made possible by the no negative equity guarantee, which is upheld by all members of the Equity Release Council. According to this guarantee, the lender is strictly limited to requesting only 100% of the sale proceeds as repayment. They are not permitted to seek additional payment from you, your estate, or your estate beneficiaries.

What is a typical rate for a lifetime mortgage?

A typical rate for a lifetime mortgage typically falls between 5.9% and 7%. That said, your rate may be different depending on factors like your loan-to-value ratio and the features included in your plan. It’s important to compare the features of different plans to find the one that best fits your needs.

What are the disadvantages of a lifetime mortgage?

Lifetime mortgages come with a few risks, such as the possibility of owing more than the value of your home due to accumulated interest. They also require monthly fees and can significantly reduce the amount of inheritance you can pass on to family members. Ultimately, it’s important to consider all of these factors when deciding if a lifetime mortgage is the right choice for you.

How do lifetime mortgage interest rates work?

Lifetime mortgage interest rates are typically based on your age, the amount of money you need to borrow, and the value of your property. Generally speaking, the older you are and the less you borrow, the lower the rate you can expect. Drawdown lifetime mortgages have interest rates set at the time of further borrowing, whereas the initial lump sum is determined at the time of arranging the plan. So be sure to research what’s out there before making a decision.

Can I pay off a lifetime mortgage early?

Yes, you can pay off a lifetime mortgage early, but there may be fees associated with doing so. Providers have varying levels of early repayment charges which your equity release adviser will discuss with you to ensure you have access to all your options and understand the features and charges. It is best to check with your provider before you decide on the repayment plan.

What are the different types of lifetime mortgage?

Lifetime mortgages come in several forms, including lump sum, drawdown and interest-only plans. Each offers different rates and repayment arrangements, so your adviser can tailor the mortgage to meet your needs. Later Life Finance provides access to the whole lifetime mortgage market. We will explain the features, costs and points to consider of each option. This will help you make a balanced decision on the right solution for you.

Can equity release be used to pay off an interest-only mortgage?

You can repay an interest-only mortgage with an equity release plan. Lifetime mortgages are the most popular form of equity release and allow optional repayments of interest charges, if you wish. Since monthly repayments are voluntary with a lifetime mortgage, your home is not at risk of repossession if you do not maintain monthly payments.Therefore these plans can be more suitable into retirement years.

what is an interest only lifetime mortgage?

An interest-only lifetime mortgage is a type of equity release plan where you can pay the interest off on a monthly basis. This avoids compound interest being added which stops the loan from increasing. This type of mortgage is popular for homeowners who want to maintain equity in the home for inheritance or downsizing purposes.