How do lifetime mortgages work for couples?

Your guide to joint lifetime mortgages

Written in line with our editorial policy.

Equity release can be a useful financial solution for couples aged 55+ who want to unlock the value of their property while continuing to live in it. 

As with more traditional residential mortgages, you can take out equity release on either a single or joint basis. If you do apply as a couple, there are a few key considerations to keep in mind to ensure both partners understand how it works and what it means for your future.

What is a lifetime mortgage?

Equity release is a financial tool that allows homeowners aged 55 or over to unlock some of the tax-free cash from their home’s value without having to sell the property or move out.

There are typically no monthly repayments to make with a lifetime mortgage – the most popular form of equity release – as the interest can be left to roll up each month. The interest and the loan itself are then typically repaid through the sale of your home when the last remaining homeowner passes away or moves into long-term care. 

If you are concerned about the amount owed growing in size over time due to compound interest, there are repayment options available to reduce how much interest builds up. Both interest-only plans and making voluntary partial repayments can help with this.

When can couples arrange equity release?

Couples may turn to equity release simply to help them enjoy a more comfortable retirement. You can use the equity tied up in your home to clear any outstanding mortgage, supplement your day-to-day income or fund major expenses.

If you are a couple looking to access some of your property wealth with a plan, both partners need to meet certain equity release eligibility criteria:

• Age requirements. Both individuals must be at least 55 years old to arrange a lifetime mortgage. If you are not old enough, there may be other ways to release equity if you are under 55. 
• House valuation. The property needs to be of sufficient value, typically a minimum of £70,000. The amount that can be released is generally based on the value of the home and the age of the youngest applicant: the older you are, the more you can typically release.
• Property ownership. If you wish to take out equity release on a jointly owned property, where both partners are named on the deeds of the house, both of you must agree and be named on the plan. This ensures that you both benefit from the protections available, including the right to remain in the property for the rest of your lives, or until you move into long-term care.

Can we still do equity release if my partner is not on the title deeds?

If only one partner is not on the title deeds, you will need to make a decision about how to proceed. Your two main options are:

Adding a partner to the deeds

The partner not on the deeds can be added to during the process of applying for the lifetime mortgage. This is to protect both parties, ensuring you each have equal rights to stay in the property for life or until you both reside in long-term care.

Proceeding as a single applicant

If adding the partner to the deeds isn’t feasible for some reason, they could still take out equity release as a single applicant while their partner lives there. However, this would leave the other partner without the same rights and protections, such as the right to remain in the home if the sole homeowner passes away or moves into long-term care.

It’s essential to seek legal and financial advice in the above situations to ensure both partners’ interests are fully protected.

What happens if a couple separates with equity release?

If a couple separates, the options for handling the lifetime mortgage depend on the circumstances:

• Selling the property. The couple could decide to sell the home and repay the lifetime mortgage from the proceeds. If the home is sold for more than the outstanding loan plus accrued interest and potential early repayment charges, the remaining equity can be split between the two partners.
• One partner remains in the home. If one partner wishes to remain in the home, they would need to seek legal advice and guidance from the plan provider to explore whether they can take on the plan independently. 
• Porting (moving) the mortgage. In some cases, the lifetime mortgage could be ported to a new property in just one partner’s name if it meets the provider’s terms and both partners agree. This would allow them to buy two new homes with one of them keeping the equity release plan.

Read more about this topic in our blog “Equity release and divorce.”

Does equity release end if one partner dies?

No, if one homeowner passes away or moves into care, the plan remains in place and the remaining homeowner can stay in the property until they also pass away or move into long-term care. This is because all plans from providers who are members of the Equity Release Council offer stringent safeguards. These protect the rights of equity release customers, including the ‘right to remain in your home’ guarantee.

When the last remaining homeowner either passes away or moves into long-term care, the loan, plus any accrued interest, is typically paid off through the sale of your property. 

You can read more about how equity release is paid back here.

Can I downsize with equity release if my partner dies?

Yes, it is typically possible to downsize if your partner passes away and you no longer wish to remain in the home. Plans from Equity Release Council members all allow for moving the plan to a new property, provided the new property meets the lender’s criteria.

Downsizing may involve repaying part of the loan if the new property is worth less than the original one. This is typically taken from the money raised from the sale of your home. However, it does enable the surviving partner to move to a more manageable home without having to immediately repay the full amount that’s owed.

Some equity release providers include a waiver of any early repayment charges if a homeowner wishes to pay back an equity release plan early following the death of their spouse or partner. You can read more about equity release downsizing protection here.

Important considerations for couples arranging equity release

There are a few additional factors that couples need to think about before opting for a lifetime mortgage:

• Arranging equity release as joint tenants. All plans approved by the Equity Release Council offer the ‘right to stay in your home’ guarantee. This means that the agreement will remain in place until the last remaining homeowner passes away or moves into care. You can read more about the Equity Release Council’s five guarantees here.
• Interest roll-up vs. interest-only. A lifetime mortgage will typically be set up so that the interest rolls up (compound interest) until the plan comes to an end. But some interest-only equity release plans let you pay off all or some of the interest on a regular basis. Couples should carefully consider which option best suits their financial situation.
  
• Impact on inheritance. Releasing equity from your home will reduce the value of your estate and the amount that can be passed on to your loved ones. However, many plans today offer inheritance protection. This allows you to ring-fence a portion of the home’s value that can be guaranteed as an inheritance, irrespective of how much interest accrues on your plan.
• Your health. There aren’t many times in our lives that having poor health can be a good thing, but this is the case with equity release. If you or your partner have a qualifying health condition then you could unlock a higher percentage of your home’s value – or access lower equity release rates – with an enhanced plan. Common health conditions such as high blood pressure, diabetes or even a history of smoking may all entitle you to enhanced terms.

Specialist equity release advice for couples

Equity release could provide valuable financial security in retirement for you and your partner. But it’s important to fully understand the pros and cons of equity release before making your decision.

Our selected equity release advisers are ready and waiting to help you explore your options and find the best plan for your needs. Please call 0808 178 3055, or request a call back for a time that suits you. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could unlock.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn