Plans > Lump Sum Lifetime Mortgage

Lump sum lifetime mortgages – how do they work?

Find out how a lump sum lifetime mortgage could bring you tax-free cash

Our selected advisers are rated excellent based on 7500+ reviews

What is a lump sum lifetime mortgage?

A lump sum lifetime mortgage is one of the most popular forms of equity release. It’s a way to turn equity locked in your property into a one-off tax-free cash payment.

You could be eligible if you are aged 55 or over and have a property worth £70,000 or more. You might be mortgage-free on the property, or you could use a lump sum lifetime mortgage to pay off what’s left of your current residential mortgage.

The attraction of a lifetime mortgage to many consumers is that you don’t have to make any monthly repayments. Instead, the loan is typically repaid only when you pass away or move into permanent long-term care. In the meantime, you can continue to enjoy living in your home.

At Equity Release Wise, we bring you access to the best lifetime mortgage deals from leading providers through our selected equity release advisers. You can check here to find out how much you could release, or talk to one of our friendly consultants by calling 0808 178 3055 or request a call back.

Did you know?

According to the Equity Release Council, in 2021, lump sum lifetime mortgages made up 43% of new equity release plans. An even more popular type of equity release is a drawdown lifetime mortgage where borrowers access their cash in a number of payments spread across months or years.

mature couple looking at the pc

How does a lump sum lifetime mortgage work?

A lifetime mortgage is a way to access tax-free cash now, even if you don’t have enough regular income to make loan repayments. You receive a single one-off payment as a loan secured against your property. The loan is repaid through the sale of your property when you pass away or move into long-term care.

Because a lump sum lifetime mortgage releases a single payment, it is a popular choice for borrowers who need a large cash release rather than an ongoing income. An alternative is a drawdown lifetime mortgage that lets you take instalments rather than a lump sum, potentially reducing the total amount of interest charged on the loan.

As with most types of lending, you will be charged interest on the amount you borrow. The interest is added to the loan each month on a compound basis, so it will ‘roll up’ throughout the term of the loan. You can however choose an interest-only lifetime mortgage where you make regular payments to reduce or prevent the interest from building up.

Read more: How does equity release work?

How much can I borrow on a lump sum lifetime mortgage?

How much money you can release depends on factors including the property’s value and location. Your age is also an important factor: the older you are, the more you can borrow.

Maximum release levels typically range from 25% to 60% of the property’s value. Your lender will also have a minimum loan amount, which for many lenders is £10,000.

How you spend the money is up to you. However, first you will need to use part of your cash release to clear any outstanding mortgage or other debts secured on the property. Once that is done, you can use the money for everything from home improvements to helping loved ones get on the property ladder.

To find out how much you could borrow, use our free lump sum lifetime mortgage calculator or talk to one of our friendly consultants by calling 0808 178 3055 or request a call back.

Read more: How much equity can I release?

mature couple on the beach
Elegibility document illustration

Am I eligible for a lump sum lifetime mortgage?

Each lender has their own eligibility criteria for a lifetime mortgage. UK lenders tend to take a similar approach, so these are useful typical criteria as a guide:

  • You must be resident in the UK and aged 55 or over – when couples apply, the youngest applicant on the deeds of the property needs to be 55 or over.
  • You must own a UK property with a value of £70,000 or more.
  • If the property title is leasehold, the minimum remaining lease must be around 75 years or more.

Read more: Am I eligible for equity release?

Check your eligibility

Call us on 0808 178 3055 and we’ll arrange a free, no-obligation appointment and lifetime mortgage advice* from a specialist who will confirm whether you are eligible. If you’re unable to talk now, request a call back and we’ll call when it’s convenient to you.

Check my eligibility
mature couple looking at ipad
Plan review icon

Already have a lifetime mortgage?
You could switch for a better deal

Now could be a good time to switch to a different lifetime mortgage. You may be able to release more tax-free cash due to being older than when you took out your existing plan. An increase in your property’s value or being in poorer health could also qualify you for further cash. Interest rate changes may also save thousands over the lifetime of your plan.

Why not arrange a free review* to find out if switching works for you?

Learn more

How is a lump sum lifetime mortgage paid off?

Your lump sum lifetime mortgage would usually be paid off through the sale of your property when you pass away or move into permanent residential long-term care. If you take out a joint plan, when the first of you passes away or moves into care, their partner can continue to live in the property. Only when this second borrower passes away or moves into care is the property sold to pay back the loan.

All the lenders we work with support the Equity Release Council rules, which make it clear that you have a ‘no negative equity’ guarantee. This means that should the loan plus interest due total more than the value of your property, your beneficiaries will NOT be liable to meet the shortfall.

In fact, partly because house prices tend to increase over time, there may be some money left after the sale of the property to pass to your beneficiaries. Some lifetime mortgage products even let you ring-fence some of the value of the home to guarantee an inheritance.

Can you pay back a lump sum lifetime mortgage early?

You will usually have the option of paying back some or all of the loan early. This could be a useful option should your financial circumstances change, such as coming into an inheritance.

Doing this may involve paying lifetime mortgage early repayment charges to the lender. However, this charge is waived in some circumstances:

  • Some lenders have an ‘early repayment period’ after which time no charge would be needed.
  • The lender may waive the charge if the loan is repaid within a specified time after the first of the joint borrowers passes away or moves into long-term care.

If the option of early repayment is especially important to you, please make sure you raise it with your equity release adviser. They will be able to explain your options and recommend lifetime mortgage products with suitable early repayment criteria.

Which companies have lump sum lifetime mortgage products?

There are several providers to choose from and it may be inconvenient for you to talk to them all individually. To make life easier, Equity Release Wise can arrange a comparison from top providers to help you find the best lifetime mortgage deals.

Here are some of the leading providers that your search will compare. They are all authorised and regulated by the Financial Conduct Authority and are also members of the Equity Release Council.

aviva logo
canada life logo
just logo
pure retirement logo
crown equity release logo

Apply for your no-obligation equity release quote

Find out if you qualify for equity release and how much you could borrow. Just click ‘Get started’ or call us on 0808 178 3055 and one of our team will be delighted to help arrange a free consultation and quote*.

Start your quote journey icon

1. Start your quote journey

Simply click ‘Get started’ to begin your search for the best plan for your circumstances.

Tell us what you need icon

2. Tell us what you need

Fill out some simple details about your situation so we can start to prepare your quote.

Compare your best deals icon

3. Compare your best deals

You’ll get personalised quotes tailored to your unique circumstances and goals.

Answering your questions

Still unsure of a few things? We’ve got you covered with answers to some of our most frequently asked questions.

  • Is there a difference between a lifetime mortgage and equity release?

      There are two main types of equity release, and a lifetime mortgage is one of them. This is where you take out a loan secured against your property, keep ownership of it and still have the right to live there. It’s far and away the most popular form of equity release. The second type is known as home reversion, where you sell your property or a percentage of it. Here too, you still have the right to live there, but this will be as a rent-free tenant rather than as owner of the property.

  • Do I have to make interest payments with a lifetime mortgage?

      With a regular lifetime mortgage, you have zero monthly repayments and any interest that builds up is paid along with the loan itself once the property is sold when you pass away or move into long-term care. An alternative is an interest-only lifetime mortgage where you make voluntary payments of some or all of the interest to reduce or prevent the interest building up. Some lifetime mortgage plans also allow you to pay off some of the borrowed capital.

  • What costs are involved with a lifetime mortgage?

      Just as with a normal residential mortgage, you should be aware of costs involved in setting up an equity release lifetime mortgage. Your adviser will make sure you understand these in full before you decide whether to take out a plan, but below is a summary.

      Your lender will typically charge valuation, arrangement and completion fees, with further fees payable to the solicitor who acts for you. Some of these fees can be paid from the money you borrow, so you may not have to worry about finding them from your existing savings.

      Our selected advisers naturally charge an advice fee – but remember that any initial advice or information you receive from them is completely free and without obligation. You only pay them a fee if you apply AND your case completes.

      Once a plan is taken out, there aren’t normally any fees. One exception is an early repayment charge that some lenders request if some or all of your lifetime mortgage is paid off before you pass away or move into long-term care.

  • Are lifetime mortgages available in Scotland, Wales, Northern Ireland and England?

      Yes, lifetime mortgages and other forms of equity release are available in every country in the UK. When you contact Equity Release Wise, we will connect you with our carefully selected advisers who can help you wherever in the UK you live.

  • What are the potential risks of a lifetime mortgage?

      A lifetime mortgage has worked for thousands of over 55s in need of tax-free cash. But it’s important to understand lifetime mortgage pros and cons before deciding if it’s right for you, so here are some potential risks you need to be aware of:

      • Interest is calculated daily and added to the amount you owe each month. The amount owed therefore increases and reduces any equity left in your home when the plan ends, unless you choose to make interest payments while the plan is running.
      • Taking equity out of your home will mean that the inheritance you leave to loved ones will be reduced.
      • If you give some of the money you release to family as a gift, they may be liable to pay inheritance tax in the future.
      • You may have to pay an early repayment charge if you choose to pay back some of the loan early.
      • Borrowing money through a lifetime mortgage may affect your entitlement to some means-tested state benefits. During your appointment with one of our selected equity release advisers, they will help you establish whether your benefits could be affected.

Other types of equity release

Other forms of equity release may be more suitable for you than a lump sum lifetime mortgage. Find out more below, or talk about your options to one of our selected advisers so that you can get the best solution for you:

Product drawdown icon

Drawdown lifetime mortgage

Instead of withdrawing the maximum amount available right away, you take an initial cash sum, then additional funds as and when you need them. This helps to reduce the total interest you pay.

Learn more about drawdown lifetime mortgage plans
Product interest only icon

Interest-only lifetime mortgage

A more cost-effective method of equity release where you make voluntary interest payments to reduce or prevent compound interest building up.

Discover more about interest-only lifetime mortgage plans
Product enhanced icon

Enhanced lifetime mortgage

Certain health conditions or lifestyle factors could qualify you for higher cash releases or lower interest rates. A simple questionnaire is all that’s needed to check eligibility.

Read more about enhanced lifetime mortgage plans
Product second home icon

Second home lifetime mortgage

If you have a second home you may be able to secure a lifetime mortgage against it, or make your dream of a second home come true with a release from your main residence.

Read more about second home lifetime mortgage plans
Product buy to let icon

Buy-to-let lifetime mortgage

These specialist plans could enable you to release equity from a buy-to-let property, or to use the wealth in your home to help you make a buy-to-let investment.

Read more about buy-to-let lifetime mortgage plans
Product home reversion icon

Home reversion

A type of equity release where you sell all or part of your property at less than market value in return for a lump sum, a regular income, or both. You stay in your home rent-free.

Learn more about home reversion

Still have questions?

We hope this information has been useful. To find out more or arrange a consultation with an adviser, please call or request a call back and we’ll be happy to help further.

call us icon

Let’s talk

Let us help with your questions or arrange a quote.

Call 0808 178 3055
request a call back icon

Request a call back

Book a call at a time that suits you and we’ll call you back.

Request a call back
calculator icon

Are you eligible?

Find out how much tax-free cash you could release.

Check now

+ Client testimonials refer to the service provided by our selected equity release advisers. We have changed the clients’ names and certain identifying information to protect their privacy.

Please note that equity release will involve a home reversion or a lifetime mortgage, which is secured against your property and will reduce the value of your estate and impact funding long-term care. To fully understand the features and risks, ask for a personalised illustration. Equity release requires paying off any existing mortgage. Any money released, plus accrued interest would be repaid upon death, or moving into long term care.