Buying a home later in life can be more complex, especially if income or age limits make traditional mortgages difficult to secure. Many people in their fifties, sixties and beyond wonder whether a lifetime mortgage could be used to purchase a property instead. The short answer is yes, it is possible to buy a house using a lifetime mortgage, but this option comes with specific rules, costs and risks that make it suitable for only certain buyers.
What Is a Lifetime Mortgage
A lifetime mortgage is a form of equity release available to homeowners aged 55 or over. It allows you to borrow money secured against your home while retaining ownership of it. Unlike a standard mortgage, there are no monthly repayments unless you choose to make them. Instead, the loan and any interest are repaid when you die or move into long-term care, typically from the sale proceeds of the property.
While most people use a lifetime mortgage to release equity from their existing home, it can also be used to help purchase a new one. The lender provides a lump sum that goes towards the property’s purchase price, and the rest is usually paid from your savings or from the sale of your previous home.
Who Can Use a Lifetime Mortgage to Buy a Home
Lifetime mortgages are designed for older homeowners, usually aged 55 and above, who may not qualify for a standard residential mortgage. This makes them particularly suitable for those wishing to downsize, move closer to family, or buy a more accessible property for later life. You must meet the lender’s age and property criteria, which often include minimum property values and certain construction standards.
Some people also use a lifetime mortgage to buy a new home outright after selling their previous one. For instance, if you sell your current property, use part of the proceeds as a deposit and take out a lifetime mortgage to cover the rest, you can buy your new home without taking on regular mortgage repayments.
Legal and Regulatory Overview
Lifetime mortgages are regulated financial products under the Financial Conduct Authority. This means they must meet strict standards designed to protect borrowers. Only certain lenders and advisers are qualified to offer them, and taking professional advice is a legal requirement before entering into one.
The property being purchased must meet the lender’s criteria regarding construction type, value, and location. The borrower must also occupy it as their main residence. The lender will register a legal charge against the property, just as with any mortgage. When the home is eventually sold, the loan and interest are repaid from the proceeds, and any remaining balance passes to your estate.
How Buying a House with a Lifetime Mortgage Works
If you wish to buy a new home with a lifetime mortgage, the process begins with a consultation with a qualified equity release adviser. They will assess your eligibility, your age, your current equity or savings, and the type of property you want to purchase.
Once you find a suitable home, your adviser will help you apply for a lifetime mortgage with a lender that supports purchase transactions. The lender will conduct a property valuation to ensure it meets their lending criteria. The amount you can borrow is determined by your age, property value, and lender policy. Typically, the older you are, the more you can borrow as a percentage of the property’s value.
You then combine the funds from your lifetime mortgage with your own contribution, usually from savings or the sale of another property, to complete the purchase. Once the sale is finalised, you own the property outright, but the loan and interest accumulate until it is repaid later in life.
Costs and Timelines
The process of buying a property with a lifetime mortgage follows similar stages to a standard purchase, although it can take slightly longer due to additional checks. From the initial application to completion, it usually takes between eight and twelve weeks, depending on the lender and the complexity of the transaction.
Costs include arrangement fees for the mortgage, property valuation fees, and solicitor’s charges for conveyancing. You may also have to pay stamp duty if the purchase price exceeds the threshold. As with all equity release products, the biggest cost is the interest that accumulates over time. Since most borrowers do not make regular repayments, interest is compounded, meaning the amount owed grows each year.
Risks and Considerations
One of the main risks of using a lifetime mortgage is that the debt increases over time. Because interest is rolled up, the longer you live, the more you owe. This reduces the amount of inheritance you may leave to your family. Some lifetime mortgages include a “no negative equity guarantee”, which means you will never owe more than your home is worth, but this should be confirmed before signing.
Another consideration is flexibility. While most providers allow you to move home and transfer your lifetime mortgage, the new property must meet the lender’s approval. If it does not, you may have to repay the loan earlier than planned.
Buying with a lifetime mortgage also limits your options later. If you wish to borrow again, remortgage, or release more equity, your existing agreement might restrict this. It can also affect your eligibility for means-tested benefits.
Because of these risks, it is essential to work with a financial adviser who specialises in equity release. They will explain how the product affects your estate, inheritance, and long-term financial stability.
Who Should Consider This Option
Buying with a lifetime mortgage can be a suitable option for those who are asset-rich but cash-poor. It is particularly attractive to retirees who want to move but cannot afford to buy a home outright without selling their current one. It can also work for those who have paid off their previous mortgage and want to access part of their property’s value to fund a move or a lifestyle change.
It is not typically recommended for younger buyers or anyone who expects to move again in the near future, as the compound interest can quickly become costly. It may also be unsuitable for those wishing to preserve the full value of their estate for inheritance purposes.
Tips for Success
If you are considering buying a house with a lifetime mortgage, start by seeking regulated advice from an equity release specialist. Ask them to compare lifetime mortgage options with retirement interest-only mortgages and standard products designed for older borrowers.
Choose a property that meets lender requirements, as some homes such as listed buildings, flats in high-rise blocks, or those with non-standard construction can be excluded. Ensure that you fully understand how much you can borrow, how the interest will grow over time, and what will happen when you eventually sell or pass away.
It is also wise to discuss your plans with family members or anyone who may inherit the property. Transparency helps avoid future disputes and ensures everyone understands the long-term implications of the loan.
Example Scenario
Imagine a couple aged 68 selling their family home valued at £400,000. They want to move closer to their children and find a smaller property costing £300,000. After selling, they plan to keep £150,000 from the sale and take out a lifetime mortgage of £150,000 to buy the new home outright. They will live in the new property without monthly repayments, and when the property is sold after their deaths, the lender will reclaim the £150,000 plus interest from the sale proceeds.
Conclusion
Yes, you can buy a house with a lifetime mortgage in the UK, provided you meet the lender’s criteria and receive proper financial advice. It can be a useful option for older buyers who want to move without taking on traditional mortgage repayments. However, it comes with significant long-term costs, so it is important to weigh up the benefits against the risks.
A lifetime mortgage can provide financial freedom and housing stability later in life, but it should always be approached with care and full understanding. Professional advice is essential to ensure the product suits your personal and financial goals, helping you make an informed decision about your future home and finances.