Can I Buy a House With a Lifetime Mortgage

Can I Buy a House With a Lifetime Mortgage

A lifetime mortgage is a form of equity release that allows homeowners to unlock the value of their property while continuing to live in it for the rest of their lives. Often associated with retirement planning or supplementing later life income, a lifetime mortgage can also be used to purchase a new property entirely. For older homeowners looking to downsize, relocate or even move closer to family, buying a house with a lifetime mortgage can be a practical and financially viable option. Understanding how the process works, who qualifies and what the implications are is essential for making an informed decision.

What Is a Lifetime Mortgage

A lifetime mortgage is a long term loan secured against your home that does not require monthly repayments. Instead, the interest is rolled up and added to the loan balance over time, with the full amount repaid when you die or move into long term care. The loan is typically repaid through the sale of the property, and any remaining equity belongs to your estate. Lifetime mortgages are available to homeowners aged fifty five and over and are regulated by the Financial Conduct Authority. Unlike traditional mortgages, they offer a way to access property wealth without selling your home or moving out of it.

Using a Lifetime Mortgage to Buy a New Home

Many people do not realise that a lifetime mortgage can be used not just to release equity but also to purchase a new home. This is known as a lifetime mortgage for home purchase and is designed for those who want to buy a property without the need for a traditional mortgage or cash purchase. It can be particularly helpful for those moving to a more expensive area, downsizing while releasing cash or needing a property that better suits their health or lifestyle needs. The amount you can borrow depends on your age, the value of the property and the lender’s criteria. The rest of the purchase price can be made up from savings or the sale of a previous home.

Who Can Qualify for a Lifetime Mortgage Purchase

To qualify for a lifetime mortgage for purchasing a home, you must usually be at least fifty five years old and buying a property that meets the lender’s criteria. The property must be your main residence and in good condition, with standard construction and located within the UK. Most lenders do not allow lifetime mortgage funds to be used to buy second homes or investment properties. You will also need to pass the lender’s checks, which may include a property valuation and a review of your personal circumstances. There is no need to pass affordability assessments in the way that a traditional mortgage requires, as the loan does not require monthly repayments.

How the Process Works

If you plan to use a lifetime mortgage to buy a new property, you will first need to find a lender or broker that offers this type of equity release. You will receive an offer in principle, which outlines how much you can borrow based on your age and the value of the new property. Once you have found a property and had your offer accepted, the lender will arrange a valuation and legal checks. Your solicitor will handle the legal side of the transaction and ensure that the funds from the lifetime mortgage are available for completion. Any shortfall in the purchase price must be covered by your own funds, usually from savings or equity from a previous sale.

Advantages of Buying With a Lifetime Mortgage

One of the main benefits of using a lifetime mortgage to buy a house is that it allows you to move without relying on traditional income based lending. This can be particularly helpful for retirees or those no longer in full time work. It provides flexibility to buy a property that suits your needs in later life, such as a bungalow or home closer to family. It can also free up cash from the sale of a previous property, giving you additional funds to support your lifestyle or make home improvements. Lifetime mortgages come with a no negative equity guarantee, which means you will never owe more than the value of the property when it is sold.

Things to Consider Before Proceeding

While a lifetime mortgage offers several advantages, it is important to understand the long term impact. Because interest is compounded and added to the loan balance, the amount owed can grow significantly over time, reducing the value of your estate. If you plan to leave an inheritance, this may affect how much is passed on. Some plans offer options to ring fence a portion of the equity for your beneficiaries or make partial repayments to control the loan balance. You should also consider early repayment charges, changes in property value and whether the property will remain suitable as you age. Independent financial advice is strongly recommended before committing to an equity release plan.

Lifetime Mortgage Versus Retirement Interest Only

It is worth noting that there are other products available for older borrowers looking to buy a home, such as retirement interest only mortgages. These loans allow you to pay monthly interest to stop the debt from growing, while the capital is repaid when the home is sold. They can offer lower long term costs but require regular payments, which not everyone can commit to in retirement. Choosing between a lifetime mortgage and a retirement mortgage depends on your financial situation, health, goals and attitude to inheritance planning. A qualified adviser can help compare your options and explain the risks and benefits clearly.

Final Thoughts

Yes, you can buy a house with a lifetime mortgage, and for many people it provides an accessible and flexible route to homeownership in later life. Whether you are downsizing, relocating or seeking a more suitable home for retirement, a lifetime mortgage can help bridge the gap without the need for monthly repayments. However, like all financial products, it comes with long term implications that must be carefully considered. With the right advice and a clear understanding of how it works, buying a house with a lifetime mortgage can be a positive step towards financial comfort and freedom in your later years.