Can I Buy a House with a Lifetime Mortgage

Yes, you can buy a house using a lifetime mortgage, although the process and eligibility are slightly different from a traditional residential mortgage. Lifetime mortgages are a form of equity release, designed primarily for older homeowners who want to unlock property wealth without having to sell their existing home. However, certain lifetime mortgage providers allow you to use the funds to purchase a new property outright or to top up the difference between the sale of your existing home and your next one.

This approach is often used by people over 55 who want to move to a more suitable property later in life, especially when downsizing or relocating for retirement.

How a Lifetime Mortgage Works When Buying

A lifetime mortgage allows you to borrow a percentage of your new property’s value while retaining full ownership. The loan is secured against the property and is typically repaid when you pass away or move into long-term care. Unlike a standard mortgage, there are usually no mandatory monthly repayments. Instead, interest rolls up over time, unless you choose a plan that allows or requires interest payments.

If you are selling your current home and buying another, you can use the proceeds from your sale combined with a lifetime mortgage to fund the purchase. For example, if your new home costs £300,000 and your current one sells for £200,000, a lifetime mortgage could help you cover the £100,000 shortfall.

Who Can Use a Lifetime Mortgage to Buy

To qualify, you must usually be at least 55 years old, though some providers set the minimum age at 60. The property you are purchasing must meet specific criteria regarding its type, value, and condition. Most lenders require the home to be your main residence and located in the UK. Leasehold properties, flats, or those with non-standard construction may not be eligible.

The amount you can borrow is determined by your age and the value of the property. The older you are, the more you can usually borrow. Some providers offer enhanced plans with higher borrowing limits for those with certain health conditions or lifestyle factors.

The Buying Process

Using a lifetime mortgage to buy a house involves a slightly different process to a traditional sale. You will still need a solicitor to handle the legal side, and a financial adviser who is qualified in equity release to recommend a suitable product.

You must obtain a property valuation and your application will be assessed to ensure the new home meets the lender’s requirements. Once approved, the funds are released at completion. Many lifetime mortgage lenders are part of the Equity Release Council, which ensures consumer protections, including the right to remain in the property for life and a no-negative-equity guarantee.

Costs and Considerations

Lifetime mortgages often come with higher interest rates than standard mortgages, and because the interest compounds, the total amount owed can grow significantly over time. Some plans allow you to pay interest monthly or make voluntary repayments to reduce the impact.

You will also incur other costs such as arrangement fees, legal fees, and valuation charges. Stamp duty still applies on the purchase price. Lifetime mortgages may reduce the value of your estate and could affect your entitlement to means-tested benefits, so careful financial planning is essential.

Is It the Right Option

Buying a home with a lifetime mortgage can be a good option for older individuals who do not qualify for standard mortgages or who prefer not to use savings. It allows you to move to a more suitable home without selling other assets or committing to regular repayments. However, it is not suitable for everyone. Lifetime mortgages are long-term financial products that require independent advice and a full understanding of the implications for your estate and family.

Conclusion

It is entirely possible to buy a house using a lifetime mortgage if you are over 55 and meet the lender’s criteria. It can be a helpful solution for later-life movers looking to bridge the gap between their current equity and the cost of a new property. However, this approach requires careful thought and professional advice to ensure it aligns with your long-term plans and financial security.