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Payment-term lifetime mortgage

  • You could unlock more tax-free cash than a comparable lifetime mortgage
  • Commit to mandatory payments until the oldest applicant turns 66
  • We'll explain the benefits, drawbacks and costs of equity release

Am I eligible?

You could be eligible if you're a homeowner:

  • Aged 55-62

  • With a property worth £125,000+

  • Able to make mandatory repayments

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What a Key payment-term lifetime mortgage comes with:

  • Could have the ability to release more than a comparable lifetime mortgage

  • Potentially lower interest rate than a comparable lifetime mortgage

  • All the protections of a lifetime mortgage after the oldest applicant turns 66

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ⓘ We'll explain to you:

  • Your home may be repossessed if you do not keep up with mandatory payments

  • That equity release is a lifetime commitment and to check the benefits, drawbacks and costs before going ahead

  • Your other later life finance options

What is a payment-term lifetime mortgage?

A payment-term lifetime mortgage is a type of equity release that could allow you to release more tax-free cash at a lower rate of interest than you would otherwise be able to through a comparable lifetime mortgage. In return, you commit to mandatory payments until the oldest applicant (for joint applications) turns 66.

After that point, you don't need to make any mandatory payments, although we’d always recommend paying what you can.

Get the extra money you need

You could borrow up to 8% more of your home's value, tax-free. In an average UK property, that's worth more than £23,000. This extra cash could be the difference in you meeting your later life finance needs, such as repaying your existing mortgage, or not.

Save thousands in interest

You could secure a lower interest rate than a comparable high-release lifetime mortgage and save thousands in interest charges by committing to a period of mandatory payments.

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How does a payment-term lifetime mortgage work?

Similar to a lifetime mortgage, a payment-term lifetime mortgage is a loan secured against your home that allows you to release tax-free cash from your property. It's available to customers who are aged 55-62 on application and requires mandatory payments until the oldest applicant turns 66. The amount of extra money you could release compared to a lifetime mortgage depends on your age, house value, and your affordability.
 

Is it right for me? 

Interest rates have risen significantly over the past 18 months. If you've been affected, and as a result are now struggling to or can’t meet your financial commitments, such as an existing mortgage, a payment-term lifetime mortgage could be the answer. A payment-term lifetime mortgage isn't right for you, however, if you're under 55 or over 62, are looking for a regular income, or if you don't want to or are unable to make mandatory payments.

Risk of repossession

It’s important to note that a payment-term lifetime mortgage is a loan secured against your home. Your home may be repossessed if you don't keep up with mandatory payments.

How the loan is repaid

The interest accrues, rolls up and is added to your loan. This is also known as compound interest. Typically, the loan is repaid through the sale of the property when the last remaining applicant either passes away or moves into long-term care.

 

Guarantees and protections

Payment-term lifetime mortgages meet Equity Release Council standards, and you’ll automatically benefit from several protections and guarantees including:

Always retain full ownership of your home

You’ll always retain full ownership of your home and can stay in it for as long as you wish provided terms and conditions are met.

Never owe more than your home’s worth

The no negative equity guarantee means you’ll never owe more than your home’s future value, so any debt accrued through equity release can’t be passed on to your loved ones.*

You have the right to move to another property

If you wish to move home in the future, you'll have the right to take your equity release plan with you to a new property, subject to criteria at the time.

*A payment-term lifetime mortgage may leave you with limited or no property equity remaining, and it could reduce your financial options in the future.
 

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Benefits and drawbacks of a payment-term lifetime mortgage

Like any financial product, a payment-term lifetime mortgage has several benefits. But it also has drawbacks you need to consider before making a decision. Your Key equity release adviser will help you decide if a payment-term lifetime mortgage is right for you. And if it isn’t, they'll tell you.
 

Benefits

Your specialist equity release adviser will explain:

  • You can unlock cash from your home, tax-free, to help meet your needs in later life
  • You'll retain full ownership of your home and can stay in it for as long as you wish
  • You can make reduced or no monthly repayments with a lifetime mortgage. This applies to a payment-term lifetime mortgage after the oldest applicant turns 66, and overpayments can be made at any time, subject to criteria
  • You'll never owe more than your home's worth or pass on any equity release related debt to your family, provided terms and conditions are met
  • You have the right to move home in the future, subject to criteria

Drawbacks

Your equity release adviser will also outline the following:

  • Lifetime mortgages and payment-term lifetime mortgages are loans secured against your home and are subject to compound interest, meaning the amount you owe can grow quickly
  • There’s a period of mandatory payments with a payment-term lifetime mortgage, and your home may be repossessed if you don't keep up with these payments
  • Equity release may leave you with limited or no property equity remaining and will reduce your financial options in the future
  • Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • These are long-term financial products and are not designed to be repaid early. If you do, early repayment charges may apply
Back to "What's in this guide?"

Am I eligible for a payment-term lifetime mortgage?

If you’re a homeowner aged 55-62, you could use a payment-term lifetime mortgage to release equity from your home to help boost your later life finances.

To take out a payment-term lifetime mortgage with Key, you must be a UK homeowner:

  • Aged 55-62 (applicable for both applicants)
  • With a property worth £125,000+
  • And you have to be willing and able to make mandatory payments
It’s a regulatory requirement that you get advice from a qualified equity release adviser before taking out a payment-term lifetime mortgage in the UK.

Our friendly professionals are on hand to answer any questions you might have and to chat through the options available with you.
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ⓘ Did you know...

Aged 55-62 with a property value below £125,000, or aged 63+?
You can still apply for a lifetime mortgage with optional repayments. If you're not eligible for either, why not try our later life mortgage finder? We may still be able to help you take control of your later life finances.


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How does the advice process work?

Releasing equity with a payment-term lifetime mortgage is a big decision, and at Key, we understand that you’ll need to consider it carefully. To help, you’ll receive transparent advice before you apply.
 

ⓘ Did you know...

You have to get advice from a qualified equity release adviser before applying for a payment-term lifetime mortgage - it’s a regulatory requirement.

  • After you book a free callback for a time that suits you, your equity release adviser will consider your alternative later life finance options, such as retirement mortgages, downsizing and other non-property-based solutions, before determining whether a payment-term lifetime mortgage is right for you.
  • If they don’t think equity release is the right option for you, they’ll tell you. It’s part of our company ethos to be open and transparent with all of our customers.
  • Keep in mind that all our equity release advice only relates to our range of Key lifetime mortgages and Key payment-term lifetime mortgages, both of which are loans secured against your home. You'll only pay our fixed advice fee of £1,299 on completion of a plan.
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Payment-term lifetime mortgage vs lifetime mortgage

You may have other, more suitable options that Key doesn't offer, which you should also consider before going ahead.
 

Criteria Payment-term lifetime mortgage Lifetime mortgage
Minimum age at application 55 55
Maximum age at application 62 95
Minimum property value £125,000
£70,000
Mandatory payment period ✓ ⨉
Optional payments ✓ ✓
Credit score dependent ✓ ⨉

✓ Examples when a payment-term lifetime mortgage may be right for you

  • You can't release the amount you need through a comparable lifetime mortgage
  • You're happy to commit to mandatory payments until you turn 66 to reduce your total cost of borrowing
  • You can prove you're able to commit to mandatory payments

✖ Examples when a payment-term lifetime mortgage is not right for you

  • You don’t want to commit to mandatory payments
  • You’re under 55 or over 62
  • Your home’s worth less than £125,000
  • You don’t meet affordability criteria
  • You have other more suitable financial options

Equity release helps homeowners across the UK take control of their finances. It means they can live the later life that they deserve.

Explore how Key could help you put the life in later life. Request your free, comprehensive guide today.

Download now

Your other options

Here are some alternatives that may be more suitable for you:

Equity release costs

Here are some guides to help you understand equity release costs:

ⓘ If another product is more suitable, we'll refer you to a different adviser within Key Group who can help. If you go ahead, you'll only be charged the same £1,299 advice fee you'd pay with us, even if their fee is usually higher.

 

Here are some other later life finance options which Key doesn't offer but may be more suitable for you:

  • Home reversion

  • Downsizing

  • Unsecured lending

  • Using existing assets

  • Support from friends or family


Back to "What's in this guide?"

How much could I borrow with a payment-term lifetime mortgage?

You could release more tax-free cash with a payment-term lifetime mortgage than a comparable lifetime mortgage. But the amount you can unlock from your home depends on:

  • The value of your property
  • Your age
  • Your affordability
As each application is unique, we recommend you use our free calculator to get a tailored estimate of how much you could release.

Calculate now


Back to "What's in this guide?"

How much does a payment-term lifetime mortgage cost?

The overall cost of your payment-term lifetime mortgage borrowing will depend on a few factors.

These include:

  • The amount you want to release in tax-free funds
  • Your interest rate
  • How much you repay
  • Other costs involved with setting up lifetime mortgages, including solicitor's and advice fees

Read more in our detailed guide to how much equity release costs.


Back to "What's in this guide?"

Why choose Key?

Equity release is a big decision and we understand that you’ll need to consider it carefully, by choosing Key we will ensure you receive transparent advice before you apply. Find out more on why you should choose Key.

We're regulated experts

Key is regulated and a proud member of the Equity Release Council.
 

Trusted award-winners

We've won 80+ awards and we are rated 'Excellent' on Trustpilot with 17,000+ reviews. Making us the UK's most trusted equity-release specialist.

Highly experienced

We have over 25 years' experience. We've helped more than a million customers with tailored equity release advice. Once we've taken the time to understand your needs, we’ll have a sound idea of what the right plan is for you.

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How to release equity from your home

Use our free calculator

Check your eligibility and how much cash you could release tax-free from your home. Try our equity release calculator.

Use our calculator

Speak to an adviser

Book an appointment with a qualified equity release adviser at a time that's good for you. Find out what to expect from your equity release advice appointment.

Book now

Not sure what product is right for you?

To release equity from your home, this typically involves taking out a form of mortgage product. Our later life mortgage finder helps you consider your options

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Page last updated: Friday 01 March 2024
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