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Am I eligible?
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.
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.
Watch our video to learn more about the benefits and drawbacks of equity release and see if it could be right for you.
Our equity release advice relates to Key's range of lifetime mortgages only - loans secured against your home.
How a payment-term lifetime mortgage could work for you
ⓘ Case study example
Stephanie Higgins, aged 55, is a divorced nurse from Shropshire. She has an outstanding mortgage of £78,000 she wishes to repay. Stephanie tried to release equity previously but found she wasn't able to unlock enough money from her home to meet her needs. However, thanks to a payment-term lifetime mortgage, that’s about to change.
| Illustrative example | Lifetime mortgage² | Payment-term lifetime mortgage³ |
|---|---|---|
| House value | £286,000 | £286,000 |
| Maximum release¹ | £60,060 | £78,650 |
| Interest rate | 6.83% MER | 6.83% MER |
| Mandatory monthly payment | £0 | £200 (until Stephanie turns 66) |
Payment-term lifetime mortgage arrangement fee of £999 not included in calculation.
With a lifetime mortgage, Stephanie is only able to release just over £60,000 from her £286,000 home. This leaves Ms Higgins a little under £18,000 short of the money she needs to clear her existing mortgage. However in this example of a payment-term lifetime mortgage, by committing to making mandatory payments of £200 until Stephanie's 66th birthday, she can release a further £18,590 – which gives Ms Higgins the money she needs to clear her existing mortgage.
Stephanie can make voluntary ad-hoc or regular overpayments of up to 10% of the initial loan amount each year without incurring an early repayment charge to help manage her total cost of borrowing.
Case study example. (1) The amount of tax-free cash this customer can release from their home through a comparable lifetime mortgage. We always recommend only releasing what you need. (2) Comparable lifetime mortgage. (3) Variant of a payment-term lifetime mortgage. Interest rates are for illustrative purposes only. Speak to your adviser for a personalised illustration. You may be able to release a higher amount with an alternative lifetime mortgage; however, the total cost of borrowing may be significantly more.
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
ⓘ 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.
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.
Key is a specialist, award-winning later life mortgage provider for the over 55s. We've helped over a million customers see if equity release was right for them. After we take the time to understand your needs, we'll recommend the most suitable later life option for you.
Next steps to release equity from your home
Your other options with Key
If another product is more suitable, we'll refer you to a different adviser within Key Group to 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. Key offers alternatives to equity release such as a retirement interest-only mortgage or retirement repayment mortgage.
Other options to think about
It's important to know your other options before going ahead with equity release. These include: downsizing, unsecured lending, using existing assets, or support from friends or family.
Payment-term lifetime mortgage FAQs
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.
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
Calculate now
The amount of extra tax-free cash you could release depends on how much you need to borrow and your affordability. But by committing to a period of mandatory payments, you could unlock up to 8% more of your home's value, tax-free.
In an average UK property, that's worth more than £23,000, which could be the difference in you meeting your later life finance needs, such as repaying your existing mortgage, or not.
A payment-term lifetime mortgage is available to customers aged 55-62 at the outset, with a property value of £125,000 or more.
It could be the right solution for you if you need access to a tax-free lump sum and you’re able and willing to make mandatory payments until you or the oldest applicant turns 66, as you’ll need to pass an affordability check to take out a plan.
There's no drawdown option with a payment-term lifetime mortgage.
Page last updated: Wednesday 11 September 2024