How Lifetime Mortgages Can Fund a House Purchase

At Towerstone, we provide specialist property accountancy services for homeowners, landlords, and property investors. This article explains what you need to know to make informed decisions around this topic.

This is a question that comes up more often than you might expect, particularly from older buyers, downsizers, people who have already used equity release, or those whose income no longer fits traditional mortgage criteria. Lifetime mortgages are usually associated with releasing equity from a home you already own, so it is natural to wonder whether they can also be used to buy a property in the first place.

The short answer is yes, in certain circumstances you can buy a house with a lifetime mortgage, but it works very differently from a standard residential mortgage and it is not suitable for everyone. There are strict rules, fewer lenders, and important long term implications that must be understood before going ahead.

In this guide, I will explain clearly how lifetime mortgages work, when they can be used to buy a property, how the process differs from a normal purchase, and the key pros and cons you should consider before deciding whether this route makes sense for you.

What is a lifetime mortgage?

A lifetime mortgage is a type of equity release product designed for older homeowners, usually aged 55 or over.

Instead of making monthly repayments like a normal mortgage:

You borrow money secured against a property

You do not usually make monthly repayments

Interest rolls up over time

The loan is repaid when you die or move into long term care

Repayment normally comes from the sale of the property

You remain the legal owner of the home for life.

Because there are no affordability checks in the traditional sense, lifetime mortgages can be attractive to people who are retired, semi retired, or living on pension income.

The traditional use of lifetime mortgages

Historically, lifetime mortgages were used almost exclusively to release equity from a property you already own.

Common uses include:

Supplementing retirement income

Paying off an existing mortgage

Funding home improvements

Helping family financially

Covering later life expenses

Using a lifetime mortgage to purchase a new property is a more recent development, but it is now a recognised option in the market.

Can a lifetime mortgage be used to buy a house?

Yes, this is known as a lifetime mortgage for purchase.

It allows you to:

Use a lifetime mortgage as part of the purchase price

Combine it with your own cash or sale proceeds

Buy a new home without monthly mortgage repayments

However, not all lifetime mortgage providers offer this, and not all properties qualify.

Who typically considers buying with a lifetime mortgage?

Buying with a lifetime mortgage is most commonly considered by people who:

Are downsizing but still need some borrowing

Have sold a previous home and want to top up funds

Are mortgage free but want to keep cash back

Cannot pass standard mortgage affordability checks

Want to avoid monthly repayments in retirement

It is often about flexibility and cash flow, rather than maximising borrowing.

How buying with a lifetime mortgage works in practice

The mechanics are similar to a standard purchase, but with some key differences.

In simple terms:

You choose a property to buy

You contribute part of the purchase price from savings or sale proceeds

A lifetime mortgage provider lends the remainder

The property is bought in your name

The lifetime mortgage is secured against the new property

From a legal perspective, you still own the property outright, subject to the lender’s charge.

How much can you borrow with a lifetime mortgage?

The amount you can borrow depends primarily on:

Your age

The value of the property

The lender’s loan to value limits

As a general guide:

Borrowing typically ranges from around 20% to 50% of the property value

The older you are, the higher the percentage available

For example, at age 60 you may only be able to borrow a relatively modest amount. At age 75 or 80, borrowing limits increase significantly.

This means you usually need a substantial cash contribution to complete the purchase.

Example of buying with a lifetime mortgage

To make this clearer, consider a simple example.

Purchase price: £400,000

Your cash from sale or savings: £250,000

Lifetime mortgage: £150,000

You buy the property outright in your name. There are no monthly repayments. Interest accrues on the £150,000 loan and is repaid later from the eventual sale.

This structure is common for downsizers who want to keep money available rather than tying everything up in the property.

Property types that are acceptable

Lifetime mortgage providers are cautious about the properties they lend against.

In general, acceptable properties must:

Be in good condition

Be suitable for owner occupation

Meet minimum value thresholds

Be easy to sell in the future

Most providers prefer:

Standard houses or bungalows

Properties of conventional construction

They are often more cautious with:

Flats, especially leasehold flats

Properties with short leases

Listed buildings

Unusual or non standard construction

If the property is hard to sell, the lender may refuse it.

Age restrictions and eligibility

Lifetime mortgages are usually available to people aged 55 or over, although some providers have higher minimum ages.

If you are buying jointly:

The age of the youngest applicant usually applies

Both applicants must meet eligibility criteria

This is important for couples where one partner is significantly younger.

Do you still need a solicitor?

Yes, absolutely.

Buying with a lifetime mortgage involves:

A property purchase

A mortgage charge

Equity release regulation

You will need a solicitor to handle the conveyancing and mortgage legal work, just as with any other purchase.

In addition, equity release rules require independent legal advice, meaning the solicitor must confirm that you understand the implications of the lifetime mortgage.

Do you need financial advice?

Yes, regulated advice is mandatory.

Lifetime mortgages are regulated financial products. Before proceeding, you must:

Receive advice from a qualified equity release adviser

Be given a personalised recommendation

Understand the long term impact

You cannot usually arrange a lifetime mortgage for purchase on a DIY basis.

This protects you, but it also means more time and cost compared to a standard purchase.

How does the buying process differ from a normal mortgage?

There are several practical differences.

With a lifetime mortgage:

There are no affordability checks based on income

There are no monthly repayments to stress test

The lender focuses on property value and age

The legal process includes additional safeguards

However, the purchase timeline can be slightly longer due to advice and compliance requirements.

What are the advantages of buying with a lifetime mortgage?

There are genuine advantages in the right circumstances.

No monthly repayments

This is often the biggest attraction.

If you are retired or on a fixed income, avoiding monthly mortgage payments can significantly reduce financial pressure and increase peace of mind.

Greater flexibility in retirement

Using a lifetime mortgage can allow you to:

Buy a suitable home

Keep more cash available

Fund lifestyle or care needs

Avoid relying solely on pensions

This flexibility is valuable for many older buyers.

Avoiding affordability barriers

If you would struggle to pass traditional mortgage affordability checks due to age or income, a lifetime mortgage may be one of the few borrowing options available.

Downsizing without giving up all equity

Some people want to downsize but not lock every pound into the new property.

A lifetime mortgage allows you to buy a smaller home while keeping some capital accessible.

What are the disadvantages and risks?

Despite the benefits, there are significant downsides that must be considered carefully.

Compound interest over time

Interest on a lifetime mortgage usually rolls up.

This means:

The loan balance grows each year

The longer you live, the more interest accrues

The final repayment can be much higher than the original loan

This can substantially reduce the value of your estate.

Impact on inheritance

Because the loan and interest are repaid from the property sale, there is usually less left for beneficiaries.

Some plans offer inheritance protection, but this limits how much you can borrow.

Limited flexibility compared to standard mortgages

Once a lifetime mortgage is in place:

Early repayment charges can be significant

Switching properties later may be restricted

Borrowing more can be costly

You should assume it is a long term commitment.

Higher interest rates

Lifetime mortgage interest rates are typically higher than standard residential mortgage rates.

This reflects the long term risk taken by the lender.

Can you combine a lifetime mortgage with another mortgage?

In most cases, no.

You generally cannot mix:

A standard residential mortgage

With a lifetime mortgage on the same property

However, some people pay off a small existing mortgage using a lifetime mortgage as part of the purchase process.

Each case must be assessed individually.

What happens if you want to move again later?

Some lifetime mortgages are portable, meaning you can move the loan to another property, subject to the lender’s approval.

However:

The new property must meet criteria

You may need to reduce the loan

Additional costs may apply

Portability is not guaranteed, so future plans should be considered carefully.

Stamp Duty and other costs

Buying with a lifetime mortgage does not change Stamp Duty Land Tax rules.

You still pay:

Stamp Duty based on the purchase price

Legal fees

Survey and valuation costs

The lifetime mortgage itself may also have arrangement fees.

How does this compare to a retirement interest only mortgage?

Some buyers confuse lifetime mortgages with retirement interest only mortgages.

The key difference is:

Retirement interest only mortgages require monthly interest payments

Lifetime mortgages usually do not

If you can afford interest payments, a retirement interest only mortgage may preserve more equity, but it requires ongoing income.

When buying with a lifetime mortgage makes sense

Buying with a lifetime mortgage often makes sense when:

You are over 55

You are downsizing

You want to avoid monthly payments

You value cash flow over inheritance

You understand the long term impact

It is usually less suitable for younger buyers or those who expect to move frequently.

When it is usually not a good idea

This route is often unsuitable if:

You can comfortably get a standard mortgage

You want to maximise inheritance

You expect to move again soon

You are sensitive to long term interest costs

In these cases, alternative options should be explored first.

A simple way to think about it

A helpful way to frame the decision is this:

Buying with a lifetime mortgage trades long term equity for short term security and flexibility.

Neither choice is right or wrong, but the trade off must be understood.

Final thoughts

Yes, you can buy a house with a lifetime mortgage, and for some people it is an excellent solution that enables secure home ownership in later life without the burden of monthly repayments. However, it is not a standard purchase, and it carries long term consequences that cannot easily be reversed.

The key is to approach it with clear eyes. Understand how much you are borrowing, how interest will build up, how it affects your estate, and how long you realistically expect to stay in the property.

With proper regulated advice and careful planning, a lifetime mortgage for purchase can offer freedom and stability. Without that understanding, it can become an expensive mistake.

You may also find should i fix my mortgage and what is a lifetime mortgage useful. For wider guidance, explore our mortgage guidance hub.