Do equity release products reduce property ownership?

There are different types of equity release, and some do involve giving up a share of ownership (home reversion plans, for example). But if we’re talking about lifetime mortgages, the arrangement doesn’t change the deed in your name; you will always be the legal owner of the home and will own 100% of the property.

It’s worth repeating because the fear of being kicked out is so strong. Yet providers will tell you plainly: “You’ll never be kicked out” and “There’s no risk or default repossession or anything like that for life.” And that’s not marketing fluff, it’s baked into the Equity Release Council standards that providers have to follow.

How does a lifetime mortgage work?

A lifetime mortgage is a loan secured on your home that’s repaid when you die or move into long-term care. In practice, that means you can unlock cash from your home, often through a lump sum or drawdown facility, without selling it.

You’re free to make voluntary repayments if you want to slow down the compounding interest, and modern plans include protections like the no-negative-equity guarantee.

For instance, if your home is worth £300,000 and you take out £60,000, you still live there as usual, but the interest is added each year until the loan is repaid.

Think of it as pre-spending part of your estate while keeping the right to live in your home for life. You stay the legal owner, but the lender places a charge on the property, and interest rolls up over time, usually repaid from the eventual sale of the house.

Can you rent out a property with a lifetime mortgage?

Most lifetime mortgages require the property to be your main residence, so full rental is usually not allowed. According to the Equity Release Council, letting a property under a lifetime mortgage generally requires prior consent and is limited to partial or temporary letting.

So, it depends heavily on the terms of your specific lifetime mortgage agreement and whether the lender allows it. Normally, the property must be your main residence if you decide to stop living there permanently, which can trigger a repayment event under many contracts.

However, certain lenders may permit letting part or all of the property, but they impose conditions. So, it is doable if you coordinate with your lenders; it's better to seek advice from professionals to see your options.

When are you out of the ‘Penalty Zone’ on a lifetime mortgage?

With the current product innovation, you can be out in 5 years or below. The “penalty zone” comes down to early repayment charges (ERCs). In the past, these charges were heavy-handed: it wasn’t unusual to be tied in for 10-15 years, with steep costs if you tried to pay off early (unless triggered by death or long-term care).

But the market has changed a lot in the last year:

• Hybrid products now let borrowers pick a shorter penalty period, often just 5 years.

• Some lenders now offer ERC-free repayment after a fixed period.

• Some plans even offer penalty periods shorter than 5 years, something unheard of not long ago.

Other considerations about equity release products

Lifetime mortgages come with safeguards like voluntary repayment options, portability, downsizing protection, and a no negative equity guarantee.

Lifetime mortgages sound straightforward on paper, but the fine print often holds the real story. Here are some:

• Voluntary repayments: Most lenders now let you repay up to 10% a year without penalties, helping you preserve more equity for your heirs if you want to leave a larger inheritance.

• Portability: You can often take your lifetime mortgage with you if you move, as long as the new property meets the lender’s rules.

• Downsizing protection: Some plans let you repay the loan without penalties if you sell and move to a smaller or cheaper home.

• No negative equity guarantee: You’ll never owe more than your home is worth, even if property prices fall.

Important: The rolled-up interest can grow quickly, so seek professional advice to understand the long-term cost.

FAQs

Will I still own my home with a lifetime mortgage?
Yes. You remain the legal owner, and the lender simply places a charge on the property. You hold 100% ownership, but the loan and interest reduce the value of what’s left for your estate.

Can I rent out my property?
Usually not in full. Lifetime mortgages require the property to remain your main residence. Some lenders allow lodgers or partial rental, but letting the whole house without permission can break the contract.

When can I get out of early repayment penalties?
It depends on the product. Older plans had 10-15 year penalty zones, but newer ones may last just 5 years, and some have no penalties at all. Most allow you to repay up to 10% a year penalty-free.

What happens if I move into care or die?
The loan, plus rolled-up interest, is repaid from the sale of the property. If it’s a joint plan, this usually happens after the last borrower passes away or goes into care.

Can I make repayments voluntarily?
Yes, many modern lifetime mortgages let you pay back some or all of the interest (or part of the capital) each year. This can help control the compounding effect and preserve more equity for your family.