Many UK homeowners aged over 55, who have paid off their traditional mortgage and own their main residence outright, will qualify for a lifetime mortgage. There can be exceptions to this, but these will generally relate to the property itself, rather than the borrower – including houses which are of uncertain value or difficult to sell.
It is worth noting that there is limited standardisation in industry lending principles and speciality lenders exist who will accept borrowers with non-standard properties.
A lifetime mortgage is an equity release product, sometimes called a reverse mortgage in the US and Canada, that works by a lender providing a mortgage to a previously unmortgaged homeowner, thereby releasing cash from the property. However, unlike a traditional mortgage, there are no regular payments to be made – instead the borrowing is repaid by the sale of the property when the last homeowner dies or moves into residential care.
As there are no monthly repayments, factors such as credit score, which can be essential for traditional mortgages, are much less relevant for lifetime mortgages. Even Individual Voluntary Arrangements (IVAs) and unspent County Court Judgements (CCJs) are not impossible hurdles to obtaining a lifetime mortgage, though the lender may require that the IVA or CCJ be spent or discharged by the time the lifetime mortgage is extended, or shortly thereafter.
Unless the homeowner is bankrupt or has a charging order placed upon their house under a CCJ, lifetime mortgages are generally not rejected for credit reasons.
However, the lender will be concerned to understand the value of the property and how easily it can be sold. Lenders will typically not offer lifetime mortgages against properties which are difficult to value or sell. This could be for several reasons, which vary by lender. Homes of non-standard construction are frequently excluded.
In the UK, standard construction means stone or brick-and-mortar, with a slate or tiled roof. Therefore, homes constructed with concrete, steel or timber framing, a flat roof or thin walls, or with significant structural issues could encounter problems being approved by a lender. Other restrictions include retirement living or sheltered accommodation (as these are usually not freely marketable), and sometimes former local authority properties.
Location is another common issue, as this may affect how readily sellable they are. Lenders may decline to lend against homes in very remote locations, those at risk of flooding, and those adjacent to commercial property, as well as those with contamination from ground or water pollution or containing asbestos. Even factors such as a very messy or unkempt property may dissuade the lender from extending a loan, as the cost to remove and dispose of the rubbish may be excessive, as well as making it difficult to diagnose structural issues with the building. So hoarders be warned!
There may be other restrictions or reasons you could be refused equity release, including age – as mentioned above, generally lifetime mortgages are not available until the youngest homeowner is over 55, but these are typically lender-specific and can be circumvented by using an equity release broker who will be able to provide advice and direct you towards the most appropriate lender for your circumstances.