Payment-term lifetime mortgage

Find out how you could unlock more tax-free funds from your home than with a standard lifetime mortgage, by committing to a period of mandatory payments. We'll explain the benefits, drawbacks, and costs to help you make an informed decision.

Scroll down

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 lifetime mortgage. In return, you commit to a specified period of mandatory payments.

After the mandatory payment period ends, making further payments becomes optional. We would always recommend paying what you can to help manage your total cost of borrowing, as if you do stop making payments the impact of compound interest will increase. Even if you choose not to continue payments, you'll retain full ownership of your home and can continue to stay in it for as long as you wish.

A payment-term lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly. Your home may be repossessed if you do not keep up with mandatory payments.

Is a payment-term liftime mortgage right for me?

A payment-term lifetime mortgage 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, 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.

How much extra cash could I release?

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 more of your home's value, tax-free.

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.

Benefits and drawbacks of lifetime mortgages and payment-term lifetime mortgages


  • Tax-free cash: You can unlock cash from your home, tax-free, to help meet your needs in later life
  • Stay in your home: With a lifetime mortgage and payment-term lifetime mortgage you'll always own your own home and have the right to stay in your property for as long as you wish, however, with a payment-term lifetime mortgage you must ensure all mandatory payments are met
  • Reduced or no monthly repayments: You can make reduced or no monthly repayments with a lifetime mortgage. This is the same with a payment-term lifetime mortgage after its mandatory payment period ends, overpayments can be made, subject to lender's criteria
  • No negative equity guarantee: You’ll never owe more than your home's worth or pass on any equity release debt to your family, providing you keep to the terms of your plan
  • You can still move house: You have the right to move home in the future, subject to criteria


  • The interest can build up quickly: 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
  • Mandatory payments: 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
  • Reduced or no property equity: Equity release may leave you with limited or no property equity remaining and will reduce your financial options in the future
  • Effect on estate & means-tested benefits: Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • Long-term financial product: These are long-term financial products and are not designed to be repaid early. If you do, early repayment charges may apply

Your other options

It's important you're aware of some of your other later life finance options, which may include:

Retirement interest-only mortgage
Retirement repayment mortgage
Home reversion plans

Equity release costs

Knowing the costs associated with equity release and how to help manage them is important.

Compound interest explained
Lump sum vs drawdown lifetime mortgage
What does equity release cost?

Other options we don't offer

  • Downsizing
  • Unsecured lending
  • Using existing assets
  • Support from friends or family

Ready to see if a payment-term lifetime mortgage is right for you?

Remember, you must get advice before you take out any equity release product. If you want to do some more of your own reading, our equity release guide is free to download and can provide you with more information.

So, if you’re ready to start exploring your options, our friendly and experienced team can be reached via our quick contact form or on 0800 188 4812 Lines are open Monday-Friday 9am-5.30pm. 

We have no ties to any providers, so you’re always guaranteed, honest, independent advice that’s straightforward and tailored to you – nothing else. We'll always tell you if equity release isn't right for you, and we offer a full range of later life options, so we can see if there is another product more suitable for your needs.

Unless you decide to go ahead, our service is completely free of charge as our fixed advice fee of £1,799 is only be payable on completion of a plan.