Lifetime mortgage or home reversion?

Equity release comes in two forms: a lifetime mortgage or a home reversion scheme, and both have long-term financial impacts¹. A lifetime mortgage is the more common of the two. It involves taking out a loan secured against the value of your home that is repaid once you die or move into long-term care². A home reversion scheme buys all or part of your home for a cash payment or regular income, while you continue to live there rent free¹.

The practical difference is ownership. With a lifetime mortgage you remain the owner of your property and interest on the loan is rolled up, so the debt grows over time³. With a home reversion plan you sell a share of your home outright, typically from 25% to 100% of it, and the provider receives its share of the proceeds when the property is sold⁴. Under a lifetime mortgage you can usually release from 20% to 60% of the value of your home⁵.

Neither route is available without advice. You cannot take out an equity release product unless you have taken financial advice, and for a lifetime mortgage that advice must come from a qualified equity release adviser, a requirement of the Financial Conduct Authority⁶. Both types are regulated by the FCA⁴.

How a lifetime mortgage works

A lifetime mortgage lets you borrow money against the value of your home¹. You usually do not have to make repayments on the loan while you remain in your home; instead, the loan is paid back after you have moved out or after you have died⁷. The loan plus interest is repaid from the sale of the property, either on the death (or second death) of the applicants or a move into long-term care⁸.

Interest is normally rolled up, meaning it compounds over the full term of the loan. There are no monthly repayments on a standard plan, and the debt grows over time, eroding the property's value⁹. The FCA treats a lifetime mortgage as a type of interest-only mortgage, because full repayment of capital and interest is not required over the term, and the requirements that apply to interest-only mortgages apply to lifetime mortgages unless they are specifically disapplied¹⁰.

You keep ownership throughout. With a lifetime mortgage you will continue owning your home, and you keep the right to live in it¹¹. Under Equity Release Council standards, customers must have the right to live in their property for the remainder of their life, or until they permanently move into care¹².

The loan can move with you. A lifetime mortgage can be transferred to a new property, subject to the lender agreeing that the new house is suitable¹³. Council standards require that customers are allowed the opportunity to move to a suitable alternative property and transfer their lifetime mortgage, subject to lending criteria at the time of the move¹⁴.

Lifetime mortgage or home reversion: how each one behaves

The two products behave differently in ways that matter over decades. A lifetime mortgage is a debt secured on your home: the lender will not seek full repayment of the loan, including any outstanding interest, until one or more specified life events occurs¹⁵. A home reversion plan is not a loan at all. You sell all or part of your home to a home reversion company, and the provider buys that interest taking into account your age and your health, giving you a tax-free cash lump sum or regular payments and a lifetime lease¹⁶.

The FCA's rules require that any lifetime mortgage is described as a "lifetime mortgage" and any home reversion plan as a "home reversion plan", with no other expression used¹⁷. That matters when you read an illustration: the document you are given must use those terms, so you can tell which product you are being offered.

A home reversion plan is defined in the FCA's rules as an arrangement where a reversion purchaser buys all or part of an interest in land in the UK from a homeowner, on the basis that the individual is entitled to use at least 40% of the land as a dwelling until the end of a fixed period of at least twenty years, or until the individual dies, or until the individual enters a care home²⁰.

Optional payment lifetime mortgages and lower rates for paying interest

Not every lifetime mortgage rolls up all its interest. With some plans, rather than roll up the interest you can opt to make monthly repayments if you wish¹⁶. Some lifetime mortgages allow ad-hoc repayments or paying the interest monthly, reducing the overall debt²¹. An interest-paying lifetime mortgage lets you make monthly or one-off payments to pay off your interest and reduce what you owe, with the remaining balance repaid when the home is sold²².

There is a trade-off. Options that reduce your monthly payments now cost more over the lifetime of the mortgage²³. Paying interest as you go does the opposite: it reduces the amount that compounds, which is why some providers price it differently.

Legal & General, for example, offers an Optional Payment Lifetime Mortgage where you can choose to pay all or some of the monthly interest for the rest of your life, with any unpaid interest added to the amount owed⁶. The provider states that from 10 August 2026 it introduced a reduced interest rate for customers taking out an Optional Payment Lifetime Mortgage who make monthly interest payments, for those who received their key facts illustration from that date onwards⁶. It also states that you can make an Optional Partial Repayment at any time if you have its Interest Roll Up Lifetime Mortgage, or if you have stopped making monthly interest payments on its Optional Payment Lifetime Mortgage²⁴.

If you want to make partial repayments, you can do this penalty-free for lifetime mortgages that meet standards set by the Equity Release Council, often limited to 10% of the loan per year²⁵. Since March 2022, lifetime mortgages that meet Council standards must give customers the right to make voluntary, penalty-free partial repayments¹³.

FCA rules on how equity release is sold

Lifetime mortgages and home reversion schemes are regulated by the Financial Conduct Authority⁴. Giving advice on equity release products is a regulated activity, which means those who give such advice must be authorised and regulated by the FCA and abide by its rules²⁶. The legal basis is the Financial Services and Markets Act 2000: giving advice on a home reversion plan or lifetime mortgage is a regulated activity under that Act²⁷.

The advice requirement is not optional. You cannot take out an equity release product unless you have taken financial advice⁶. Before arranging a lifetime mortgage, you need to obtain regulated advice from a qualified equity release adviser, a requirement of the Financial Conduct Authority²⁸. A lifetime mortgage is an advised product, meaning you cannot have one without speaking to a qualified adviser first²⁹. Switching a lifetime mortgage also requires regulated financial advice, no different from taking out a plan in the first place, even if you stay with the same lender²⁵.

There is a disclosure rule that helps you judge the advice you are offered. For the purposes of the FCA's rules there is one relevant market for equity release transactions, and a firm offering a customer only lifetime mortgages or only home reversion plans must include in its disclosure that it is limited in that regard in the range of products it can offer³⁰. In other words, an adviser who only sells one of the two types has to say so.

Independent legal advice is essential before proceeding with a lifetime mortgage or home reversion¹². The FCA's rules also set out how the product must be presented: an illustration must carry prominent use of the Key facts logo followed by the text "about this lifetime mortgage" or "about this home reversion plan"¹⁷.

The FCA market study into lifetime mortgages

The FCA is examining consumer understanding, advice quality and barriers to access across 2026, with a progress update expected by year-end³¹. The study covers lifetime and retirement interest-only mortgages.

That sits alongside a market that has been changing. New loans to older borrowers reached 37,300 worth £6.2bn in the second quarter of 2026, with lifetime mortgage lending down 1.7 per cent year on year³². Drawdown plans, where the money is released in stages rather than as one lump sum, are a significant part of the market: between July and September 2023, 53% of customers opted for drawdown²⁵.

Drawdown matters because taking money in stages means interest compounds on less of the loan for less time. It is one of the choices an adviser will discuss, alongside whether to pay interest monthly, whether to take a lump sum, and whether a home reversion plan suits your circumstances better than a loan.

Where to get help and how to complain

If something goes wrong, the first step is normally the firm. Where the complaint concerns a lifetime mortgage or home reversion plan, or the advice received during the sale of the plan, it should normally be referred first to the provider or adviser firm concerned³³. If you are not satisfied with the response, the Financial Ombudsman Service can look at it. In the first quarter of 2026/27 the ombudsman opened 71 complaints about lifetime mortgages³⁴.

The ombudsman can order redress. In one case, it decided that the lender should refund, with interest, the set-up cost that the customers had paid when they took out the lifetime mortgage³⁵. That case involved customers who were told to take a lifetime mortgage when they did not need the money³⁵.

There is a time limit on complaints. If you wish to complain about products taken out or advice given before the regulation dates, 2004 for lifetime mortgages and 2007 for home reversions, your complaint may be rejected³³.

Free, impartial help is available. MoneyHelper, the government-backed service, and debt advice charities including StepChange and National Debtline can talk through your options, including whether equity release is the right route at all. Alternatives worth weighing include a mainstream mortgage, a retirement interest-only mortgage, a personal loan, help from family, or taking a lodger³⁶. A retirement interest-only mortgage works differently: you make interest-only payments each month for life, the loan amount stays the same with no roll-up of interest, and the loan is repaid when you pass away or move into long-term care¹².