Lifetime Mortgage Calculator — The Roll-Up, and the Exit Nobody Models

A lifetime mortgage is a loan secured on your home, for homeowners aged 55+. You keep 100% ownership and the right to live there for life. You make no monthly payments unless you choose to. Interest is added to the balance each month, and the whole thing is repaid when the last borrower dies or moves into long-term care.

It is by far the most common form of equity release — home reversions are a small minority of the market — and this page is the deep-dive on the product itself.

Still deciding whether to release equity, or which product? Start at the equity release calculator, which compares lump sum, drawdown, interest-served and home reversion side by side. This page assumes you've chosen a lifetime mortgage and want the numbers to the pound.

Lifetime mortgage rates are quoted as MER — Monthly Equivalent Rate. It's on every Key Facts Illustration. And it means exactly what it says: interest is added to your balance every month, and next month's interest is charged on that slightly bigger balance.

Most online calculators take the headline rate and apply it once a year. That's the AER approach, and for a lifetime mortgage it's simply wrong.

Two-tenths of a percent sounds like nothing. Compounded over twenty years on an £80,000 loan it's roughly £6,000 of debt that the other calculator never told you about.

This one compounds monthly, the way your lender does. Tick the "show what a wrong calculation says" box and you can see the gap for yourself — it's a useful way to sanity-check any figure you've been given elsewhere.

Notice the shape. In the first five years the debt grows by £30,700. In years 20–25 it grows by £112,800 — nearly four times as fast — even though nothing about the loan changed. That's compounding: interest charged on interest.

At 6.5% MER the balance doubles roughly every ten and a half years. Which means the single most important variable isn't the rate. It's how long the plan runs — and that is the one thing nobody can tell you in advance.

Lifetime mortgage pricing is tiered by loan-to-value, and the tiers are steep. The closer you borrow to your maximum, the more you pay — because the lender is taking more risk that the debt outgrows the house.

Here's why that matters more than it looks. Borrowing £85,000 instead of £80,000 doesn't just cost you the extra £5,000 — it can push you into the next band and reprice the entire loan a quarter-point higher, for life. Over twenty years of compounding, that £5,000 can cost you £20,000+.

The calculator prices your rate off your LTV band automatically. Nudge the loan amount up and down and watch the rate jump — the cliff edges are the most useful thing on the page, and no other calculator shows them.

Take what you need, not what you're offered. It is genuinely that simple, and it is worth more than shopping for a better lender.

The no-negative-equity guarantee promises you'll never owe more than the house. It does not promise there'll be anything left. Inheritance protection is the only feature that actually does — and the calculator models it directly.

A lifetime mortgage is designed to run until you die. But life happens: an inheritance arrives, you want to move somewhere the plan won't port to, your family offers to clear it, or you simply change your mind.

If you repay early, you may face an early repayment charge — and there are two completely different kinds.

Fixed (defined) ERCs — you know where you stand

A set percentage of the balance, tapering over time. Real examples in the market: 5% for years 1–5, 3% for years 6–10, then nothing. Or a longer scale starting at 10% in year one, stepping down annually to 2% by year nine, then 1% to year 15, then zero.

They're expensive, but they're knowable. You can see the number before you sign, and you can plan around it.

Gilt-linked (variable) ERCs — you genuinely cannot know

These are tied to 15-year government bond yields. If gilt yields have risen since you took the plan, no charge is payable at all. If they've fallen, the charge is calculated from how far — and it can be enormous.

This is the formula lenders use. It is not a secret, but it is almost never shown to borrowers in a form they can actually run:

Work through it. You're 75, repaying a £150,000 balance, and gilt yields have fallen 1.0% since you took the plan.

(90 − 75) × 1.0% × £150,000 = £22,500. That's 15% of your balance, gone, because of something that happened in the bond market.

Now make it a 1.5% fall: (90 − 75) × 1.5% × £150,000 = £33,750 — 22.5%. Most plans cap gilt ERCs at 25% of the amount borrowed, and you can get uncomfortably close to that cap.

Notice the cruelty in the formula: the younger you are, the bigger the charge, because (90 − age) is larger. Take a gilt-linked plan at 60 and try to exit at 65 and the multiplier is 25.

So should you avoid gilt-linked plans?

Not automatically. If yields rise, you pay nothing — which a fixed ERC would never give you. It's a genuine bet on the bond market over a horizon of decades.

But it is a bet, and you should know you're making it. If there's any realistic chance you'll want out early — you might move, you might inherit, you might change your mind — a fixed, tapering ERC is the safer product, even if the headline rate is slightly worse. Certainty is worth paying for.

The exit mode above runs both against your actual numbers, so you can see what each would cost you in the year you'd realistically want out.

Most people never pay an ERC. These are the standard waivers — check which ones your plan actually has.

Ask your adviser three questions, in writing: "Is the ERC fixed or gilt-linked? What is the taper? Does the plan include downsizing protection, and after how long?"

If they can't answer all three clearly, you're talking to the wrong adviser.

Plans meeting Equity Release Council standards are portable. You can transfer the loan to a new home, subject to the lender accepting the property — which they may not, if it's a flat, a non-standard construction, or below their minimum value.

The catch: if the new property is worth less, the lender may require you to repay part of the balance to keep the LTV within their limits. And that partial repayment can trigger an ERC — unless your plan has downsizing protection.

Which is exactly why downsizing protection matters so much and is so rarely discussed. Most people over 55 will consider moving somewhere smaller at some point. If your plan doesn't protect that, you've locked yourself into the house.

You're 68, your home is worth £400,000, and you want £80,000. That's a 20% LTV, which puts you in the cheapest band at about 6.05% MER.

The roll-up

Compounding monthly, after 20 years you'd owe about £267,700. Your home, growing at 2.5%, would be worth roughly £655,400. Equity left: £387,700.

Now borrow £5,000 more

£85,000 is 21.25% LTV — over the 20% cliff. Your rate jumps to 6.30%, on the whole loan. After 20 years you'd owe about £298,300.

That extra £5,000 cost you £30,600 of your family's inheritance. Not because of the £5,000 — because of the 0.25% reprice on the entire balance. This is the cliff edge nobody shows you.

Now suppose you need out in year 7

Your balance is about £121,600. You're 75.

Fixed ERC (3% in year 7): £3,648. Annoying, survivable.

Gilt-linked, yields fell 1%: (90 − 75) × 1.0% × £121,600 = £18,240. Five times as much.

Gilt-linked, yields rose: £0. Nothing at all.

Same plan, same year, same balance. The difference between £0 and £18,240 depends entirely on what the bond market did while you weren't watching. That is what a gilt-linked ERC is, and it's why "which ERC basis?" is a more important question than "what's your rate?".

Official sources & further reading: read the Equity Release Council's ERC factsheets and standards, get free impartial guidance from MoneyHelper, and verify any adviser on the FCA register. Start from the equity release calculator if you're still choosing a product.