A bungalow that suits later life can cost more than the house being sold to pay for it. This case study shows how Tony and Adam, long-standing clients in Preston, used a lifetime mortgage to buy a £240,000 bungalow when their own home was worth around £180,000.

Meet The Clients 👫

Tony (72) and Adam (68) had been clients of Aspect Mortgages since 2005 and owned their Preston home outright, having paid off their traditional mortgage in 2018. Their property was worth around £180,000.

The terraced house that had been their home for many years was becoming increasingly difficult to manage. Steep stairs and ongoing maintenance were starting to take their toll, and both Tony and Adam felt the time had come to find something more suitable.

The Challenge They Faced 🏡

Tony and Adam wanted a bungalow in their preferred part of Preston, and they did not want to compromise on location. The bungalows that suited them were priced above the value of their own home. The one they went on to buy was £240,000, against a house worth around £180,000.

That left a gap of around £60,000 on the purchase price, before moving costs were added. Without a way to fund it, their choices were to limit the search to properties within the value of their existing home, or to accept a location neither of them wanted.

How We Helped 💡

Tony and Adam came to us before they started house-hunting, so the first job was to establish what they could afford. Rachel, our equity release specialist, carried out a detailed review of their circumstances, including their pension income, outgoings, property value, and long-term goals.

Rachel recommended a lifetime mortgage of £70,000, secured on the bungalow they were buying. Together with the proceeds from the sale of their house, this covered the £240,000 purchase price and the associated moving costs.

The key feature of the plan was the option to service the monthly interest from their pension income. By committing to regular interest payments, Tony and Adam qualified for a lower interest rate from the lender. If their circumstances change, they can reduce or stop the payments, at which point the interest rolls up instead.

All lenders considered were members of the Equity Release Council, ensuring Tony and Adam had the protection of a no-negative-equity guarantee and the right to remain in their new home for life.

The Outcome 📝

Tony and Adam bought the £240,000 bungalow they wanted in their preferred part of Preston. The £70,000 lifetime mortgage bridged the gap between the proceeds from their old property and the cost of the move, and the purchase went ahead smoothly.

Because they are currently servicing the monthly interest from their pension income, the mortgage balance is not increasing, which means the equity in their new home is being preserved rather than eroded. The property is 100% in their names, and the Equity Release Council safeguards in place mean they have the right to live there for the rest of their lives or until a move into long-term care.

The plan is also portable. If Tony and Adam decide to move again in the future, the lifetime mortgage can be transferred to another suitable property.

Why Advice Matters 🤝

Timing was one of the most important parts of this case. Because Tony and Adam came to us before they started house-hunting, we were able to establish a realistic budget from the outset. They went into the property search knowing what they could afford, rather than finding a home and then working out how to fund it.

Without a lifetime mortgage, their options would have been limited to properties within the value of their existing home, or a compromise on location that neither of them wanted. The interest-serviced structure also secured them a lower rate than a standard roll-up plan would have offered.

As with all our equity release clients, the Aspect Mortgages team will continue to support Tony and Adam for the life of their mortgage. You can read more about the options available on our later life planning page.

Your Equity Release Questions Answered 🙋

Can I use equity release to buy a new home rather than releasing cash from an existing one?

Yes. Instead of releasing cash from your current home and then using it towards a new property, a lifetime mortgage can be set up on the property you are buying. This gives you a clear budget before you start house-hunting, and the lifetime mortgage completes alongside the purchase rather than as a separate step afterwards.

What is the difference between rolling up interest and servicing it monthly?

With a roll-up lifetime mortgage, no monthly payments are required. The interest compounds and is added to the loan balance, which is repaid when the property is eventually sold. With an interest-serviced plan, you pay some or all of the monthly interest from your income, which keeps the balance from growing and can also qualify you for a lower interest rate from the lender. Our roll-up interest calculator shows how a balance grows when interest is not paid.

Does using equity release to move home affect my Equity Release Council protections?

No. Plans that meet Equity Release Council standards include a no-negative-equity guarantee, the right to remain in your home for life, the right to move the plan to another suitable property, and the right to make penalty-free partial repayments within the lender's limits. If you move again, the new home needs to meet the lender's criteria for the plan to transfer.

How much equity release can I access when buying a new home?

The amount available depends on the age of the youngest applicant and the value of the property being purchased. Older applicants and higher property values generally mean more can be borrowed. As independent whole-of-market advisers, we compare options across Equity Release Council lenders for your specific circumstances.