What does ‘lifetime lease purchase’ mean?

Imagine this: you’re sat on your sofa browsing Rightmove, clicking through a seemingly endless supply of three-bedroom properties, when out of nowhere comes a five-bedroom detached house with acres of gardens in your preferred area… and all for within your budget!

But before you get too excited, it may be worth skim reading the property description for these three magic words: lifetime lease purchase.

What is a lifetime lease purchase?

In short, think equity release, but on new homes rather than existing homes. Lifetime leases are essentially legally binding agreements that let a person (or people) live in a property mortgage-free and rent-free for the rest of their lives.

The lifetime lease firm will buy the home on your behalf, and then sell you a lease for the remainder of your life. However, once you die or move into a care home then the property – or a portion of it – will revert to the lender’s ownership.

These lifetime leases are most popular with over-60s who want to move to a property that they otherwise might not be able to afford. Indeed, some lifetime lease companies are advertising properties at up to 59% less than their market price. They also allow retirees to avoid renting in later age and – depending on the specifics of the lease – may be able to free up additional equity that could pay off mortgages, outstanding loans or simply fund more holidays abroad.

The value of a home you can buy through a lifetime lease will depend on a few criteria including, among other things, the price of your current home, how much mortgage you have left to pay, your age, and how much of your property’s value you’d like to safeguard. There are online calculators which can help you ballpark how much you might be able to spend on a new home through the lease purchase, but you won’t usually know for sure until you’ve gone through the full application.

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What are some alternatives to lifetime leases?

Lifetime mortagages are the most popular alternative to lifetime leases. The biggest difference between the two is that when you take out a lifetime mortgage you will still own your own home, but any money taken out will be repayable with interest when you die or move in to long-term care. However, one similarity with lifetime leases is that you can opt to ring-fence a certain percentage of your property for your beneficiaries.

For more information on lifetime mortgages, we recommend reading this thorough but easy to read guide by The Money Advice Service.

Ben Johnson came to Yopa in 2016 after a long tenure at Rightmove, and has since dedicated his expertise to analysing the intricacies of house valuations. Ben has a particular interest in the impact of fluctuating interest rates on property prices.