Interest only lifetime mortgage

An interest only lifetime mortgage is a relatively new kind of equity release plan where you can pay the interest due on a monthly basis. This means the size of your loan never goes up, making them an increasingly popular option for over-55s

What is an interest only lifetime mortgage?

You pay off the interest on your lifetime mortgage monthly – rather than paying it off along with the loan through the sale of your home when you pass away or move into long-term care.

Interest is fixed, so your monthly payments never change and the amount you owe never increases, provided you continue to make payments.

The eligibility criteria is the same as any equity release plan. See how much you could borrow with an interest only lifetime mortgage using our equity release calculator.

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Interest only versus lump sum

Interest only mortgages are relatively new, but are already proving an attractive option to many. Here are some of the reasons why:

  • Reduced cost of borrowing – as you are paying the interest each month the effects of compound interest are reduced
  • Security for the future – you have the peace of mind knowing that the amount that you borrowed isn’t increasing
  • There’s no upper age limit – you just need to be over 55 and be able to afford the repayments
  • Interest can be fixed for life – helping you plan your retirement finances
  • You can stop paying any time – you’ll still stay in your home, but the ongoing interest will be added to your debt from that point, effectively becoming a roll-up lifetime mortgage

Getting started

Get a quick quote

Use our free equity release calculator to find out in minutes if you qualify and how much you could release.

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Speak to an adviser

Book a free Fact Find call to find out from one of our experienced advisers if equity release is right for you.

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Download our guide

Packed full of information, our guide is the perfect starting place for anyone considering equity release.

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Other types of lifetime mortgages

An interest only lifetime mortgage isn’t your only option. Here’s three other types of lifetime mortgages that your adviser will consider for you depending on your individual circumstances:

lifetime mortgage

A roll-up lifetime mortgage (also called a lump sum lifetime mortgage) enables you to take a lump sum of tax-free cash and typically no repayments are made. This means the interest is added to the loan amount and the balance grows (compounds) over time.

Explore roll-up

lifetime mortgage

A drawdown lifetime mortgage is a type of equity release plan that enables you to take cash from your home in chunks, as and when you need it. Interest is only charged on the cash which you have drawn down, meaning this can be a cost-effective way of borrowing.

Explore drawdown

lifetime mortgage

An enhanced lifetime mortgage – also known as an ‘impaired’ lifetime mortgage – enables you to release more tax-free cash from your home, by taking into account your health and lifestyle choices. Put simply, the poorer your health, the more you can borrow.

Explore enhanced

Frequently asked questions about interest only lifetime mortgages

Do I qualify for an interest only lifetime mortgage?

To qualify for a lifetime mortgage you must be over 55 (both if in couple). Your home must be in the UK and worth at least £70,000, and – like with a traditional mortgage – must be ‘mortgageable’ in the eyes of the lender. If you have an existing mortgage you must repay the outstanding balance with the money released. A interest only lifetime mortgage might be perfect for you if you can afford monthly repayments but don’t want to commit to them.

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What happens at the end of my mortgage?

Interest only lifetime mortgages are designed to be repaid when the plan come to an end – either because you have passed away or moved into long-term residential care. At this point your home the home is sold and the money from the sale is used to pay off the loan. Anything left goes to your estate and therefore beneficiaries. If your estate can pay off your lifetime mortgage without having to sell the property they can do so.

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Can I stop making repayments?

As long as you keep up with the interest payments the amount you owe never increases – thus avoiding compound interest. If you can’t afford or choose not to make full repayments you can elect to make partial payments, to help reduce the long-term cost. If you can no longer afford or wish to stop making payments altogether then (depending on your plan) you can do this without penalty and your mortgage will simply become a roll-up lifetime mortgage.

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Is an interest only lifetime mortgage the right option for you?

An interest only lifetime mortgage might seem like a good option if you want some extra money and don’t want to move house. However, there are some important ‘Things to think about‘. You need to look at how it will affect your future choices and financial situation in later life too.

Our friendly advisers can help you to explore interest only lifetime mortgages – and the alternatives – without it costing you a penny. Only if you decide to go ahead we charge an advice fee of £995, payable on completion.

Your adviser will be able to explain how:

  • An interest only lifetime mortgage is a loan secured against your home. It will reduce the value of your estate and may affect your entitlement to means-tested benefits now and in the future
  • Compared to some other types of mortgages lifetime mortgage interest rates are usually higher because they’re fixed for life
  • Interest repayments add to your overall monthly spending – unlike other types of equity release plans where there’s nothing to pay monthly
  • If you want to pay off the loan early repayment charges (ERCs) can be substantial
  • You can only get one if your home is mortgage free, or if you can borrow enough to clear any existing mortgage or secured loan
  • The amount you can borrow is a percentage of your home’s value based on your age. If you want to access more of your equity, there are other mortgage options you could explore
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Don’t just take our word for it

Can I say a huge thank you for all your time and patience in explaining and ensuring that I have the best contract for my needs. It was clear that your guidance was not money driven but a concern for my future welfare and again I thank you. I would have no hesitation in recommending your services to anyone in the future.

Mrs C Trigg, Nottinghamshire

From the outset our adviser encouraged us to explore our scepticism thoroughly and this inspired confidence. He listened patiently and carefully assessed our rather complicated set of requirements. He acted in a totally professional yet friendly way, continuously ensuring that we had understood the options and the implications of any decisions to be made. He encouraged us to move at our own pace, retracing steps – sometimes several times – ensuring that equity release was right for us.

Mr and Mrs JD, Berkshire

My husband and I were very happy with the advice our adviser gave to us re equity release. There were several questions I had in relation to releasing some money but had not thought them through. Our adviser explained everything very clearly and I didn’t feel the push to go ahead some firms give. I felt that either way the decision was ours to proceed or not.

Mrs Colley, Wales

Our adviser James was extremely helpful and went through all options with us. He listened to what we wanted and explained everything and took his time.

What really impressed me with James was that instead of thinking of himself he was genuinely trying to find the best option for us, which in today’s world does not happen. I would certainly recommend James to anyone as he is honest, reliable and makes you feel at ease.

Mrs D Pepper, Lancashire

Your interest only lifetime mortgage safeguards

As proud members of the Equity Release Council, all of the plans we recommend meet their standards, so that you:

  • Have the right to remain in your home for as long as you want, or until you move into full time residential care
  • Have the freedom to move to another property without financial penalty (subject to criteria)
  • Will never have to repay more than the value of your home with the no negative equity guarantee