Interest Only Lifetime Mortgage

Discover the In’s & Out’s of Interest-Only Lifetime Mortgages Right Now
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
Leave More Inheritance With an Interest-Only Lifetime Mortgage. Discover Everything You Need to Know to Unlock the Key to Your Retirement Dreams.

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Everything You Need To Know About Interest-Only Lifetime Mortgages

Do you need some extra cash quickly? Equity release is an excellent option for quick cash that’s locked up in your home

. Interest-only lifetime mortgages are prevalent in the UK. We’re here to tell you everything you need to know.

What are Lifetime Mortgages Exactly?

A lifetime mortgage is a type of equity release lets you take out a mortgage on your home if it’s your primary residence.

However, you will remain the owner. You’ll have the option to ringfence part of your property for your family to inherit. You can also make repayments or let the interest increase.

Better yet, if there’s any loan amount or any accrued interest, it’ll be paid back when you pass away or need long-term medical care.


When it comes to lifetime mortgage plans, they offer tax-free cash release for you to enjoy while you’re retired.

At the same time, lifetime mortgage plans also allow you to live in your property after you’ve taken out the plan –

meaning you maintain ownership of your property until the plan ends and your provider sells your property.

You have a choice to release all the cash at once as a lump sum or to release small amounts of the money whenever you need it. The smaller release of funds is known as ‘drawdown’.

How Does This Affect You?

If you already have a mortgage you need to repay on your property, the money you release will pay off that mortgage first before you can access more equity.

After that, it’s your choice what you do with the rest of the equity that you’ve released.

Simply put…

You can use that cash for anything you want to: buying your dream car, going on that long-awaited overseas trip, doing home renovations, or helping your kids to pay for investment

– you have absolute freedom to do as you wish with your mortgage money.

Let me tell you something:

Lifetime mortgage plans give you a variety of choices, making your life so much easier.

This is unlike other types of equity release plans. You can now choose from this wide range of options for the perfect one. Some of these options are:

  • Enhanced
  • Drawdown
  • Lump-sum, interest-only
  • Income
  • Voluntary
  • Buy to let (BTL)
  • Retirement
  • Retirement interest-only

How Does It Work?

Taking out this interest-only lifetime mortgage plan depends on the same principles as standard lifetime mortgages –

meaning you have to be 55 years old or older. You also need to own a house valued at a minimum of £70,000.


The loan-to-valuation formula is based on the youngest applicant and the market value of your property.

Therefore, you can release more equity when you’re older because your life expectancy is shorter.

Even though it might appear to be contrary to interest-only schemes’ requirements, some elements within this mortgage plan allow you to change to a roll-up plan later in your life, which is an adequate safeguard.

How Much Do I Need To Repay Monthly On My Interest-Only Lifetime Mortgage?

Once again, it’s up to you how much interest you want to pay monthly. However, the amount must meet your provider’s terms and conditions.

There aren’t formal affordability tests done for this type of lifetime mortgage, but you should ask your equity release adviser how much is sensible to repay each month.

It’s so important.

Always discuss any changes to your salary, the value of the estate you’ll leave behind, and the balance of your lifetime mortgage loan.

Let’s take a closer look…

Pros & Cons Of Interest-Only Lifetime Mortgages

Some people are worried about interest rolling up. If that’s you, interest-only lifetime mortgages are an excellent way to go.

Simply put:

You make month-to-month interest payments. If you’re able to do this throughout the life of your mortgage, you won’t be charged additional interest when it ends.

So, only the first amount of money you borrowed will be charged interest.

Let me tell you:

People who earn a reliable extra salary and prefer to pay their lifetime mortgage plan to prevent rolled-up interest like this mortgage plan.

With this mortgage, you can get as much equity from your property as possible. Those who aren’t eligible for a residential mortgage once they retire also take out an interest-only mortgage plan.

It’s very similar to the residential interest-only mortgage plan.

4 Pros of Lifetime Interest-Only Mortgages

  1. Your loan amount decreases as you pay off interest
  2. It maximises the money in your home and your heirs’ inheritance
  3. There aren’t any affordability or income checks
  4. Sometimes you can change to a roll-up plan if you don’t want to make monthly payments

4 Cons of Lifetime Interest-Only Mortgages

  1. You’ll have to repay the interest rates with your salary monthly
  2. Early repayments are penalised
  3. Your inheritance will be worth less
  4. Your state means-tested benefits may be affected

Is The Value Of My Property Safe?

All lifetime mortgage providers who are members of the ERC 1(Equity Release Council) have a ‘no negative equity guarantee.

It protects you so that you don’t pay more than you owe to your equity release provider.

However, when your lifetime mortgage plan comes to an end, the lender will sell your house and settle the loan amount plus any interest.


If the estate market value decreases and the money can’t repay your mortgage, the lender won’t request more cash from your estate or heirs.

Since you’ll be protected by the ‘no negative equity guarantee’, they aren’t legalized to do so. Therefore, consider the equity release firm that will offer you this protection.


An interest-only lifetime mortgage can also help manage the total amount owed as you repay all or some of the interest monthly.

But how do you calculate the amount you’ll be able to loan? There’s a calculator specifically designed to help you with that.

How Do I Use The Interest-Only Calculator?

The amount of money you release through an interest-only mortgage will differ from provider to provider.

However, it’s possible to get an estimated amount with the help of this calculator. It’ll calculate your estimated loan amount if you have an interest-only equity release plan.


Well, you’ll need to provide the calculator with a few crucial details about yourself. But don’t worry, it’s perfectly safe to do so. Firstly, it’ll ask for the value of your house.

Since mortgages have to do with your property, the value of your home is significant to know. The loan provider will send someone to your house to evaluate its worth.

However, if you haven’t had your property evaluated, simply input your home’s market price for now.

What’s next?

Secondly, the calculator will ask your age, the person’s name taking out the loan, and contact details. Simple as that! You’ll then be provided with the estimated loan amount of an interest-only mortgage.

Common Questions

What Are The Benefits Of Interest-Only Mortgages?

What Are the Pitfalls of Interest-Only Mortgages?

How Much Do I Have to Repay Monthly With an Interest-Only Lifetime Mortgage Plan?

Is An Interest-Only Lifetime Mortgage A Good Idea?

In Conclusion

When looking at how to extract some income from your property it can be a bit daunting at first. People are also wanting to get the best value for their primary residence, as they should.

However, we have come to find that it is quite easy to determine what amount you can get when you take out an interest-only mortgage through an equity release provider.

They will ask you for a few details and then begin the very simple process with you.

It’s a great and flexible option if you need to borrow some extra or much-needed cash.

If you’re still considering whether or not interest-only mortgages are for you, feel free to contact us with any further questions.

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Editorial Note: This content has been independently collected by the EveryInvestor advisor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.