Interest Only Lifetime Mortgage: Financial Freedom?

If your current mortgage deal is ending, or you simply want to unlock your home's wealth, discover financial freedom with the growing range of interest-only lifetime mortgages in 2025

Discover the greatest level of flexibility ever known in mortgages, exclusively for the over 55s!

Author Paul Murphy 

Later Life Finance Limited. 

A couple of holiday discussing interest only lifetime mortgages

Key takeaways:

  • Equity Release to repay Interest-only mortgages empowers the over 55’s with solutions the banks do not provide
  • With no income checks, interest-only lifetime mortgages offer a greater chance of approval 
  • No deadlines to repay means less pressure
  • The option to downsize when you’re ready
  • No risk of default/repossession gives long term security in your home for life
Jump to a section on interest only lifetime mortgages...

Interest only Equity Release: The Solution For A Secure Retirement?

To state the later life mortgage market has evolved recently is a big understatement, following the launch of Interest only equity release plans which provide a greater level of security and freedom in retirement. 

These mortgages have gradually developed to closely reflect the mortgages they are being designed to replace; interest only plans arranged in the 90’s with unsuitable repayment vehicles arranged alongside. 

Lenders and funders have stepped up to the mark to provide the over 55s with the greatest range of solutions ever known for later life and interest-only lifetime mortgages

Equity Release To Pay Off Interest-Only Mortgage?

Can you use equity release to pay off an Interest only lifetime mortgage? Yes, these modern, flexible mortgages are a type of equity release designed for homeowners over 55, providing the option of making fixed monthly payments to maintain control of the mortgage interest, but without the restrictions of a typical fixed mortgage term. 

You may not be ready to move home, or simply have no desire to.  You may fit into the ‘asset rich cash poor’ category-like many UK pensioners. Using the wealth in your home via an interest-only lifetime mortgage can provide a wide range of benefits.

Key benefits of interest-only lifetime mortgages include:

  • Equity release to pay off interest only mortgage
  • Safely release tax free equity from your home
  • Make voluntary repayments which can be stopped at any time
  • Avoid compound interest eroding your equity
  • No deadlines to settle the mortgage by & no risk of default
  • Preserve your equity for inheritance/long term care 
  • Security of full equity release council protection 
  • Stay in your home for life & plans are ‘portable’ if you wish to move later

 

These new mortgages have been developed in line with increased demand from homeowners with a strong desire to continuing servicing the interest payments each month on a lifetime mortgage.

Help family with a gift

Gifting an inheritance and IH tax planning

Dream Holiday

Equity release can help you fulfil a dream holiday destination

Cash Lump Sum

Lump sum for home improvements, a new vehicle or to boost finances

Pay Off your Mortgage

Repaying your mortgage to enjoy the retirement you've worked for
  • Interest only lifetime mortgages allow homeowners over 55 to borrow against your home with the option to make voluntary repayments to preserve more of your equity. (Payments are optional). 
  • No income or affordability checks to qualify, and takes around 8 weeks to arrange a lifetime mortgage. We have access to the best UK equity release companies to help the process run smoothly with expertise and service. 
  • The money is repaid at the end of your lifetime from the sale of your home. 
  • To check your eligibility and how much equity you can release, try our free equity release calculator
  • Borrow between 20% and 50% of your home’s value, depending on age; enhanced mortgages available for those health problems. 
  • Negative equity guarantee for Equity Release Council members, which ensures you and your estate are fully protected. Martin Lewis mentions this when recommending how to safely choose a lifetime mortgage provider.
  • Possible to move home and take the lifetime mortgage if moving to a suitable property
  • Drawdown plans available to stage the borrowing over the coming years, providing more flexibility
  • Get professional advice to understand if a lifetime mortgage is suitable. 

Interest Only Lifetime Mortgage: The Path To Financial Freedom?

Interest-only lifetime mortgages are the newest and most popular form of equity release plans, and provide a realistic solution for homeowners looking to retain control of their mortgage lending and preserve more equity for the future. 
 
These groundbreaking new interest only lifetime mortgage plans allow interest payments without requiring a repayment vehicle, as the mortgage is repaid at the end of your lifetime. The mortgages provide a solution to widespread demand for homeowners over 55 looking for a flexible remortgage solution. 
 
  • Remortgage onto more flexible terms
  • Carry out home improvements
  • Gift to family members
  • Purchase a new car/motorhome
  • Dream Holidays
  • Cash Injection & Long-term financial security
 
Later Life Finance are a whole of market broker with access to lifetime mortgage providers from the whole market, including the new range of equity release interest only lifetime mortgage providers. 

Speak to our experts on

0800 2465228

Interest only lifetime mortgage providers

Later Life Finance are a specialist interest only lifetime mortgage broker with access to the whole mortgage market.

Our expert advisers will source the best solution for your requirements and guide you through the whole process. 

Who are the best Interest only lifetime mortgage providers?

  1. Legal & General
  2. Standard Life Home Finance
  3. Just
  4. More to Life
  5. Pure Retirement
 

Other interest only lifetime mortgage providers, including Aviva and Royal London allow voluntary interest repayments on their lifetime mortgage ranges. 

These interest only lifetime mortgage lenders provide options to pay 100%, 75% and 50% interest payments each month to maintain control of the interest on the mortgage. 

If you don’t pay 100% of the monthly interest, there will be a proportion of compound interest accruing on the mortgage. As a broker we provide detailed illustrations showing the effect of the interest only lifetime mortgage payments. 

Other lifetime mortgage lenders provide the facility to make voluntary repayments to maintain the interest, but not all lenders offer the discounted interest rates noted above. 

Our interest only lifetime mortgage calculator is good starting point to access detailed interest projections. 

Interest only lifetime mortgage providers

What are the pitfalls to consider with interest only lifetime mortgages?
 
  1. Interest-only lifetime mortgages need settling when the property is eventually sold, so this will need to be taken into account and will reduce the size of your estate. 
  2. Means tested benefits can be affected by having extra capital on deposit. Ensure you check your entitlements
  3. You will need to maintain payments if you want to avoid compound interest accruing

Our experts at Later Life Finance can help you navigate the world of interest only lifetime mortgages. Get in touch for expert advice. 

Interest payment lifetime mortgages

Do you pay interest on a lifetime mortgage? Yes, along with the added choice to make your own selected repayment amounts.
 
Interest payment lifetime mortgages are growing with popularity due to the level of flexibility they can offer into retirement years. 

This financial security provides the assurance of staying in your home for the rest of your life, without pressure from a lender to repay the mortgage at the end of a term. 

The key difference with interest payment lifetime mortgages is they are designed for the over 55’s and do not have deadlines to settle the mortgage. In addition, payments are voluntary, which makes the plans safer than mainstream mortgages. 

A married couple discussing an interest only lifetime mortgage calculator with their adviser

How are interest-only lifetime mortgage rates calculated?

Interest-only lifetime mortgage rates are based on the percentage of interest you agree to pay each month. The more interest you pay, the lower the interest rate! 

For example, 100%, 75% and 50% interest payment options are available.

If you don’t pay 100% interest there will be a proportion of compound interest accruing on the mortgage. As a broker we provide detailed illustrations showing the effect of the interest only lifetime mortgage payments. 

Can you release equity on an interest only mortgage?

In 2023 the equity release council added voluntary repayments without an early repayment charge to their code of conduct rules. In 2025 we are experiencing the biggest developments in lifetime mortgages since voluntary repayment options were introduced back in 2014. 

Standard Life have launched an interest only lifetime mortgage following Legal & General offering an over 50’s interest only lifetime mortgage in 2023. 

Livemore, a relatively new lender to the market, introduced RIO and TIO plans over the past 2 years following demand for later life mortgage lending. 

Speak to our experts on

0800 2465228

Get your free lifetime mortgage calculation...

£

Book a free, no obligation discovery call with our expert advisers

Summary

Equity Release To Pay Off Interest-Only Mortgage is becoming more popular as demand for flexible borrowing grows. 

Our expert equity release advisers will provide detailed interest projections and illustrations for your consideration. 

Your adviser will check if an equity release product is suitable and explain how much equity you are eligible for and compare the market to ensure you secure the best solution. 

They will also explain how the lifetime mortgage interest may affect the remaining equity in your home and they should recommend you discuss your plans with any family members, if appropriate.

To find out how much equity you can borrow with a lifetime mortgage, request a call back for a detailed illustration. 

Interest Only Lifetime Mortgage FAQs

How is interest calculated on a lifetime mortgage? Interest Only Lifetime Mortgages have a fixed interest rate for life, which means it will not change for the duration of your loan if you maintain the interest payments.
Interest on a lifetime mortgage is calculated using a lifetime fixed interest rate. The Monthly Equivalent Rate provides the most accurate measurement, whilst the Annual Equivalent Rate provides the yearly calculation. An interest-only lifetime mortgage avoids compound interest accruing with regular repayments to maintain the balance.
During 2025 the average lifetime mortgage interest rate is expected to be around 5.5% to 6.5%, depending on whether regular repayments are made, and the loan to value percentage of borrowing.
Lifetime Interest on a mortgage is calculated using a lifetime fixed interest rate. The Monthly Equivalent Rate provides the most accurate measurement, whilst the Annual Equivalent Rate provides the yearly calculation. Lenders provide a projection of interest over an estimated life expectancy to show the interest costs.
In the event of you passing away shortly after obtaining a lifetime mortgage, the interest accrued would not have significantly accumulated, resulting in a smaller growth of the debt. If no other homeowner is listed on the lifetime mortgage, the lender requires the mortgage to be settled within 12 months of you passing away. The executors of your will sell the property and utilise the proceeds to settle the debt. The beneficiaries of your estate may opt pay off the debt using cash or a new mortgage and retain ownership of the property. This will depend on factors including your wishes set out in your will, and on whether the property is to be retained or sold, with any remaining equity divided by your beneficiaries. 
Equity release lenders who are a member of the Equity Release Council provide a no-negative equity guarantee. This ensures you will never be required to repay more than the proceeds from the sale of your home to settle the debt. In other words, the lender cannot pursue you for any shortfall between the debt amount and the sale proceeds. This protection is made possible by the no negative equity guarantee, which is upheld by all members of the Equity Release Council. According to this guarantee, the lender is strictly limited to requesting only 100% of the sale proceeds as repayment. They are not permitted to seek additional payment from you, your estate, or your estate beneficiaries.
A typical rate for a lifetime mortgage typically falls between 5.5% and 7%. That said, your rate may be different depending on factors like your loan-to-value ratio and the features included in your plan. It’s important to compare the features of different plans to find the one that best fits your needs.
Yes, mortgages are available for over 70s. Retirement and interest only lifetime mortgages provide the over 70s with a range of flexible mortgage solutions for remortgages and raising tax free wealth from their home.
Lifetime mortgage interest rates are typically based on your age, the amount of money you need to borrow, and the value of your property. Generally speaking, the older you are and the less you borrow, the lower the rate you can expect. Drawdown lifetime mortgages have interest rates set at the time of further borrowing, whereas the initial lump sum is determined at the time of arranging the plan. So be sure to research what’s out there before making a decision.
Yes, you can pay off a lifetime mortgage early, but there may be fees associated with doing so. Providers have varying levels of early repayment charges which your equity release adviser will discuss with you to ensure you have access to all your options and understand the features and charges. It is best to check with your provider before you decide on the repayment plan.
Lifetime mortgages come in several forms, including lump sum, drawdown and interest-only plans. Each offers different rates and repayment arrangements, so your adviser can tailor the mortgage to meet your needs. Later Life Finance provides access to the whole lifetime mortgage market. We will explain the features, costs and points to consider of each option. This will help you make a balanced decision on the right solution for you.
You can repay an interest-only mortgage with an equity release plan. Lifetime mortgages are the most popular form of equity release and allow optional repayments of interest charges, if you wish. Since monthly repayments are voluntary with a lifetime mortgage, your home is not at risk of repossession if you do not maintain monthly payments.Therefore these plans can be more suitable into retirement years.
An interest-only lifetime mortgage is a type of equity release plan where you can pay the interest off on a monthly basis. This avoids compound interest being added which stops the loan from increasing. This type of mortgage is popular for homeowners who want to maintain equity in the home for inheritance or downsizing purposes.
An interest-only lifetime mortgage is a way to release equity from your home to spend as you wish, whilst also paying interest monthly to avoid compound interest being added.