Interest Only Lifetime Mortgages: A Complete 2024 Guide

The options with lifetime mortgages has changed significantly in 2024 due to the launch of new interest only lifetime mortgages as the later life mortgage market grows.

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Table of Contents

Updated February 2024 -Author Paul Murphy 

Later Life Finance Limited. 

Table of Contents

martin lewis and lifetime mortgages compass pointing to expert

What is an interest only lifetime mortgage?

In 2024 the range of equity release interest only lifetime mortgages available in the later life mortgage industry has stepped up a gear with more plans becoming available. 

These new mortgages have been developed in line with increased demand from over 50’s homeowners, especially where remortgaging from an existing interest only mortgage with a strong desire to continuing servicing the interest payments each month. 

Legal and General Lifetime mortgages have developed to offer interest only options and several more lenders are launching similar plans as the equity release lifetime mortgage market evolves. 

Later Life Finance have being arranging mortgages for 10 years and have seen demand continue to grow for more flexibility in later life. 

If you’re considering releasing some of the equity in your home, knowing how much money you can borrow with a lifetime mortgage broker is one important factor, but understanding the most cost effective way to arrange the plan is equally important. 

Demand for flexibility in later life continues to grow with lifetime mortgage lenders offering what the banks aren't

Can you pay interest on a lifetime mortgage?

Interest only lifetime mortgages all interest payments without requiring a repayment vehicle, as the mortgage is repaid at the end of your lifetime. 
 
These are relatively new mortgages and provide a solution to a widespread issue for homeowners over 55 needing a remortgage solution. 
 

Later Life Finance are a whole of market broker with access to lifetime mortgage providers from the whole market, including the new range of interest only lifetime mortgage providers. 

Who are the top interest only lifetime mortgage providers in 2024? ​

  1. .Legal & General- RIO &  interest only lifetime mortgages
  2. Standard Life- Lump sum and drawdown plans, voluntary repayments
  3.  Livemore-RIO and Lifetime mortgages

What is the difference between an interest only lifetime mortgage and a voluntary repayment lifetime mortgage?

in 2023 the equity release council added voluntary repayments without an early repayment charge to their code of conduct rules. 

in 2024 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. 

What are the benefits of an interest only lifetime mortgage?

Later Life Finance has arranged homeowner lifetime mortgages for 10 years. 

We have noticed a demand for voluntary repayment lifetime mortgages over the past few years. 

The reason for this is because many years ago equity release had a negative reputation which was mainly due to the effect of compound interest eating up your equity. 

Interest only lifetime mortgages make sense for everyone involved. Less equity being eroded, more inheritance for your estate, and for the providers, less risk of negative equity arising from compounding interest. 

Are interest only lifetime mortgages safe?

The major attraction for homeowners considering an interest only lifetime mortgage is the fact the plans are safe from  repossession due to non payment of interest. 

If payments stop, the interest is compounded in the same way a conventional lifetime mortgage would be. 

There is no risk of default or losing your home, as long as you keep the house full insured and in good condition.  

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What are the typical percentages available with interest only lifetime mortgages in the UK?

the older you are the higher the equity release percentage is infographic

What could I use an interest only lifetime mortgage for?

Help family with a gift

Gifting an inheritance and IH tax planning

Dream Holiday

Equity release can help you fulfil a dream holiday destination

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0800 2465228

Cash Lump Sum

Retirement planning with a lump sum or drawdown facility

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. 
top reasons for equity release companies & percentages infographic

What is the maximum age for an interest-only mortgage?

Most banks have an age limit of around 75 for mortgages and are less flexible with customers in later life. 

Interest only lifetime mortgages and RIO’s have no upper age limit which provides a much greater range of options to older homeowners. 

As experts in later life mortgages we offer lifetime mortgages nationwide and will also discuss the critical points to consider when deciding whether it is right for you. 

Do Aviva offer an interest-only lifetime mortgage?

Aviva don’t offer an interest only lifetime mortgage, however they do allow voluntary repayments on their lifetime mortgages. 

To review the lifetime mortgage market and compare your options with the range of available interest only lifetime mortgages contact Later Life Finance on 0800 2465228. 

You can also get started with our free lifetime mortgage calculator. 

Get your free lifetime mortgage calculation...

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Can a 70 year old get an interest only mortgage?

Interest only mortgages for over 70s are available and consist of the retirement Interest Only Mortgage (sometimes called a ‘RIO Mortgage’) andInterest only lifetime mortgages . 

You are entitled to make regular voluntary repayments to maintain control of the interest. 

For example, if you want to avoid compound interest accruing, you can pay the interest back each month. 

If you choose to do this, there will be no compound interest applied, so long as you continue to make these payments. 

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

How do I get out of an interest-only mortgage?

How do you qualify for an interest only lifetime mortgage? Lets look at the criteria:

  1. Income: Income checks are not carried out with interest only lifetime mortgages as repayments are voluntary. 
  2. Age: A common question is what is a lifetime mortgage for the over 60s. Most lifetime mortgage providers require borrowers to be aged 55 as a minimum. 

  3. Property Ownership: You must own a property, which will serve as the security for the lifetime mortgage company

  4. Property Value: The value of your property and the age of the younger homeowner will be a key factor in determining how much you can borrow. 

  5. Property Type: Different lenders have varying criteria regarding the types of properties they accept, standard construction residential houses or flats are acceptable. 

  6. Outstanding Mortgage: If you have an existing mortgage on the property, you need to repay it. You can use the funds from the lifetime mortgage to clear the existing mortgage on completion.

  7. Health and Lifestyle: Some lenders offer enhanced lifetime mortgages for individuals with certain health conditions or lifestyle factors that may impact life expectancy.

  8. Independent Financial Advice: It is essential to seek advice from an independent financial advisor who specialises in equity release and lifetime mortgages. Later Life Finance assess your specific circumstances and guide you on whether a lifetime mortgage is a suitable option for your needs.

Summary

Interest only lifetime mortgages are 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. 

Lifetime mortgage FAQs

The amount you can release on a lifetime mortgage is usually between 20% and 50% of the home's valuation. This is based on the age of the youngest homeowner and the property type.
If you need to raise more money and have no remaining Drawdown (reserve) Facility, you may be able to take a Further Advance from your lifetime mortgage. This is additional borrowing on top of your existing lifetime mortgage and is subject to the valuation of your home and the balance on your lifetime mortgage.
Equity release companies who adhere to the Equity Release Council codes of conduct offer the option to transfer your lifetime mortgage to a new property if you decide to move. However, certain conditions must be met for the new property to be considered "suitable." A suitable property refers to one that is deemed marketable by the equity release company in the future. For instance, if the new property is located in a flood-prone area, the transfer of the lifetime mortgage may not be permitted. In the case of downsizing to a property of lesser value, you might be required to repay a portion of your lifetime mortgage to facilitate the transfer.
In the case of a lifetime mortgage, you generally do not need to make monthly repayments since the loan, along with the accumulated interest, is settled when your home is eventually sold. Your lifetime mortgage adviser will provide detailed projections of how much you will pay back based on whether you opt to make payments or not.
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 5.9% 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.
Lifetime mortgages come with a few risks, such as the possibility of owing more than the value of your home due to accumulated interest. They also require monthly fees and can significantly reduce the amount of inheritance you can pass on to family members. Ultimately, it’s important to consider all of these factors when deciding if a lifetime mortgage is the right choice for you.
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.

As a specialist equity release broker, Later Life Finance are well positioned to review & compare the interest only lifetime mortgages to help you navigate your options. 

Get a lifetime mortgage quote from Later Life Finance and compare the whole market. 

We have access to exclusive broker deals to save you time and money when comparing the best equity release providers

Our FREE equity release lifetime mortgage comparison service includes: