Interest Only Lifetime Mortgage

Want to know how an interest-only lifetime mortgage works? Here’s all you need to know.

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Home Lifetime Mortgages How To Get An Interest-Only Lifetime Mortgage
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Updated: May 13, 2024

If you’ve been exploring the possibility of lifetime mortgages and equity release, you may be wondering if it’s possible to set up an interest-only arrangement (opposed to a typical ‘roll-up’ scheme).

This guide covers everything you need to know about using an interest-only lifetime mortgage for releasing equity. We’ll explain the rates you can expect to pay, the providers who offer this type of loan, and where to get expert support to help with your financial goals.

Keep reading for all the details on interest-only lifetime mortgages, or click on a link below to jump straight to a section…

What is an interest-only lifetime mortgage?

This type of loan product works in a similar way to a standard lifetime mortgage arrangement. It allows you to release equity from your home, but the major difference is that the total amount you owe stays the same because you’re able to pay off the interest as you go, instead of letting it accrue.

Sometimes this will be marketed or referred to as a retirement interest-only (RIO) mortgage – a product specifically for pensioners or those in later life. Your property will be used as a repayment vehicle, so when you die or move into long-term care, the sale proceeds will be used to pay off the balance of your loan, just like with a standard interest-only mortgage.

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Why an interest-only option is useful

There are plenty of pros and cons with a standard lifetime mortgage. One of the pros is that you don’t have to pay back anything until you die or move into care. However, the downside is that this interest can compound and you may need to use the entire property sale to cover your costs, leaving less inheritance to pass down.

The benefit of an interest-only lifetime mortgage is that your interest owed won’t build up in the background if you keep up your interest payments. So, if there’s any surplus money left over (perhaps if your property appreciates in value), the remaining proceeds can be passed onto your family or beneficiaries.

Interest-only lifetime mortgage calculator

The amount of equity you can release will be determined by your specific lifetime mortgage arrangement, which will likely be tailored around your circumstances. The amount of equity you own, your age, credit score, the type of property, and the lender you deal with can all make an impact.

If you want to get an idea about the level of equity you can release with this sort of scheme, try our calculator below. Keep in mind that it will give you useful estimates to work with, but for accurate and true figures, it’s best to discuss your particular property and individual finances with a specialist equity release mortgage advisor.

Equity Release Calculator

Use this calculator to determine how much capital you could unlock from your home through equity release, based on your age and the property's market value.

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For joint applications the amount you can release is based on the age of the youngest applicant
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The Maximum Equity you could release is

The amount is of your homes value, the maximum most borrowers your age can release.

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How to get an interest-only lifetime mortgage

When you’re looking to release equity, the exact process will depend on your individual circumstances. Yet, there are some universally helpful steps to follow if you want to set up a lifetime mortgage on an interest-only basis:

  1. Speak to a lifetime mortgage expert. Releasing equity with a lifetime mortgage can be extremely useful, but it’s best to get some expert advice before you make any life-long commitments – especially in later life. An experienced equity release mortgage broker will take a look at your property and finances, and then help you to arrange the right interest-only lending arrangement.
  2. Start your application. Once your broker has given you a detailed breakdown of the interest-only lifetime mortgages available to you (or any other relevant lending options like a retirement interest-only (RIO) mortgage), they will then assist with putting together your application and introducing you to the most suitable lender.
  3. Start your application. Once your broker has given you a detailed breakdown of the interest-only lifetime mortgages available to you (or any other relevant lending options like a retirement interest-only (RIO) mortgage), they will then assist with putting together your application and introducing you to the most suitable lender.

Having an expert broker in your corner means that they can help you liaise with all parties while setting up your interest-only lifetime mortgage. If you’re happy with the offer, the lender will release funds to your solicitor who will then pass them on to you.

Just make an enquiry if you’d like to have a free chat with a skilled mortgage broker who has plenty of experience securing competitive interest-only equity release deals.

Example interest rates

With an interest-only lifetime mortgage, the interest rate will usually be fixed and based on the total amount borrowed (although there are some lenders who do offer tracker options). Locking in rates is great for stability, but makes it vital you secure the best deal possible. Otherwise, it’s going to mean higher payments for the lifetime of your loan.

The fixed-rate nature of this product means that typically, a higher interest rate is used by some lenders. At the time of writing (January 2023) there are rates ranging from 6% to 8%. However, your loan-to-value (LTV) ratio, age, and a variety of other eligibility factors can impact your rates with an interest-only lifetime mortgage product.

Lifetime mortgage providers

Here are a few examples of some major high-street lenders and providers who offer retirement interest-only and lifetime mortgages:

  • Nationwide – offers fixed or tracker retirement interest-only mortgages with a maximum loan of £500,000 and a 50% LTV cap.
  • Tipton Building Society – offer a retirement interest-only mortgage to release equity, but with a maximum LTV of 60%. You must also be in receipt of a pension that meets its affordability requirements.
  • Stonehaven – offers an interest-only lifetime mortgage scheme (rebranded as ‘retirement advantage interest-only lifetime mortgages’) that allows equity release of between £10,000 and £750,000.

Unfortunately, not all lenders will be open to this type of borrowing. For example, some big-name options like Santander, Halifax, and Aviva – do not offer specific interest-only lifetime mortgage products.

There are additional bespoke lifetime mortgage lenders out there who offer competitive loans on an interest-only basis, but most do not advertise publicly or require an introduction from a trusted broker. If you want to release equity, using a specialist broker means you’ll get full access to the complete range of choices available.

Speak with a lifetime mortgage specialist

Releasing equity with a lifetime mortgage can be extremely useful in the later stages of life. But if you want to get set up with a competitive interest-only borrowing arrangement, guidance from an expert broker is the surest path to success.

We offer a free, broker-matching service. This means we’ll quickly assess your equity release plans and then introduce you to a suitable interest-only lifetime mortgage advisor.

Just call 0808 189 2301 or make an enquiry. We’ll arrange a free, no obligation chat between you and a specialist lifetime mortgage broker today.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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