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What is an interest-only lifetime mortgage?

A standard lifetime mortgage is a loan for over 55s where you unlock some of your home’s value, but without a requirement to make regular repayments. Instead, the loan and interest are repaid via the sale of your home when you pass away or move into long-term care.

With an interest-only lifetime mortgage, you agree to make full or partial interest payments each month. This reduces how much interest builds up on the loan, potentially preserving more of your home’s value later down the line.

You can stop making these payments at any time. If you do, your plan converts to a standard lifetime mortgage. When this happens, the interest will start to roll up and add to your loan balance.

Why choose an interest-only lifetime mortgage?

Millions of people aged 55+ own their own home, yet many struggle with ready access to cash when they need it. Being ‘asset rich, cash poor’ can prevent you from doing some of the things you’d really like to.

That’s where a lifetime mortgage comes in. It’s like a regular mortgage, but one where you don’t have to make any monthly payments. That could be ideal if you are on a low or fixed income, or simply need a significant sum of cash and don’t want to downsize in order to raise it.

If you do have enough income to pay some or all of the interest each month, an interest-only lifetime mortgage could be worth considering. It lets you pay some or all of the interest each month to prevent or slow down interest from building up. This could be an attractive option if protecting more of your family’s inheritance is important to you.

An interest-only lifetime mortgage offers all these benefits and more:

  • A tax-free cash boost to spend however you want.

  • Freedom to make monthly interest repayments for as long as you wish.

  • You can stop making interest payments at any time – interest will then accrue and roll-up on the loan as a standard plan.

  • The right to also make repayments on the loan capital – typically up to 10% of the original loan amount in each 12 month period.

  • Full ownership of your home and the right to live there for as long as you wish.

  • Freedom to move home, if the new property meets the lifetime mortgage provider’s criteria.

Five star reviews from happy customers

Taking out equity release is a big decision, so it’s good news that our selected advisers enjoy great feedback and an ‘excellent’ Trustpilot rating from customers who have used the service.

Highly recommended

Explained everything from the first phone call we made to completion, giving us time to understand all the options. Everything went smoothly - would highly recommend.

Brilliant service

The service we have received so far has been brilliant. The documentation came through very quickly, but we have not been put under any pressure to make a decision.

Help was always on hand

Everything explained to me every step of the way and always time to ask questions which are always fully answered. I never felt pressured to make a decision but help was always on hand.

What options do I have with an interest-only lifetime mortgage?

What sets interest-only lifetime mortgages apart from other interest-only loan options is that you can stop making your interest payments at any time. If you do stop making the agreed payments, your plan will switch to a standard ‘roll-up’ plan. From then, interest will accrue on your loan plus any interest on it each month.

If you wish to pay more than the monthly interest, lenders typically allow you to make repayments of up to 10% of the original loan amount each year without an overpayment charge. Some lenders are now waiving charges altogether in certain circumstances. At least one lifetime mortgage product now allows a total repayment of the loan with no charges.

Another option for some interest-only plans is how you choose to access your funds. You could take a larger single lump sum at the outset, or instead opt for a drawdown facility that lets you release smaller amounts as and when you need them. The benefit of drawdown is that you only pay interest on the money you’ve actually withdrawn, while the rest of your facility remains untouched until you decide to use it.

How much can I release with an interest-only lifetime mortgage?

How much you can release depends on several factors:

  • Property value: There will be a maximum release based on a percentage of your home’s value.

  • Your property: The property’s tenure (freehold or leasehold), location and type of construction.

  • Your age: The older you are, the more you will be able to borrow with a lifetime mortgage. Someone aged 55 will typically be able to release around 20% of their property’s value, rising to over 50% for the oldest applicants.

  • Your health or lifestyle: An enhanced lifetime mortgage may let you release more if you are living with certain health conditions or make certain lifestyle choices such as smoking.

Things to consider

As with most decisions about financial matters, you do need to weigh up the pros and cons of a lifetime mortgage. Although interest-only lifetime mortgages can significantly reduce borrowing costs, there are potential disadvantages to consider:

  • Unlocking your property wealth will reduce the size of inheritance you can leave. The loan plus interest is repaid from the sale of your home, so there’s less equity to pass on.

  • If you stop paying the interest each month, the amount owed can grow quickly. Lifetime mortgages work on a compound interest basis, where interest is applied to the loan amount plus any interest already accrued.

  • When you release money, it might affect your eligibility for homecare funding and other means-tested benefits.

  • Early repayment fees will typically apply should you wish to repay the loan plus interest early. However, lenders may waive these fees in some circumstances.

  • If you gift some of the money you release to family or friends, they may be liable to pay inheritance tax when you pass away.

How to get your interest-only lifetime mortgage quotes

At Compare More we work with specialist partners who bring you quotes from the UK’s leading lifetime mortgage providers. To show quotes that match your circumstances and needs, we’ll need to know:

Your property type and value

The type and value of your property will impact how much you can release: the higher the value, the more you can release. We also ask whether you have an outstanding mortgage, as you will need to use the money you release to clear your existing mortgage.

The reason you are considering equity release

This can help tailor the service to your circumstances – but if you’d rather not say at this stage, just select ‘other’.

Your personal details

You’ll need to share details like your age and postcode as these will also affect how much you can release. We also need some contact details so we can get in touch with information about your quotes. 

Equity release guides

Answering your questions about interest-only lifetime mortgages

What type of equity release plan is right for you?

Explore your equity release options to find a plan that’s best for you.

Equity release tools and calculators

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Equity release calculator

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Equity release compound interest calculator

A quick way to work out how much interest builds up on a lifetime mortgage

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Secured Loans

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Page updated on 31st July 2025, Reviewed by Richard Groom