Lifetime Mortgages - Interest Only Schemes

An interest only lifetime mortgage is like any ordinary mortgage you will probably have had in the past except that you do not make any capital repayment each month, just the interest and that it has no maximum term.  As a result with an interest only lifetime mortgage the debt doesn't build up unlike a roll up lifetime mortgage and therefore the amount which will need to be repaid when the property is sold should be the same amount as the amount you borrowed.

In comparison with all other equity release schemes an interest only lifetime mortgage will preserve the most amount of equity in your property, which will not only mean you will leave your beneficiaries more, but will retain more equity to possibly help yourself later in life.

We can't have a mortgage-we're retired!

It is a popular misconception that once retired you are unable to obtain a mortgage but this is wrong.  Obviously it is important that any borrowing should remain affordable just on pensionable income, but there are a few building societies and banks that are forward thinking enough to offer ordinary interest only mortgages for life as an alternative to roll up lifetime mortgages, to those retired people who can demonstrate that they should be able to continue to afford payments.  These schemes only require repayment whenever the property is sold on death or going into care, thereby giving you the reassurance that you can remain living in your property for life.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Interest only lifetime mortgages-advantages

• Under an interest only lifetime mortgage providing you pay all payments the debt remains the same.
• Amount available can be higher for younger people than roll up schemes, as the amount is based on pensionable income and not on age.
• Short term fixed interest rates are generally lower than available under roll up lifetime mortgages.
• Interest only lifetime mortgages preserve more equity in your property for either your own use later in life or to leave to children.
• Interest only mortgages can be particularly useful as a temporary alternative measure for people who would prefer a roll up lifetime mortgage, but are currently too young to obtain any of the best roll up or want to delay rolling up interest until later.

Interest only lifetime mortgages-disadvantages

• You need to make monthly repayments for the lifetime of the mortgage - thus increasing your expenditure.
• If you fail to keep up the mortgage repayments under an interest only lifetime mortgage your home could be repossessed.
• Although interest rates available at the outset may be lower than those available under a roll up lifetime mortgage where the interest rate remains fixed or capped for life,  interest only lifetime mortgage rates are only normally fixed for between 2-5 years.  Thereafter you need to find a new fixed rate giving rise to new fees, or the rate would revert to the standard rate, both of which could be considerably higher at the time, leading to increased monthly repayments.
• Lending or personal circumstances may change resulting in you finding it difficult, if not impossible, to raise sufficient new money at the time.
• Lenders limit the amount available to a multiple of your pension income, which may not be sufficient for your needs.
• Mortgages established based on joint incomes, may become unmanageable on first death, possibly forcing you to either sell up and downsize just to pay off the mortgage, or to take out a roll up lifetime equity release mortgage later just to pay the mortgage off.

Further information and advice

If you have any further questions about interest only lifetime mortgages or other equity release schemes, or would now like to arrange a free home consultation, call us today on 0800 970 4883 or complete our online enquiry form.


This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

Now what would you like to know more about?

Clicking on any of the following links will allow you to find out more about key information on releasing equity from your home.

Drawdown Lifetime Mortgages | Fixed Repayment Lifetime Mortgages | Roll Up Lifetime Mortgages | Home Reversion Plans | How to book an appointment