What is an interest only lifetime mortgage? | Compare rates - Finder UK

Interest only lifetime mortgages

If you want to unlock the equity in your home but keep your interest costs down, an interest-only lifetime mortgage could be for you.

Compare interest rates and providersQuick comparison
How does interest only equity release work?Learn more

Table: sorted by the lowest AER from each brand included. Please use the filters to tailor the comparison to your needs.

Data updated regularly
Name Product Product type Rate type Maximum LTV Monthly rate Annual rate (AER)
Optional Payment Black Lifetime Mortgage
Interest only
Fixed
26%
2.49%
2.52%
Interest Payment Roll-Up Lite Variable
Interest only
Variable
29.5%
2.8%
2.84%
J1 Interest Servicing 75% Lump Sum
Interest only
Fixed
33%
2.84%
2.88%
Retirement Mortgage 2 Year Fixed
Interest only
Fixed
50%
4.05%
4.05%
Optional Payment Black Lifetime Mortgage DTV
Interest only
Fixed
26%
2.49%
2.52%
Optional Payment Black Lifetime Mortgage
Interest only
Fixed
26%
2.49%
2.52%
Optional Payment Black Lifetime Mortgage DTV
Interest only
Fixed
26%
2.49%
2.52%
Optional Payment Pink Lifetime Mortgage
Interest only
Fixed
28.7%
2.51%
2.54%
loading

Compare up to 4 providers

We work with Age Partnership, one of the UK’s leading equity release specialists, which scours more than 500 deals to find the best equity release products. We compare only lifetime mortgages, and do not compare any home reversion plans. To understand the features and risks of lifetime mortgages, ask for a personalised illustration from a lifetime mortgage company. Check that this type of mortgage is suitable for your needs if you plan to move or sell your home or you want your family to inherit it. If you're not certain, seek independent advice. Your home may be repossessed if you do not keep up repayments on your mortgage.
Promoted
Age Partnership

Age Partnership

  • FREE equity release online calculator
  • Rated Excellent By Over 5,900 People
  • Compare the whole of the market

What is an interest-only lifetime mortgage?

An interest-only lifetime mortgage is a form of equity release which lets you unlock the equity you have in your home via a loan that’s secured against your house. The difference with an interest-only lifetime mortgage is that you’ll need to make monthly interest repayments, which can help keep your overall interest costs down by avoiding compounded interest charges.

Like all forms of equity release, you’ll also retain full ownership of your house with an interest-only lifetime mortgage, but releasing equity will also reduce the amount you receive when you sell the property.

How does an interest-only lifetime mortgage work?

With an interest-only lifetime mortgage, you’ll need to be a homeowner aged over 55. You can then apply to unlock some of the equity you own in your home by taking out a new loan that’s secured against the property. The equity amount is repaid in full once the house is sold, and is therefore deducted from the sale price.

As with all forms of equity release, the amount you can borrow will depend on a number of factors including your age and lifestyle and the value of your home, with older homeowners able to unlock more equity.

Like a lump sum lifetime mortgage, you’ll receive the full equity amount immediately, but will also need to make monthly interest repayments for the lifetime of your loan. These monthly payments are designed to only cover the interest that is accruing on the loan, which means you’ll still need to repay the full equity amount at the end of the loan term.

What are the pros and cons of an interest-only lifetime mortgage?

Pros

  • Lets you access the equity you own in your home
  • Monthly repayments help avoid costly compounding interest
  • Interest rates can be fixed for life
  • No income or affordability checks required

Cons

  • You’ll need to make regular monthly repayments to cover the cost of interest
  • Releasing equity from your home will reduce the inheritance you are able to leave behind
  • Interest-only payments mean you’ll still need to pay off the equity amount in full at the end of the loan term
  • Equity release can complicate your tax position

How much do I need to repay each month with an interest-only lifetime mortgage?

While other forms of equity release require no monthly payments, with an interest-only lifetime mortgage you’ll need to pay off the cost of accruing interest every month. The size of your monthly payments will depend on both the amount of equity you unlock (your loan amount), as well as your personalised interest rate, but will remain the same every month, provided you always make a full repayment.

What are the best rates for interest-only lifetime mortgages?

Most interest-only lifetime mortgages are typically offered with fixed APRs between 2.4% and 5%, but the specific rate you receive will depend on a number of factors, such as your age and the value of your home. You’re also likely to need to pay a number of fees when setting up a lifetime mortgage, including:

  • Advice fee. This is the fee paid to the broker or financial adviser who helps advise you on taking out a lifetime mortgage. Some advisers and lenders may waive this fee.
  • Valuation fee. This covers the cost of the property valuation that is conducted as part of your application, and will vary depending on the type and value of your house.
  • Legal fees. These will typically be around £400-£500 and are paid to your solicitor or legal adviser once your offer is confirmed.
  • Application fee. Some lenders or brokers may also charge an application fee, which is generally around £500-£700.

Eligibility criteria

In order to apply for an interest-only lifetime mortgage, you’ll need to be at least 55 years old, and own a house worth at least £70,000. Certain interest-only lifetime mortgage providers may have additional lending requirements that you’ll need to meet in order to apply for a lifetime mortgage.

How to apply for an interest-only lifetime mortgage scheme

You can apply for an interest-only lifetime mortgage through a recognised equity release lender or broker. Like a regular mortgage, you’ll generally need to arrange an appointment with an equity release expert who will talk you through your lifetime mortgage options and help find the loan that best suits your circumstances.

Once you’ve discussed your options, you can apply for a quote to get an idea of the size of lifetime mortgage you’re eligible for, and can then begin the formal application process.

Frequently asked questions

More guides on Finder

  • Getting a 5% deposit mortgage under the government’s new guarantee scheme

    Learn more about the new government scheme that will allow first-time buyers and home movers to get on the property ladder.

  • Chain break finance

    Everything you need to know about chain break finance – a type of bridging loan that stops you losing your dream home if the sale of your existing one falls through.

  • Commercial bridging loan

    Everything you need to know about commercial bridging loans. We look at when they’re useful, how they work and what to be aware of before taking one out.

  • Loans for small businesses affected by coronavirus

    Learn about government support and alternative options for businesses needing finance to help deal with the impact of coronavirus.

  • Why it pays to be a patient investor

    One way to develop healthy investing habits is to make regular contributions to your investment pot over a period of time, instead of investing a large lump sum. This is called “pound-cost averaging”. It’s a way of investing without trying to time the market.

  • Molo Finance mortgage review

    Discover whether a digital-only Molo Finance mortgage could be suitable for you.

  • Compare bridging loans to buy land

    Find out if a bridging loan could be a good option versus other types of finance if you’re buying land. We explain the pros and cons and how to get the best deal.

  • Probate loans

    Probate loans can be a valuable tool for dealing with the financial issues that can come up when you’re dealing with someone’s estate. We explain what you need to know.

  • Compare residential bridging loan rates

    Everything you need to know about residential bridging loans, including what to consider before taking one out, what they can be used for and their pros and cons.

  • Auction finance: Compare bridging loan rates

    Everything you need to know about auction finance, including why it can be a good alternative to a mortgage, its downsides and where to go to get the best deal.

    Ask an Expert

    You are about to post a question on finder.com:

    • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
    • finder.com is a financial comparison and information service, not a bank or product provider
    • We cannot provide you with personal advice or recommendations
    • Your answer might already be waiting – check previous questions below to see if yours has already been asked
    Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

    By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

    Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
    Go to site