Interest-payment lifetime mortgage rates: how to compare quotes

This guide explains how interest-payment lifetime mortgages work and how to compare a current personalised quote.

This guide explains the main options, conditions and risks to discuss with a qualified adviser.

In this guide, we’ll look at:

•  What a lifetime mortgage is and how it works
•  Who can apply for a lifetime mortgage
•  How interest on a lifetime mortgage is worked out
•  What can change the interest rate
•  The good and bad things about a lifetime mortgage

Compare the product’s full costs, payment obligations and alternatives with a qualified adviser.

How is interest calculated on a lifetime mortgage?

The interest on a lifetime mortgage is compounded. This means the interest applied each month is applied to your principal loan and any interest already accumulated. 

If unpaid interest is added to the balance, it can compound. Payments and fees change the result.

Can you get an interest-only lifetime mortgage?

Some lifetime mortgages allow voluntary interest payments, while payment-term products require payments for an agreed period. Paying all interest as it falls due can prevent interest-driven balance growth, subject to fees and other changes.

Borrowing extra money to fund interest payments increases initial debt and costs and may not provide a sustainable payment plan. Discuss affordability and alternatives.

Is the interest rate on lifetime mortgages fixed?

Rates are often fixed, but each later drawdown can have a different fixed rate. Drawdown is not inherently more likely to be variable; check the actual product. See related guidance.

What affects the interest rate charged?

The size of your loan affects the rate of interest charged. Your age affects how big of a loan you can get, so this indirectly affects the interest rate charges as well. 

What are the best interest-only lifetime mortgage rates?

Rates change and depend on the product and your circumstances. Obtain a current personalised illustration and compare the APRC, fees, repayment options and total projected cost; this article does not quote a live market-leading rate.

An equity release broker could help you find reputable lenders with the lowest rates. 

What are the average interest only lifetime mortgage rates?

This article does not provide a verified live average rate. Obtain current illustrations showing the APRC, fees, projected balance and repayment terms.

Taking your time to find the best lifetime mortgage rates is worthwhile, especially if you are aiming to pay off the interest each month. By doing your research and finding the better deals, you could save thousands of pounds in monthly interest repayments over the lifetime of the loan. 

Advantages of an interest-only lifetime mortgage

The advantages of using an interest-only lifetime mortgage are:

1. Get approved for a loan in later life when other borrowing methods may not be available
2. Paying some or all interest can reduce balance growth. Whether payments are optional or mandatory and whether charges apply depends on the plan.
3. Lower debt may preserve more estate value, but future spending, property values and other liabilities still affect inheritance.
4. Use depends on provider terms and advice on the intended purpose, tax, benefits and risk.

Disadvantages of an interest-only lifetime mortgage

The disadvantages of using an interest-only lifetime mortgage are:

1. Required payments must be affordable and maintained; voluntary payment arrangements have different conditions.
2. You won’t know how much to put aside to cover ongoing interest repayments
3. There are still fees as part of the application process and there could be expensive early repayment costs
4. Using any lifetime mortgage could disqualify you from means-tested benefits

What is the average interest rate on a lifetime mortgage? (Quick recap!)

Rates change and depend on the product and your circumstances. Obtain a current personalised illustration and compare the APRC, fees, repayment options and total projected cost; this article does not quote a live market-leading rate.

Pricing depends on product-specific factors, potentially including age, loan-to-value, payment term and underwriting. Ask the provider how the actual offer is calculated.