What are Interest-Only Lifetime Mortgages?

Interest-only lifetime mortgages allow you to borrow money from your home, like a regular lifetime mortgage. But with one key difference: you can pay off the interest as you go, which can help keep the amount you owe the same.

Unlike standard lifetime mortgages, which see interest build up and compound, interest-only lifetime mortgages ensure that your debt remains constant.

This is why they are sometimes referred to as retirement interest-only (RIO) mortgages, as they are specifically designed for pensioners or those in later life.

With an interest-only lifetime mortgage, your property acts as the repayment vehicle. When you die or move into long-term care, the proceeds from the sale of your property are used to pay off the balance of the loan. 

This is the same principle as a standard interest-only mortgage, but the ‘lifetime’ aspect is what sets it apart.

When is an interest-only mortgage a good idea?

Interest-only mortgages can be a good idea if you want more flexibility and to protect your inheritance.

As discussed earlier, with a standard lifetime mortgage, you don’t have to pay back anything until you die or move into care. This means that the interest can compound and use up the entire property sale to cover costs, leaving nothing for your heirs.

An interest-only lifetime mortgage is different. With this type of mortgage, you only pay interest on the loan, so your debt doesn’t increase over time. This means that if your property appreciates, you may have some money left over to pass on to your family.

Interest-only mortgages can give you more control over your finances and peace of mind knowing that you are protecting your estate for the next generation.

The Pros and Cons of Interest-Only Lifetime Mortgages

While this may be a good option for most homeowners looking to release cash from their home.  It’s crucial to weigh up the pros and cons before making a final decision. Let’s break it down for you:


> You can keep the amount you owe the same by paying off the interest as you go.
> Interest rates are typically fixed for life, so you know how much you will have to pay each month
> You retain ownership of your home and enjoy any growth in its value.
> The money you release is tax-free and you can use this for any purpose, such as home improvements, debt consolidation, or retirement expenses.
> You don’t have to repay the loan until you die or move into care.
> You can take the mortgage with you if you move.


> The equity you release can reduce what you leave for your family.
> It could affect your eligibility for means-tested benefits.
> You may have to sell your home if you can no longer afford the interest payments.
> There may be additional monthly costs.
> There may be early repayment charges if you decide to repay the loan early.
> Interest-only lifetime mortgages can be more expensive than other types of mortgages.

Interest-Only Lifetime Mortgage Calculator

When considering an interest-only lifetime mortgage, understanding how much equity you can release is key. Many factors can affect this, including the amount of equity you own, your age, credit score, type of property, and the lender you choose.

You can use our equity release calculator to get an estimate of how much you could release. Keep in mind, these are just estimates, and you should consult a specialist equity release mortgage advisor for accurate and tailored figures.

A specialist advisor can provide insights beyond what a simple calculator can offer, assisting you in making the best decision for your financial situation.

[Embedded Equity /Lifetime Mortgage Calculator]

How to Get an Interest-Only Lifetime Mortgage

Obtaining an interest-only lifetime mortgage might feel like a complex process, but by following these steps, you can navigate it with ease and confidence.

  1. Speak to a lifetime mortgage expert. A lifetime mortgage expert can help you understand your options and choose the right mortgage for your needs.
  2. Evaluate your eligibility. Not everyone is eligible for an interest-only lifetime mortgage. You will need to be over 55, have a certain amount of equity in your home, and meet other requirements.
  3. Start your application. A broker can help you with this process. They will find a lender, assess your finances, and help you with the paperwork.
  4. Have your property valued. The lender will need to value your property to assess the risk of the loan.
  5. Receive your offer. Once the lender has approved your application, you will receive an offer with the terms of the mortgage.
  6. Work with a solicitor. A solicitor will review the mortgage documents and ensure that they are in your best interests.
  7. Complete the mortgage. Once you have agreed to the terms of the mortgage, the lender will release the funds to your solicitor.
  8. Manage your mortgage. You will need to make interest payments on your mortgage, and you may also need to make capital repayments.

By following these steps, you’re well on your way to securing an interest-only lifetime mortgage. Remember, the guidance of a skilled mortgage broker and solicitor is invaluable in this process, ensuring that everything goes smoothly for you.

Eligibility Criteria for Interest-Only Lifetime Mortgages

The eligibility criteria for interest-only lifetime mortgages can vary by provider, but they typically include the following:

  • You must be over 55 years old.
  • You must own your own home outright or have a small mortgage remaining.
  • Your home must be worth at least £70,000.
  • You must be able to afford the interest payments.
  • You must be in good health.

Note that these general eligibility criteria may vary by provider. Always ask your provider or a mortgage broker to understand their specific requirements.

Informative checklist infographic detailing the eligibility criteria for a lifetime mortgage in the UK, featuring age, property ownership, home value, and more.

What Are the Interest Rates for Interest-Only Lifetime Mortgages?

If you get an interest-only lifetime mortgage, the interest rate is often set and won’t change. It’s based on how much money you borrow. Some lenders might let the rate change with the market, but most will fix it.

Having a fixed rate is good because your payments stay the same. But it’s really important to get the best deal you can. Otherwise, you might end up paying more over the lifetime of your loan.

Currently, the rates for these mortgages are between 6% and 8%. The exact rate you get can change based on different things like your age and how much of the house’s value you want to borrow.

Talking to an expert can help you understand what rate you might get. They’ll look at your specific situation and help you find the best deal.

Which Providers Offer Interest-Only Lifetime Mortgages? 

Interest-only lifetime mortgages are special loans. Some well-known lenders offer them:

  • Nationwide – They give fixed or moving interest-only loans for older people. You can borrow up to £500,000, but the loan must be no more than half the home’s value.
  • Tipton Building Society – They also give these loans but have a 60% maximum LTV. You must have a pension that fits their rules.
  • Stonehaven – They let you take out £10,000 to £750,000 from your home’s value through their special plan.

Some less well-known lenders also offer good loans on an interest-only basis. They might not tell people about these loans, so it’s smart to talk to a specialist broker who knows about these kinds of loans. They can show you all the choices out there, so you find the best one for you.

Exploring Options Beyond an Interest-Only Lifetime Mortgage

An interest-only lifetime mortgage might be suitable for some, but it’s not the only path to access funds during retirement. Here’s a quick rundown of alternatives:

  • Downsizing – If equity release doesn’t fit your needs, consider downsizing your home. Consult an equity release guide for more insights.
  • Continuing to Work or Shifting to Part-Time – Delaying retirement or shifting to part-time work might give you the extra cash you need.
  • Selling Valuable Assets – If you have valuable items that are no longer needed, selling them could provide additional funds.
  • Enhanced Lifetime Mortgage – For those with certain health conditions, this mortgage may enable unlocking more cash, possibly at better rates.
  • Roll-Up Lifetime Mortgage – This option doesn’t require monthly payments; the loan and interest are covered by your home’s sale when you’re no longer living there.
  • Drawdown Lifetime Mortgage – It’s like a roll-up but allows taking the loan in instalments, keeping cash interest-free until needed.
  • Flexible Lifetime Mortgage – You have the option to make voluntary payments, reducing your loan amount.
  • Home Reversion – You can sell part or all of your property to your equity release provider, obtaining tax-free cash.

The Bottom Line

The path to securing an interest-only lifetime mortgage can be a complex one, but you don’t have to walk it alone. This guide has provided an overview of the critical aspects of interest-only lifetime mortgages, including definitions, comparisons, benefits, rate options, and providers.

Key Takeaways

  • Interest-Only Lifetime Mortgages allow you to pay off interest over time, keeping the amount you owe the same, suitable for pensioners or later-life individuals.
  • This type of mortgage offers fixed interest rates and tax-free money release, but it may affect benefits eligibility and have higher interest rates.
  • Currently, the average rates for interest-only lifetime mortgages are between 6% and 8%, depending on various factors. This includes your age and property value.
  • Several known lenders offer these mortgages, and there are other alternatives like downsizing and different types of lifetime mortgages.
  • Speaking with a specialist is critical to understand the intricacies and securing the best deal for an interest-only lifetime mortgage.

Get Matched with a Lifetime Mortgage Advisor Today

Lifetime mortgages are complex financial products, and the process of choosing the right one for your situation requires a profound understanding of the market, interest rates, and your financial status. Even a small mistake could lead to significant financial consequences.

Having an expert by your side ensures that you make informed decisions and seize opportunities you might otherwise miss. 

An expert will evaluate the different mortgage options for you, clarify terms and conditions, secure the best possible interest rate tailored to your situation, and guide you from application to final agreement.

Unsure where to find the right specialist? Fill out this quick form. We provide a free broker-matching service to connect you with an experienced, licensed mortgage specialist who knows the market inside and out.