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Interest-payment lifetime mortgage

  • Save on interest by making monthly payments
  • Help reduce your total cost of borrowing
  • We'll explain the benefits and drawbacks

Am I eligible?

You could be eligible if you're:
  • A UK homeowner aged 55+
  • With a property worth £99,000+
Calculate now

What is an interest-payment lifetime mortgage?

An interest-payment lifetime mortgage is a type of equity release which is a loan secured against your home. It could help you unlock some of your property's value.

It's different to a lifetime mortgage with voluntary payments as when you release cash through an interest-payment lifetime mortgage, you agree to make monthly interest payments in order to gain an interest rate discount to help reduce your cost of borrowing.

If you’re able to make full interest payments for the life of your plan, it’ll leave you with only the amount borrowed to pay at the end. An interest-payment lifetime mortgage isn’t subject to affordability tests, however, agreed payments must be sustainable as there would be a penalty for stopping (removal of rate discount).

The money you unlock through an interest-payment only lifetime mortgage is tax-free. You can use it in several ways, such as:

  • Repaying your existing mortgage
  • Supporting your loved ones when they need it most
  • Generally boosting your retirement finances
  • Making home improvements as you grow older
With a lifetime mortgage, any unpaid interest accrues, then rolls up and adds to the loan. This is also known as compound interest.

How does an interest-payment lifetime mortgage work?

With an interest-payment lifetime mortgage recommended by Key, you could receive an interest rate discount by making monthly interest payments. The longer you commit to making payments, and the more interest you pay, the bigger the discount.

The discount that you get will depend on the amount you want to borrow compared to the value of your house, how much interest you can pay each month and the duration of the payment term.

The combination of making payments and the reduction in interest rate could help you save thousands – even with a small discount on your interest rate. Your adviser can give you an illustration of what discount you could get and how much it could save you.

There are different types of interest-payment lifetime mortgages which Key recommend and they are subject to different terms and criteria. The following is an example based on one type of plan.

ⓘ Illustrative example

Marge is a 71-year-old divorced retiree looking to release £100,000 from her £600,000 property to gift money to her grandchildren and help making some home and garden improvements.


By committing to paying 100% of the monthly interest for 10 years, Marge is rewarded with a 0.30% interest rate discount. Through this interest rate discount, and by paying monthly interest payments for 10 years, Marge can save more than £116,000 over 20 years compared to making no repayments through the same standard lifetime mortgage.

  Lifetime mortgage    Interest-payment lifetime mortgage
Initial loan amount £100,000 £100,000
Interest rate 6.5% MER* 6.2% MER*
Monthly payments £0 £532 (for 10 years) (100% of the monthly interest)
Total cost of borrowing after 20 years       £365,645 £249,436 (inc.payments)
Net saving £0 £116,209


*Monthly Equivalent Rate. Interest rates, monthly payments and savings amounts are for illustrative purposes only. Interest rate received and plan features are subject to eligibility. Ask your adviser for a personalised quote.

See what you could release by using our lifetime mortgage calculator.

What are the benefits and drawbacks of equity release?

Like any financial product, equity release has benefits and drawbacks to weigh up.

All our equity release advice relates to lifetime mortgages - a loan secured against your home. Our fixed advice fee of £1,699 is only payable on completion of a plan.

Am I eligible for an interest-payment lifetime mortgage?

To qualify for an interest-payment lifetime mortgage, you must:

  • Be aged 55 or over

  • Own your own home with a property value of at least £99,000

  • Be able to commit to making monthly interest payments

ⓘ Did you know...

If you're not eligible for an interest-payment lifetime mortgage now, try our later life mortgage finder. We could still help you take control of your later life finances.

Why choose Key Equity Release?

Trusted

  • We've won 80+ awards 

  • We're rated 'Excellent' on Trustpilot with 17,000+ reviews

  • We're the UK's most trusted equity-release specialist

Expert

  • Key is a regulated equity release expert

  • We're proud members of the Equity Release Council

  • We've helped 1 million+ see if it was right for them

Protected

  • Equity release advising and arranging is covered by the FSCS

  • You'll be protected by up to £85,000

  • Key could help you access some of your home's equity in a safe and transparent way

How to release equity from your home

To help you understand the process, we’ve put together these simple steps. They highlight what your journey to equity release could be like:

Use our free calculator

Check your eligibility and how much cash you could release with our equity release calculator.

Speak to an adviser

Book an appointment with a qualified equity release adviser at a time that's good for you.

Assess your options

Your adviser will recommend the most suitable product. Learn more about your later life mortgage options.

Your other options with Key
If another product is more suitable, we'll refer you to a different adviser within Key Group to help. if you go ahead, you'll never be charged more than our standard fixed advice fee of £1,699, even if their fee is higher.  Key Group offers alternatives to equity release such as a retirement interest-only mortgage or retirement repayment mortgage.

Other options to think about
It's important to know your other options before going ahead with equity release. These include: downsizing, unsecured lending, using existing assets, or support from friends or family.

Not eligible for an equity release mortgage?
If you're not eligible now, try our later life mortgage finder. We could still help you take control of your later life finances.

Page last updated: Wednesday 30 April 2025