A lifetime mortgage with an interest only option is another equity release option available to those looking to release equity in their home.
Unlike a standard lifetime mortgage where interest rolls up over time with no monthly payment of interest required, the lifetime mortgage interest only option requires the monthly payment of the interest.
There are few banks or building societies that provide this facility, but for those that do they are happy to provide their best lifetime mortgages on an interest only basis for life, either on a fixed rate or a variable rate.
Each lender apply's different lending criteria, with some being more flexible than others. Essentially though there are two types of interest only equity release lifetime mortgage.
The first is a standard interest only mortgage where the lender will assess your income, and will typically lend a maximum lump sum of 3 - 3.5 times income, where income includes pensionable income and retirement benefits. Unlike a standard 25 year mortgage, this mortgage will run for life, and is only available to those that are 60 or older, and sometimes only available from the point of retirement at age 65. Often this type of mortgage is on a variable rate, although it is sometimes possible to fix the rate for two three or five years.
The alternative is where the lifetime mortgage provider sets up an interest only equity release lifetime mortgage on the same terms and conditions as a standard lifetime mortgage with rolled up interest, from day one. With this type of scheme you are able to pay all or part of the monthly interest payment which is calculated on the interest rate applicable to the lifetime mortgage. At some point in the future, should you wish to cease interest payments, the mortgage reverts to a standard lifetime mortgage with the interest then being added to the loan, without the need to reapply.
The obvious benefit of the latter option, is that it is possible to secure a lifetime mortgage rate now, without having to see interest erode the equity in your property until you are ready.
Be aware however that if you should select an interest only equity release lifetime mortgage with a variable rate, and your pension and other sources of retirement income are fixed, you may find repayment of your mortgage difficult should interest rates rise.
When looking at how much can be drawn down with a lifetime mortgage, the amount that can be borrowed will depend on many different factors, including your age, the value of the home, and other factors. The following table gives an estimate of the maximum amounts that can be released in relation to your age. Please note that these are only an indication, and will be different with each equity release provider. If you take advantage of your FREE equity release Lifetime Mortgage consultation, your advisor will provide you with all the details of the best lifetime mortgage schemes available.
This is an indication of the Max Equity Release % available from SHIP member providers |
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Age |
Max LTV |
Age |
Max LTV |
55 |
21% |
76 |
43% |
56 |
22% |
77 |
44% |
57 |
23% |
78 |
45% |
58 |
24% |
79 |
46% |
59 |
25% |
80 |
47% |
60 |
26% |
81 |
48% |
61 |
27% |
82 |
49% |
62 |
28% |
83 |
50% |
63 |
29% |
84 |
51% |
64 |
30% |
85 |
52% |
65 |
31% |
86 |
53% |
66 |
33% |
87 |
54% |
67 |
34% |
88 |
55% |
68 |
35% |
89 |
56% |
69 |
36% |
90 |
57% |
70 |
37% |
91 |
57% |
71 |
38% |
92 |
57% |
72 |
39% |
93 |
57% |
73 |
40% |
94 |
57% |
74 |
41% |
95 |
57% |
75 |
42% |
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For more information and advice about lifetime mortgages, simply
or request a copy of the equity release guide.