Interest Servicing Plans

Mark Gregory

Checked for accuracy and updated on 29 September 2025

Interest Servicing Lifetime Mortgages Interest servicing is one of the most significant developments in the evolution of lifetime mortgages. It provides homeowners with more choice, control, and flexibility when accessing the wealth tied up in their home.

Traditionally, lifetime mortgages were designed around the concept of roll-up interest, where no monthly payments are made and the loan, plus compound interest, is repaid when the property is sold. However, today’s plans now give you the option to repay some or all of the interest during the life of the loan. This can be done on a voluntary or regular basis, without any affordability checks or impact on your credit score.

This repayment feature can help manage the overall cost of borrowing, reduce the effect of compound interest, and preserve more of your home’s equity for the future.

What is interest servicing?

Interest servicing is a flexible feature built into most modern lifetime mortgages that allows you to pay off part or all of the interest charged on your loan. Unlike a traditional residential mortgage, these payments are not mandatory and there are no affordability requirements.

Payments can be:

• Regular (monthly, quarterly or annual)
• Voluntary or structured
• Set up by standing order, and paused or stopped at any time (subject to lender criteria)

This flexibility makes interest servicing ideal for retirees who want to reduce the build-up of interest but also keep the option to stop payments should circumstances change.

How much interest can I repay?

Lenders offer a range of interest servicing options. Depending on the plan, you may be able to repay:

• Up to 10% of the original amount borrowed each year without penalty using voluntary payments
• Between 25% and 100% of the interest each month (on partial servicing plans)
• 100% of the interest (on full servicing plans)

This allows you to tailor repayments to suit your financial situation, whether you're looking to keep the loan balance steady or simply reduce the rate of interest roll-up.

How long can the interest be paid for?

It depends on the plan in question. There are many types of interest servicing plans in today's flexible lifetime mortgage market giving you the choice over how long to make payments. Voluntary payments can typically continue for part, or the full duration of the lifetime mortgage, at a frequency or ad-hoc basis you choose. You can stop voluntary payments at any time you choose without any penalty.

With the more standard interest servicing plans such as the Optional Payment plans from Legal & General, there is no set term, giving you the freedom to choose how long you wish to make payments for, whether that’s indefinitely or just for a limited time.

Recent innovations have redefined how interest servicing can be even more flexibly applied. The aptly named 'Interest Reward' plans come with a choice of repayment terms - 5, 10, 15 or 20 years and then a choice of how much interest you can repay - 25%, 50%, 75% and 100%. Effectively, you can choose any combination. Dependent upon the term and percentage repayment selected, will determine the interest rate offered by the lender. For instance, the higher the percentage of the interest you pay and the longer the payment term - the lower the interest rate becomes, and vice versa.

Importantly, interest servicing plans are designed with flexibility in mind. Most lenders allow you to stop or reduce payments at any time without penalty, should your financial circumstances change. Some plans may also allow you to switch between full, partial or roll-up interest structures depending on your needs.

This makes interest servicing a practical long-term strategy for managing equity release, especially when combined with the ability to adjust your repayments as life evolves.

Who is interest servicing suitable for?

Interest servicing plans are suitable for a wide range of people, including:

• Those with some disposable income who wish to manage their loan balance
• People looking to reduce the impact of compound interest
• Homeowners who want to maximise the equity they leave behind for loved ones
• Individuals approaching the end of an interest-only residential mortgage term who need a repayment solution

This last group in particular can benefit greatly. A lifetime mortgage with interest servicing can replace a traditional mortgage, offering continuity of payments but with far more flexibility and security.

Key features of interest servicing plans

• Make payments from as little as £50 per month (depending on the lender)
• No affordability assessments required
• Switch to roll-up interest and even voluntary payments if needed
• Option to stop or reduce payments without penalty
• Helps protect inheritance by limiting the growth of the loan