Interest Repayment Options

Mark Gregory

Checked for accuracy and updated on 29 September 2025

One of the most important developments in lifetime mortgages in recent years is the ability to manage how interest is repaid. Traditionally, equity release worked on a roll-up basis, where interest was added to the loan each month, interest compounds yearly and the loan is eventually repaid when the plan ends.

However, today’s lifetime mortgages now offer far more flexibility - including the option to make interest payments, either regularly or on an ad-hoc basis.

This shift has been particularly helpful for those approaching the end of an interest-only residential mortgage term, offering a more flexible route to remain in their home where they can replace their mortgage with a lifetime mortgage, thus maintaining payments, but with the option of stopping them if future finances dictate.

This means that, depending on your circumstances and preferences, you can choose whether to make no monthly repayments at all, repay some of the interest each month, or even service all the interest to help maintain the original loan balance. This increased flexibility gives you more control over the long-term cost of borrowing and can help preserve more of your estate for loved ones.

Importantly with lifetime mortgage plans, this payment flexibility comes without the need to prove income or affordability - we call these 'committed' payments, unlike a traditional mortgage which has 'mandatory' payments. Additionally, these payments can be switched off in the future, unlike a traditional mortgage where non-payment could lead to repossession of your home.

What happens if I choose NOT to make any repayments?

Many people still prefer the traditional route of rolling up interest, especially if they’re looking to boost their retirement finances without taking on any monthly commitments. With a roll-up lifetime mortgage, no payments are required. Instead, the interest is added to the loan each month, and the total amount - both the original loan and the accumulated interest is repaid when the property is eventually sold.

This approach may suit you if you want to maximise your retirement income now, and are less concerned about reducing the impact on your estate later. It also offers peace of mind, as you won’t be tied to making payments during retirement.

What are voluntary payment options?

If you have disposable income and/or have access to capital, you may want to reduce the total cost of borrowing, by making ad-hoc or regular voluntary payments. While making voluntary payments remains entirely optional for the customer, the ability to do so is now a mandatory feature on all lifetime mortgages that meet the standards set by the Equity Release Council.

This means all plans must include the option for borrowers to make repayments of up to 10% of the original amount borrowed each year without penalty. Typically, these payments are flexible - you can start or stop payments when it suits you, most plans allow you to even set up a regular monthly standing order (subject to the lender’s terms).

Many clients choose this option as a middle ground - gaining the benefits of equity release now, while helping to protect the value of their estate in the future. You don’t have to commit to a fixed payment either; plans often start from as little as £50 per month.

If you’re thinking about how to balance your own financial needs with leaving something behind for loved ones, flexible voluntary payments can be a very effective strategy.

Can I service part or all of the interest?

For those who prefer a more structured approach, some lenders now offer plans that allow regular interest payments to be made each month. These work more like a traditional interest-only mortgage, with the key difference being that there is no end date or affordability assessment in the same way.

What makes today's lifetime mortgage products so flexible is the wide range of interest servicing options available. Depending on the lender and product, plans may allow you to pay anywhere from 0% to 100% of the interest charged. Some allow full servicing of interest to keep the balance static, while others offer partial servicing options, such as paying 25%, 50%, or 75% of the interest accrued. This enables you to tailor your repayments to suit your financial circumstances and long-term goals.

Importantly, even these structured payment options still come without the need for affordability checks, and many interest only plans offer the ability to pause or stop payments in the future if your situation changes. This makes servicing all or part of the interest a flexible and secure way to manage the cost of equity release, while retaining greater control over your estate.

Some of these lifetime mortgages also allow you to switch to roll-up at a later stage if your circumstances change, and still have the option of making flexible voluntary payments, even if the interest servicing feature has lapsed.

This can be a good option if you are used to managing monthly payments, but don't want that cloud of uncertainty over missing payments. It also provides a potential solution for those reaching the end of an interest-only residential mortgage term, where repayment of the capital is required.

A lifetime mortgage with interest servicing can offer a seamless transition, allowing homeowners to remain in their property while managing interest payments in a more flexible and secure way - all without the pressure of affordability checks or risk of repossession. At the same time, it offers a way to retain as much equity as possible in the property for the future.

Which option is right for you?

Everyone’s circumstances are different, and your decision around how interest is managed should reflect your income, goals, and outlook for the future. The good news is that there’s no longer a one-size-fits-all approach to equity release and our role at Equity Release Supermarket is to help you explore all the available options, so you can make an informed choice that feels right.

Whether you’re looking to make no repayments at all, contribute something towards the interest, or cover it fully - we’ll show you what’s available from across the market, and guide you through the pros and cons of each route.

You can also use our free, no-obligation smartER tool to see real-time deals and explore which products allow interest payments. It’s quick, easy, and tailored to your needs.