Updated Interest Only Lifetime Mortgage Rates

Looking into a lifetime mortgage for 2024? Well, you’ve come to the right place. We’ve made this guide to help you understand all about lifetime mortgages.

Each month, over 7,000 people visit our website to learn about equity release options, so you’re not alone.

In this guide, we’ll look at:

•  What a lifetime mortgage is and how it works
•  Who can apply for a lifetime mortgage
•  How interest on a lifetime mortgage is worked out
•  What can change the interest rate
•  The good and bad things about a lifetime mortgage

We know what it feels like to worry about making big decisions. That’s why we’re here to help you learn more about lifetime mortgages for 2024.

How is interest calculated on a lifetime mortgage?

The interest on a lifetime mortgage is compounded. This means the interest applied each month is applied to your principal loan and any interest already accumulated. 

Compounded interest will increase the amount of interest applied to a lifetime mortgage each month, as no repayments are made. Thus, the debt grows at a quicker speed.

Can you get an interest-only lifetime mortgage?

Interest-only lifetime mortgages do exist. You could take out a lifetime mortgage and agree to voluntarily pay off the interest applied each month. By clearing the interest debt each month, you will stop the debt from growing.

Some people put aside some of their loan and use it to pay off the monthly interest. However, because you won’t know how long you’ll have the lifetime mortgage, it can be difficult to know how much to put aside to pay the interest each month. 

Is the interest rate on lifetime mortgages fixed?

Lifetime mortgages usually apply a fixed interest rate. There might be some lenders who apply a variable rate, which is more likely if you use a drawdown lifetime mortgage rather than receiving a lump sum loan. 

What affects the interest rate charged?

The size of your loan affects the rate of interest charged. Your age affects how big of a loan you can get, so this indirectly affects the interest rate charges as well. 

What are the best interest-only lifetime mortgage rates?

The best interest-only lifetime mortgage rates are currently around 3% but are subject to change. The best interest rate available will be determined by your loan amount. 

An equity release broker could help you find reputable lenders with the lowest rates. 

What are the average interest only lifetime mortgage rates?

The average interest-only lifetime mortgage rates are often between 3% and 8% depending on the size of the lifetime mortgage and the lifetime mortgage company you go with. 

Taking your time to find the best lifetime mortgage rates is worthwhile, especially if you are aiming to pay off the interest each month. By doing your research and finding the better deals, you could save thousands of pounds in monthly interest repayments over the lifetime of the loan. 

Advantages of an interest-only lifetime mortgage

The advantages of using an interest-only lifetime mortgage are:

1. Get approved for a loan in later life when other borrowing methods may not be available
2. Make voluntary interest repayments to stop the debt from escalating. Lifetime mortgage debts can easily double over the first decade but they won’t if you’re paying off the interest.
3. By stopping the debt from growing, you ensure more of your wealth is passed on to loved ones. 
4. Use the money on any purchase or purpose you require

Disadvantages of an interest-only lifetime mortgage

The disadvantages of using an interest-only lifetime mortgage are:

1. You will have to make repayments each month
2. You won’t know how much to put aside to cover ongoing interest repayments
3. There are still fees as part of the application process and there could be expensive early repayment costs
4. Using any lifetime mortgage could disqualify you from means-tested benefits

What is the average interest rate on a lifetime mortgage? (Quick recap!)

Average interest only lifetime mortgage rates are typically between 3% and 8%. The best rate you can get will be determined by the lender you use and the size of your lifetime mortgage.

Your age doesn’t directly affect the rate of interest offered, but it does affect the amount of equity you release and therefore the size of the loan taken. Thus, your age indirectly affects the interest rate offered.