Interest-Only Lifetime Mortgages: Pay Now or Let Interest Roll Up?

The same lifetime loan can end in two very different balances. This guide compares paying the interest each month with letting it compound.

What is the Interest-Only Lifetime Mortgage Calculator?

A lifetime mortgage lets older homeowners borrow against their home, with the loan usually repaid when they die or move into long-term care. Paying the interest each month keeps the balance flat. Letting it roll up means unpaid interest is added to the loan and then itself earns interest, so the balance compounds upward year after year. This calculator projects both paths at one fixed rate, holding the property value flat so you can see the remaining equity under each option. Equity release reduces the inheritance you leave and can affect means-tested benefits, so independent financial advice is strongly recommended before taking one out.

How to use it

1. Enter your home value and the loan amount you are considering.
2. Enter the interest rate and how many years you want to project.
3. Click Compare Lifetime Options to see the monthly payment, both balances and the remaining equity under each path.

Worked example

A £100,000 loan at 6% costs £500 a month if the interest is paid. If the interest rolls up instead, the balance grows to about £179,085 after 10 years and about £239,656 after 15 years, before any change in the property value.

How fast does rolled-up interest grow?

By compounding: each year's interest is added to the loan and then earns interest itself. At 6%, £100,000 becomes about £179,085 after 10 years and about £239,656 after 15 years, even though no extra money was borrowed.

Frequently asked questions

What happens if I stop paying the interest?

Unpaid interest is normally added to the loan, so the balance starts to grow through compounding. Some products let you pause payments, but the terms vary.

How does this differ from a roll-up lifetime mortgage?

With a roll-up product no monthly payment is made and all interest is added to the loan from the start, so the balance grows faster than on an interest-only deal where payments are kept up.

Try the Interest-Only Lifetime Mortgage Calculator free · All guides