Could equity release help your interest-only shortfall?

If you are struggling to repay your interest-only mortgage, releasing equity could be a solution

2.6 million interest-only mortgages are expected to mature over the next 30 years, with more than half of these estimated to face a repayment shortfall.[1] Part of the reason for this is that many of the endowments set up to cover the initial loan have underperformed, leaving many searching for a way to make up the shortfall. If you too are exploring your repayment options, then releasing tax-free equity with a Lifetime Mortgage could be the answer.

The Lifetime Mortgage solution

Considerable growth in the value of UK property over the last few decades means there is a chance your home’s value may have increased significantly over the years. You could take advantage of your increased on-paper wealth with a Lifetime Mortgage – the UK’s most popular type of equity release. It’s a specialist mortgage that allows you to unlock a portion of your property wealth as tax-free cash, giving you the ability to repay your interest-only mortgage.

Unlike your existing mortgage, there are no required monthly payments and you retain 100% homeownership. Additionally, all plans from Equity Release Council approved lenders include a no-negative-equity guarantee. This customer safeguard ensures that the balance of the mortgage cannot exceed that of your property.

If you are looking to clear an interest-only mortgage, a Roll-Up Lifetime Mortgage may be suitable. With this type of plan, you take out a tax-free cash lump sum from your home with interest accruing in the background. The initial release plus interest is repaid, usually via the sale of the property, when you and your partner pass away or move into long-term care.

You should be aware, however, that a Lifetime Mortgage may only be used for this purpose if the release amount can cover the outstanding capital on your interest-only bill – although you can combine your release with other savings to clear the shortfall.

A stress-free retirement

The benefits of using your property wealth to repay your interest-only mortgage are twofold. Firstly, you retain ownership of your home meaning there is no threat of repossession. Secondly, you won’t have to make monthly payments, potentially increasing your budget in retirement. Likewise, products include many favourable features which allow you to structure your release to suit you.

For example, 4 in 5 plans give you the option to make voluntary, penalty-free repayments, potentially minimising the build-up of interest. Furthermore, nearly half of all products also have built-in inheritance guarantees, whereby you ringfence a portion of your home’s value to be passed on as a guaranteed minimum inheritance.[2]

When releasing equity, it is important to be mindful of balancing your current wants with future needs. This is because increasing your property wealth now may reduce the value of your estate in the future and could affect your entitlement to means-tested state benefits. To better understand all the features and risks of a Lifetime Mortgage, an adviser can provide you with a personalised illustration, highlighting the best plans to match your needs.

Evaluating your options

An interest-only mortgage reaching the end of its term can become a major headache, however, if you are an over-55 homeowner, switching to a Lifetime plan can give you the peace of mind you desire. Lifetime Mortgages can be a suitable alternative, even if you have a repayment plan in place because they could allow you to become free of required monthly repayments and boost your disposable income. After clearing your existing mortgage, you could use the remaining funds any way you wish.

Why not find out today if releasing equity could cure your interest-only headache and unlock the retirement you always wanted?

Use our free online calculator to find out how much you could release today: 

Could equity release help you? Call us now and speak to an expert Information Team Member who will give you all the information you need.

01752 422 930

[1] Source: – ‘The Interest Only Issue’ (October, 2018)

[2] Source: Equity Release Council – Autumn 2018 Market Report (September, 2018)

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    Responsible Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register ( under reference 610205.

    This is a Lifetime mortgage which may reduce the value of your estate and may affect your entitlement to state benefits. To understand the features and risks ask for a personalised illustration.

    Any information contained herein is a personal opinion of the author and should not be considered to be advice of any kind. Inheritance Tax planning is not regulated by the FCA. Think carefully before securing other debts against your home. By consolidating your debts into a mortgage you may be required to pay more over the entire term than you would with your existing debt.

    Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,490. Our adviser will talk through the setting up costs of a lifetime mortgage before you make any decision to proceed.