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Can Equity Release help pay off your Interest-Only mortgage?

During these challenging times many homeowners with interest-only mortgages may ask themselves what would happen if they can’t pay off their mortgage at the end of the term? Our Equity Release Adviser Laura Healy explains about repayment options and how releasing equity is a safe way to pay off an interest-only mortgage.

According to a UK Finance report approximately 500,000 interest only mortgages are expected to mature in the next 6 years*. These mortgages would have been taken out during the late 90’s and early 2000, a period that saw a boom in this type of borrowing. Some of these homeowners, likely to be over the age of 55 when their mortgage matures, are getting closer and closer to the end of their interest-only mortgage term without an adequate repayment strategy in place to pay it off. This can be a very stressful time for homeowners and given the increasing life expectancy, rocketing care costs and the need to help children and grandchildren get onto the property ladder, the savings pot may not be a solution.

For those wishing to keep their existing home, a lifetime mortgage, the most common type of Equity Release, may provide the financial security needed in retirement. The last couple of decades have seen a significant rise in house prises which means that many homeowners should have enough equity stored in their homes to help repay the mortgage. Equity release enables homeowners over the age of 55 to unlock the value built up in their homes, without having to sell and downsize, and may offer a repayment alternative for those with interest-only mortgages.

How can you release the equity in your home?

This can be achieved with a lifetime mortgage - a loan secured against the home which allows the borrower to maintain full ownership of the property. The loan, plus the rolled-up interest, will be repaid when the borrower passes away or goes into long-term care. The amount of equity that can be released will depend on factors such as age (minimum age of 55), health, property value and the amount of outstanding mortgage.

Many of our clients are unlocking their property wealth using lifetime mortgages. With no required monthly repayments and numerous recent developments in the equity release market to protect borrowers, lifetime mortgages offer homeowners a chance to benefit from the significant increase in their property value over the last few decades.

Why use equity release to pay off an interest-only mortgage?

For some of our clients, Equity Release was a financial lifeline because it allowed them to stay in their home by paying off their existing interest-only mortgage and other debts in time for retirement.

These are just some of the benefits of lifetime mortgages:

  • There are no affordability assessments to qualify for a lifetime mortgage, so it may be a good option for older homeowners who may struggle to remortgage solely on pension income
  • The interest rate is fixed for the lifetime of the mortgage and the capital is only repayable upon death or if the borrower moves into long term care.
  • Some providers allow you to repay a part of the capital or pay the interest each month in order to avoid accumulating debt by rolling-up the interest. 
  • They also provide borrowers the financial flexibility to delay having to use savings funds, to gift during their lifetime rather than only on death and to pay off other bothersome debts

How else can I repay my interest-only mortgage?

  • Remortgaging onto a new mortgage. A qualified mortgage broker can help navigate the wider mortgage market and look at all the later life borrowing options
  • Repaying the mortgage using other assets, by selling or remortgaging to raise the capital required to pay off the interest-only mortgage.
  • Downsizing to a lower property value. If selling does not provide enough funds for a new smaller property, once the interest only mortgage is paid off, some may consider taking equity release to help purchase the new property. 

These are all options we will research thoroughly to ensure the most appropriate outcomes for our clients.

In recent years, the Equity Release market has benefited from extensive product innovation offering a lot more choice and flexibility to borrowers. It is however not a decision to be taken lightly; you should weigh up all the advantages and disadvantages and our job at Fairview Financial is to help you understand your options and make the right decision. If equity release isn’t right for you, we will tell you and assist with more suitable borrowing options.

To find out more about Equity Release and discuss your options contact Laura Healy on 01242 697821 or Visit our Equity Release page for more information.


*Source: Interest-only Mortgages Update report published by UK Finance, 2020

Your home or property may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it. This is a lifetime mortgage. To understand the features and risks, please ask for a personalised illustration. Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.



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Fairview Financial Ltd is an appointed representative of The Right Mortgage Limited, which is authorised and regulated by the Financial Conduct Authority. Fairview Financial Ltd is registered in England and Wales no: 10912424. Registered office: 107 Promenade, Cheltenham, GL50 1NW.

The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK.

@ 2020 by Fairview Financial

Our Fees        

A fee may be charged for mortgage advice. The exact amount will depend on your circumstances.

Our standard fee  is £295 and this is paid when the mortgage is offered.  We do not charge a fee to First-Time Buyers. We may however charge a fee for Shared Ownership mortgages and Help-to-Buy mortgages, due to the complexity of the work involved.

We also receive a commission from the lender that will vary depending on the lender, product or other permissible factors. The nature of any commission model will be confirmed to you before you proceed. If we receive a commission, this will not affect the cost payable by you.

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