Staying in Your Home: How a Lifetime Mortgage Can Help Repay an Interest-Only Mortgage
For many homeowners, especially those who took out interest-only mortgages in the late ’90s or early 2000s, the end of the mortgage term is fast approaching—and with it, a tough question:
“How am I going to repay the balance and stay in my home?”
If you’re nearing the end of your interest-only mortgage and don’t have a repayment plan in place, you’re not alone. Thousands of people across the UK are in the same position—facing large repayment demands with limited income and few options. But there is a solution that could help: a lifetime mortgage.
What’s the Issue with Interest-Only Mortgages?
Interest-only mortgages were once popular because they offered lower monthly payments. But now, many borrowers are reaching the end of their terms—typically after 25 years—without having built up a repayment vehicle.
Lenders are rightly asking for the outstanding balance back. And in many cases, that figure is substantial—often £50,000, £100,000, or more. With limited income in retirement and no savings to cover it, the risk of having to sell up or downsize becomes very real.
How Can a Lifetime Mortgage Help?
A lifetime mortgage allows you to unlock equity from your home to repay the outstanding balance on your interest-only mortgage—without having to sell your property or move out.
Here’s how it works:
- You release a tax-free lump sum from the value of your home
- You use this to repay your current mortgage in full
- There are no mandatory monthly repayments (unless you choose to make them)
- You continue living in your home for as long as you wish
The loan, plus interest, is usually repaid from the sale of your home when you pass away or move into long-term care.
Real Peace of Mind
For many clients, this solution brings enormous relief. Instead of being forced into a rushed sale or trying to downsize at a stressful time of life, they can remain in familiar surroundings, in the home they’ve often lived in for decades.
It also gives more control and dignity in later life, letting you make decisions on your terms—not because of pressure from a lender.
Let’s Look at an Example
Take Mr & Mrs L, both aged 69, living in a home valued at £325,000. Their interest-only mortgage is coming to an end with £85,000 left to repay, and their pension income won’t stretch to a standard repayment mortgage.
By using a lifetime mortgage, they release £90,000 tax-free from their home—enough to repay the lender, cover legal and advice fees, and give them peace of mind. They don’t have to move, they don’t have to make monthly repayments, and they can stay put for life.
It’s a practical and respectful solution to what would otherwise be an extremely stressful situation.
What Are the Pros and Cons?
Like any financial product, a lifetime mortgage isn’t for everyone. There are clear benefits, but also long-term implications to be aware of:
✅ You keep your home
✅ No need to downsize
✅ No monthly repayments (unless you choose to make them)
✅ No negative equity guarantee
✅ You can involve family in the decision
⚠️ Reduces the value of your estate
⚠️ May affect entitlement to means-tested benefits
⚠️ Interest accrues over time unless repayments are made
That’s why it’s essential to take advice from a qualified, independent specialist—someone who will take the time to explain the details and help you make an informed decision.
Why Work with Prospect Tree Mortgages?
At Prospect Tree Mortgages, we’ve supported many clients through this exact situation. We understand how emotional and difficult it can be to face the risk of losing your home late in life—and we also know how powerful a well-structured lifetime mortgage can be in turning things around.
We offer:
- Personalised, jargon-free advice tailored to your circumstances
- Transparent discussions involving your family, if you wish
- Support throughout the entire process, start to finish
Whether you’re approaching the end of your mortgage or already feeling the pressure from your lender, it’s important to explore your options before making any decisions.
Keep Your Home. Retain Your Freedom.
If you’re facing the end of your interest-only mortgage and aren’t sure what to do, don’t panic—talk to us.
A lifetime mortgage could be the key to staying in the home you love, without the strain of monthly repayments or the upheaval of moving.
A lifetime mortgage will reduce the value of your estate and may affect your entitlement to means-tested benefits and tax status. The impact of not servicing monthly interest payments on a lifetime mortgage is that the outstanding debt can grow rapidly, thus reducing the value of your estate. For example, if the interest rate was 7% a year, a £50,000 loan would double to £100,000 after 10 years assuming no repayments are made. This is an example for illustrative purposes only and personalised advice and recommendations should be sought from a qualified professional. You are strongly advised to register a lasting power of attorney. This will allow your affairs to be managed by somebody else if your mental abilities significantly decline. Think carefully before securing other debts against your home. Consolidating debt may reduce your outgoings now, but you may end up paying more overall.
Your home may be repossessed if you do not keep up repayments on your mortgage. The information contained within was correct at the time of publication but is subject to change. 30.06.2025.
What’s Next?
If you’re thinking about moving home, remortgaging, or buying your first property, now is a great time to review your mortgage options. At Prospect Tree Mortgages, we’re here to help you understand your choices and find the best mortgage for your situation.
Get in touch with our expert advisors today to discuss how this base rate cut could benefit you. We aim to ensure you make the most of the opportunities available.
Call us at 0800 8620 840 or visit our website at www.ptmortgagesltd.co.uk to learn more.
If you’d like to learn more about mortgage products and how we can help you, please don’t hesitate to get in touch with our team. We’re here to help you navigate the ever-evolving world of mortgages and guide you toward a brighter, greener home.