Equity Release, Repay Interest or Make No Repayments Until You Die

With an equity release loan, one of the main benefits for most customers is that you don’t need to make any immediate repayments. Instead, interest accrues during the rest of your life and, when you move into a permanent care home or you die, the loan is repaid from your estate, usually with the sale of your house.

Do You Repay Equity Release Loans Before You Die?

Equity release loans don't require any payments until you die, but some let you pay the interest as it accrues if you prefer. This prevents interest compounding, which would leave high costs to your estate.

On some equity release loan schemes, they let you repay interest if you’d prefer. This helps to minimise the impact on your estate when the loan must be repaid in full.

However, some schemes let you repay the interest, if you want to.

Read on to find out more.

Looking for other information on Equity Release? This guide has info on 'Equity release early repayment charges explained' We have also written extensively about:

• - Equity release eligibility explained
• - Top 10 equity release facts
• - Equity release mortgage qualification

We update all our guides regularly. If you are researching Equity Release and we haven't got an exact guide that helps you, keep coming back as we update daily.

Equity Release: Making Interest Payments

For many people, the disadvantage of an equity release loan is that it can end up being fairly costly, particularly if you take the loan sooner in life and end up living for a long time. That’s because interest compounds over the years, and it’s not uncommon to owe back multiples of the original loan you borrowed.

Bearing that in mind, if you have disposable cash available during your retirement, you might prefer to pay off some or all of the interest as you go. This stops interest from compounding on top of other interest and will minimise the amount you owe when you do die or go into care.

If you can afford to repay all of the interest, then your estate will only be responsible for the value of the loan you took, which will leave a lot more money to go to your loved ones.

Equity Release: How to Afford Interest Repayments

For many people, the interest repayments on an equity release loan might not be affordable in a standard pension budget. So, if you’ve taken equity release with the intention of using it for a holiday, or to renovate your home, or just to supplement your income, you might not be able to make the extra payments needed to clear the interest.

However, if you were intending to use the equity release lump sum towards a second property, with the intention of renting it out as an additional source of income, you could make more cash that could be put towards the interest payments. You won’t get the benefit of the extra income in the short-term, but it could then help you unlock a wider portfolio which can be left to your family.

Ultimately, your financial adviser will be able to talk you through the various options available. They can explain whether it makes sense to choose an equity release loan, and if so whether you’re in a position to make interest repayments or whether your focus should just be on enjoying the money available.

We’ve got further reading available on equity release loans, including detailed guides on everything from advantages and disadvantages to eligibility, to interest rates and more.

How Can Money Savings Advice Help You With Releasing Equity?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Equity Release brokers. They have already helped thousands of people get the best Equity Release deal and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.