

This article explores the following topics, drawing on our expertise in the field:
Key Takeaways
- Voluntary repayment plans allow homeowners to make repayments of the loan balance and/or interest.
- These repayments can significantly stall the debt over time, offering a flexible way to manage the loan’s impact on the estate’s value.
- There are typically no early repayment charges for making these voluntary payments, up to certain limits per year.
- This option provides a balance between accessing home equity and maintaining control over the loan’s growth.
- It’s suitable for those who wish to mitigate the compound interest effect but still want to benefit from the flexibility of a lifetime mortgage.
Is a voluntary repayment lifetime mortgage something you’ve considered while planning for your retirement?
According to the CEO of Pure Retirement, ‘many people continue to see lifetime mortgages as an effective route to reaching their financial goals’, irrespective of how much their home is worth.1
If this is something you’ve been wondering about, you may also be aware of the potential long-term expense of a lifetime mortgage owing to the effect of compound interest.
One way to manage and potentially reduce this debt is by taking out a voluntary repayment lifetime mortgage.
What Are Voluntary Repayment Lifetime Mortgages?
Voluntary Repayment Lifetime Mortgages are a type of equity release mortgage that allows you to make voluntary payments towards the interest or the loan itself.
Unlike traditional lifetime mortgages where the interest compounds over time, these plans help to reduce your overall debt by preventing interest from compounding (or ‘rolling up’).
This flexibility can be particularly beneficial if you’re concerned about the impact of interest on the amount of equity left in your home.
How Do Voluntary Repayment Lifetime Mortgages Work?
With a voluntary repayment lifetime mortgage, you can choose to pay some or all of the interest as it accrues, or you can make payments towards the principal amount of the loan.2

This reduces your overall debt.
Typically, you’re not required to make any payments, and there are no penalties for stopping your interest payments.
The choice is entirely yours, giving you control over your finances.
For instance, if you decide to pay off the interest each month, you’ll maintain the original loan balance, ensuring that your debt doesn’t increase over time.
On the other hand, if you make payments towards the loan principal, you can gradually reduce the outstanding debt.
Are All Voluntary Payment Plans the Same?
Voluntary Payment plans vary somewhat between providers, so let’s look at a few examples.
Legal & General
For instance, with Legal & General’s Optional Payment Lifetime Mortgage, you can make monthly interest payments of between £25 and the full interest amount.
You’ll also be able to stop making these monthly interest payments if you want, but you won’t be able to restart them again.3
Aviva
Aviva will allow you to make monthly repayments starting at £50, and you’ll be able to repay up to 10% of your total debt each year.4
LiveMore
Depending on your exact plan, you’ll be able to repay up to 10% or 15% annually on your LiveMore Lifetime Mortgage.
Your minimum monthly payment will be £200.5
Benefits of Voluntary Repayment Lifetime Mortgages
The Benefits of Voluntary Repayment Lifetime Mortgages include the overall limiting of your debt.
Pros include:
- Debt Management: By making voluntary repayments, you can keep your debt under control, preventing it from growing through compound interest. The lower the outstanding debt, the less interest is charged, helping to preserve your home’s equity.
- Flexibility: Unlike traditional loans, there’s no obligation to make repayments, giving you the freedom to pay as much or as little as you want, depending on your financial situation.
- Inheritance Protection: If leaving an inheritance is important to you, voluntary repayments can help you achieve that goal by maintaining some of your property equity.
It’s important to weigh these advantages against the potential downsides of this kind of lifetime mortgage.
Considerations Before Choosing a Voluntary Repayment Lifetime Mortgage
While voluntary repayment lifetime mortgages offer many benefits, there are a few things to consider before deciding if it’s the right option for you.
These include:
- Long-Term Financial Planning: Consider your long-term financial goals. Voluntary repayment lifetime mortgages can be an excellent tool for managing debt, but they should align with your overall financial plan, including any other retirement savings or income sources.
- Affordability: Although the payments are voluntary, you should consider whether you can afford to make them. Assess your current financial situation and think about how regular payments might affect your budget.
- Reduced Inheritance: Even with partial repayments taken into account, the loan will reduce the value of your estate.
- Impact on Benefits: Depending on your situation, any kind of lifetime mortgage could affect your eligibility for certain means-tested benefits.
It’s important to consult a financial advisor to understand how voluntary repayments might impact your overall financial standing.
Common Questions
What is the difference between a voluntary repayment lifetime mortgage and a standard lifetime mortgage?
How much can I choose to repay on a voluntary repayment lifetime mortgage?
Will making voluntary repayments affect my eligibility for means-tested benefits?
Can I stop making voluntary repayments if my financial situation changes?
Are voluntary repayment lifetime mortgages suitable for everyone?
Conclusion
Voluntary repayment lifetime mortgages offer a flexible and effective way to manage your equity release debt.
By making voluntary payments, you can reduce the impact of compound interest, control your debt, and potentially leave more equity in your home for your loved ones.
While this option isn’t suitable for everyone, it provides a level of financial control and peace of mind that traditional lifetime mortgages may not.
Before making any decisions, it’s advisable to consult with a financial advisor to ensure that a voluntary repayment lifetime mortgage aligns with your financial goals and needs.
WAIT! Before You Go…
How Much Equity Can You Release?