The default is that interest is added to the balance rather than paid, which is why it compounds. Several products let you pay some or all of it instead, described with words that look similar and are not. This separates roll-up, voluntary payment, optional payment and interest servicing, and sets out what one provider publishes about each.
On some plans you can pay the interest instead of letting it roll up. The words used for that are not interchangeable, and the difference between voluntary and contractual is the one that matters.
Equity release may involve a lifetime mortgage, secured against your property, or a home reversion plan. It will reduce the value of your estate and impact funding long-term care.
The default on a lifetime mortgage is that interest is added to the balance rather than paid, which is why it compounds. Several products let you pay some or all of it instead, and they are described with words that look similar and mean different things.
Roll-up means nothing is paid and everything compounds. Voluntary payment means you may pay and may stop. Optional payment usually names a specific product. Interest serviced usually means a regular payment with terms attached. The one distinction worth holding onto is whether a payment is something you may do or something you have agreed to do.
A missed voluntary payment is a change of mind. A missed contractual payment is a missed mortgage payment on a loan secured against your home, which is a different thing entirely.
What rolling up actually does →Pure Retirement publish an interest rate discount for customers making monthly payments of at least 25% of the monthly interest. Paying can change the rate, not just the balance.
What rates are doing →On that product a customer can take up to three monthly payment holidays in every twelve month period. Miss more than that and they publish that the rate increases, because the discount stops applying.
They publish that customers can choose to stop payments at any time. That is what makes it voluntary rather than contractual, and it is the question to ask about any product offering payments.
Customers receiving that interest rate discount "will not be able to make additional partial repayments". A feature that looks purely additive removes a different one, which is why the terms matter more than the summary.
How the charges work →Paying the interest as it accrues stops the balance growing. It does not repay any of the money you borrowed: the original amount is still owed at the end, and the plan is still repaid when the last borrower dies or moves into long-term care.
That is worth being clear about because the language invites the opposite reading. Somebody paying every month for fifteen years may reasonably feel they have been paying off a mortgage. On a roll-up product with voluntary payments, what they have been doing is holding the balance still.
These are the things to establish about any plan that mentions payments. The answers differ by product and the words on the front of the brochure will not give them to you.
Whether you can afford it. That is an affordability question about your circumstances, it is exactly what the advice process exists to work through, and a website that offered a view on it would be giving advice.
Whether a payment product is better. Holding a balance still costs money every month that could be doing something else. Whether that is a good trade depends on facts about you that we do not have.
Whether you can or should make payments. That is an affordability and suitability question about your circumstances, and it belongs to a regulated adviser rather than to a web page. Every published detail above is one provider on one date and is not how the market works.
Equity release may involve a lifetime mortgage, secured against your property, or a home reversion plan. It will reduce the value of your estate and impact funding long-term care.
All of this is about the product rather than about you, and an adviser can answer it in one sitting.
Questions that get past the brochure.
Is this payment voluntary or contractual?
It is the whole question. A voluntary payment can be stopped; a contractual one is an obligation on a loan secured on your home.
What exactly happens if I stop paying?
Ask for the consequence in a sentence. On one published product it is the loss of a rate discount. Other answers exist and are more serious.
Does making payments change my interest rate?
At least one provider gives a discount for paying at least a quarter of the monthly interest, so the two are linked rather than separate.
Does this feature stop me doing anything else?
One published product blocks additional partial repayments while the payment discount applies. Worth asking of any feature.
Will I still owe the original amount at the end?
On a roll-up plan with interest payments, yes. The answer being obvious to an adviser is not the same as it being obvious to you.
Short answers to the things that come up most. None of it is advice, and every figure on this page carries its source.
On some products, yes. It is not a feature of every plan and it is not always the same thing where it exists. The word the product uses matters: roll-up, voluntary payment, optional payment and interest serviced describe arrangements with different obligations attached.
It depends entirely on whether the payment is voluntary or contractual. On one product we checked, customers can choose to stop at any time, and the consequence is that a rate discount stops applying so the rate increases. On a contractual product a missed payment is a missed payment on a loan secured against your home, which is a different situation.
No, and this is the most common misunderstanding. Paying the interest stops the balance growing; it does not reduce the amount you originally borrowed. That amount is still owed and the plan is still repaid when the last borrower dies or moves into long-term care.
It can. Pure Retirement publish an interest rate discount for customers making monthly payments of at least 25% of the monthly interest, and publish that the rate increases if more than three payment holidays are taken in a twelve month period, because the discount stops applying.
It can, and this is worth asking about specifically. On the product we checked, customers receiving the interest rate discount cannot make additional partial repayments. A feature that looks purely additive removed a different option, which is a good reason to read the terms rather than the summary.
Equity release may involve a lifetime mortgage, secured against your property, or a home reversion plan. It will reduce the value of your estate and impact funding long-term care.
One qualified equity release adviser. They will go through your figures and tell you if there is a better answer. It costs nothing and commits you to nothing.
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