When an Interest Only Mortgage Ends: Why Equity Release Isn’t Always the Answer

Many homeowners approaching the end of an interest only mortgage assume they have only two choices:

• Repay the mortgage in full
• Take out a lifetime mortgage (equity release)

Sometimes a lifetime mortgage is the right solution.

However, not always.

Recently, we helped a business owner who believed equity release was his only realistic option after his interest only mortgage reached the end of its term.

What happened next highlights why assumptions can be costly.

The Situation

The client owned a property worth approximately £450,000.

His outstanding interest only mortgage balance was around £225,000.

He wanted to remain in his home and avoid taking money from his pensions, investments or business if possible.

Having already spoken with other lenders, he believed affordability would be an issue and that equity release was likely to be his only option.

On the surface, this seemed reasonable.

However, when we looked at the numbers more closely, a problem quickly emerged.

The Equity Release Shortfall

Lifetime mortgages can be an excellent solution for many borrowers later in life.

One of their main attractions is that they are generally not based on traditional affordability assessments.

Instead, borrowing is largely determined by factors such as age and property value.

In this case, the likely maximum borrowing available through a lifetime mortgage was approximately £160,000 to £170,000.

That left a shortfall of between £55,000 and £65,000.

The client would therefore need to find additional funds elsewhere.

This could have meant:

• Drawing money from pensions or investments
• Taking funds from the business
• Creating an unexpected tax liability
• Selling assets
• Potentially considering a house move

None of these outcomes were particularly attractive.

Looking Beyond Salary and Dividends

The client was a business owner.

Like many business owners, the figures shown on his tax return didn’t tell the whole story.

His business had experienced difficult trading conditions during Covid and the economic uncertainty that followed.

However, the position had improved significantly.

Projected turnover was expected to reach around £250,000.

Operating profit was already approximately £76,000 and increasing.

The challenge wasn’t necessarily affordability.

The challenge was finding a lender prepared to understand how the business operated and assess the client’s circumstances properly.

Many lenders focus heavily on salary and dividends.

Others are willing to look more broadly at company profits and the overall financial picture. This can create very different outcomes for business owners.

Exploring Alternative Mortgage Options

Once we assessed the situation properly, it became clear that there could be alternatives to equity release.

These included:

Standard Interest Only Mortgage

Some lenders will consider interest only borrowing later in life where affordability can be demonstrated and the overall case meets their criteria.

Depending on age and circumstances, mortgage terms can sometimes extend well beyond traditional retirement ages.

Retirement Interest Only Mortgage (RIO)

A Retirement Interest Only mortgage can offer another option.

Unlike a standard mortgage, there is typically no fixed end date. The borrower continues making monthly interest payments and the capital is usually repaid when the property is eventually sold following death or entry into long-term care.

For some borrowers, this can provide significantly higher borrowing than a lifetime mortgage while allowing them to remain in their home.

Lifetime Mortgage

Lifetime mortgages remain an important solution and are often the right answer.

However, they should not automatically be assumed to be the only answer simply because a borrower has reached retirement age or an interest only mortgage has matured.

The Outcome

By exploring the wider market and understanding the client’s true financial position, the client was able to secure the borrowing required.

He remained in his home.

His pensions and investments remained untouched.

He did not need to extract additional funds from the business.

Most importantly, he achieved an outcome that he initially believed wasn’t possible.

The Real Lesson

This case wasn’t really about mortgages, it was about assumptions.

The client assumed a lifetime mortgage was his only realistic option.

In reality, there were several potential solutions worth exploring.

Every lender assesses affordability differently, every borrower has different objectives and every situation deserves to be considered on its own merits.

For business owners in particular, the way a lender interprets income can have a significant impact on the options available.

If your interest only mortgage is approaching the end of its term, it is worth understanding all available options before making any decisions.

Sometimes the challenge isn’t finding a mortgage.

It’s finding a lender who understands your circumstances properl

Symmonds de Lacey is a trading name of Easy Street Financial Services Limited which is authorised and regulated by the Financial Conduct Authority. Easy Street Financial Services Limited is a company registered in England and Wales with company number 6430453. The registered office address is Basepoint, 377-399 London Road, Camberley, Surrey, GU15 3HL.

Your home may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on 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.

There may be a fee for mortgage advice. The precise amount will depend upon your circumstances.

Information correct at the time of writing June 2026