Equity release interest works by rolling up: on a lifetime mortgage it is added to the loan, then charged on again, so the debt grows over time.
If you are asking how equity release interest works, the short version is that nothing has to be paid monthly on a lifetime mortgage, so each period's interest joins the balance and the following period is charged on that bigger total. Below, a lender's own example shows that build-up year by year, followed by what a fixed rate does not change and how paying some back slows it. MoneyHelper, the government-backed guidance service, covers equity release in general terms at no cost. If you want to see how the numbers would run on your home, a qualified equity release adviser could walk you through them, and a short note via the form on this page brings one in touch.
Taking out equity release involves two kinds of professional help: a qualified equity release adviser, and a solicitor giving independent legal advice. The Equity Release Council's standards are blunt about the second: independent legal advice is needed by all customers who take out equity release. Those standards are commitments the Council's members make rather than law. How a plan runs from start to finish is in our guide to equity release in the UK.
How does the interest on equity release work?
Interest on a lifetime mortgage is charged like interest on any loan, but you are not asked to pay it as you go. In the Equity Release Council's words, the interest "is rolled up (compounded)"; the whole debt is settled from your estate once you die or go into long-term care.
So, do you pay interest on equity release? Yes, but on a roll-up plan you pay it later, as part of the final repayment, not month by month. A home reversion plan, the other kind of equity release, is a part-sale rather than a loan, so this page is about lifetime mortgages; home reversion compared with a lifetime mortgage covers the difference.
Two lenders' own pages put the mechanism plainly. Aviva says that "interest builds up for as long as you have the mortgage and is charged on the total amount borrowed and the interest already added." Legal & General says of its roll-up plan: "Interest is charged on the loan, plus any interest already added." That is compound interest: interest on interest.
Aviva's costs page adds that "There’s no set figure for the interest rate"; what sets the rate on a plan is covered in our guide to equity release interest rates.
Why compounding makes the debt grow faster over time
Interest is first worked out on what you borrowed and added to the loan. The next calculation is made on the larger balance, so the amount added is a little bigger, and so on. The rate can stay the same while the pounds added each period keep rising, because the balance they are charged on keeps rising. So a roll-up debt grows faster in later years than in early ones, and the longer the plan runs, the more that matters.
A lender's worked example
Legal & General publishes example tables on its lifetime mortgage interest rates page (accessed 18 October 2026) showing what might be owed "with example compound interest rates of 6%, 7% and 8% on an initial loan of £50,000", with nothing repaid. The total owed, as L&G prints it:
| Years | At 6% | At 7% | At 8% |
|---|---|---|---|
| 5 | £66,911 | £70,128 | £73,466 |
| 10 | £89,542 | £98,358 | £107,946 |
| 15 | £119,828 | £137,952 | £158,608 |
| 20 | £160,357 | £193,484 | £233,048 |
In the first year at 6% the table adds £3,000; by the twentieth year it adds £9,077, at the same rate. The same table puts the total interest added after 20 years at 6% at £110,357, on top of the £50,000 borrowed. These are L&G's example rates, not offers: "The rate you will get will be based on your individual circumstances."
For a real plan, the figures come in the key facts illustration that accompanies an adviser's recommendation; MoneyHelper says it sets out the scheme's overall cost and any fees, and the Equity Release Council suggests asking "for a personalised illustration from your advisor". Other scenarios are in equity release examples. To see a projection like L&G's built around your age, your property and the sum you are considering, ask a qualified equity release adviser: say so via the form on this page, and expect a phone call.
Does a fixed rate stop the debt growing?
No. The Equity Release Council's product standards, which apply to its members' products, require a rate that is fixed, or variable with a fixed cap, for the life of the loan. That fixes how fast the debt grows, not whether it grows. Legal & General's own lifetime mortgages carry a fixed interest rate for life, and its tables above still show the balance rising each year, because the same rate is charged on a larger sum. Whether a given plan's rate is fixed or capped is covered in our guide to equity release rates, and the Council's other protections in the Equity Release Council's standards.
How paying some of it back slows the build-up
Paying some back shrinks the balance the interest is charged on. Council members' products must allow some repayment without charge, within limits each provider sets, so the allowance differs from plan to plan. Two lenders' versions, as examples rather than the market:
- Aviva. According to Aviva's equity release costs page, last updated 15 September 2026, its lifetime mortgage's voluntary partial repayment feature lets borrowers repay up to 10% of the total amount borrowed from Aviva each year with no early repayment charge, at a minimum of £50 an instalment. The allowance is based on the loans and "doesn’t include any interest that’s built up".
- Legal & General. Its Optional Payment Lifetime Mortgage lets borrowers pay some or all of the monthly interest; how that works, and what happens if payments stop, is in interest-only lifetime mortgages.
A repayment stops the debt growing only if it at least matches the interest being added. Aviva spells out the limit: "Even if you make repayments, if they are less than the interest added, or if your property value falls, the amount you owe can still grow." Paying back beyond what a plan permits may trigger an early repayment charge, as repaying equity release early explains. Not every plan has these options, so the plan's own terms are the place to check.
What else a growing balance changes
A growing debt has knock-on effects. Briefly, with the detail in our guide to equity release in the UK:
- Whatever the loan and its interest have reached is repaid before anything passes to your heirs; see how equity release affects inheritance.
- Money released can change entitlement to means-tested help, which equity release and benefits explains.
- Ending a plan early can bring an early repayment charge, so a growing balance is not easily escaped.
Weighing those against what the money would do is the subject of whether equity release is a good idea; the amount available is in how much equity release you can get. The page applies across the UK; in Scotland the lender's security over a home is a standard security, under section 9 of the Conveyancing and Feudal Reform (Scotland) Act 1970, rather than a mortgage charge. Unsolicited approaches about releasing cash from a home deserve suspicion: the FCA's scams guidance says to treat unexpected calls, emails and texts with caution and to check a firm on its Firm Checker.
Questions people ask about equity release interest
How often is the interest added to the loan?
Lenders set this. Legal & General, for example, says interest on its lifetime mortgages "is calculated daily and added to the amount you owe each month". For any other plan, its key facts illustration and terms say how interest is charged.
Is equity release interest-free?
No. Interest is charged on a lifetime mortgage; on a roll-up plan it is simply not paid until the plan ends. A home reversion plan charges no interest because it is a part-sale; see home reversion compared with a lifetime mortgage.
Can you have equity release without compound interest?
On a lifetime mortgage, interest you pay as it falls due is not added to the loan, so it cannot compound; some plans allow that, as interest-only lifetime mortgages explains. Any interest left unpaid rolls up as usual.
Can a compound interest calculator or spreadsheet show what I would owe?
It can show the shape of the growth, as L&G's tables do, but only for the rate and timing you type in, and Aviva says there is no set figure for the rate. The figures for a real plan are in its personalised illustration. Calculators that estimate how much you could release are discussed in how much equity release you can get.
Will I ever owe more than my home is worth?
Not on a product meeting the Equity Release Council's standards, so long as the home fetches the best price reasonably obtainable on sale and the borrower has kept to the loan's terms: this no-negative-equity guarantee caps what is owed at the home's value, after reasonable sales costs. It is a standard for Council members' products, so the plan's own terms are what count, and it does nothing to slow the growth before then; see the Council's standards.
Next step
How fast the balance on a plan would grow turns on its rate, its repayment options and how long it might run, and those turn on you. A qualified equity release adviser (FCA-regulated) can set those out against your circumstances; jot your name and number into the form on this page and they will ring you. MoneyHelper's free guidance stays open to you either way.
Sources: Equity Release Council, What is equity release?; Equity Release Council, Professional Standards & Guarantees; MoneyHelper, What is equity release? (archived 19 September 2026); Aviva, Equity release; Aviva, How much does equity release cost?; Legal & General, Optional Payment Lifetime Mortgage; Legal & General, Interest Roll Up Lifetime Mortgage; Legal & General, Lifetime mortgage interest rates; FCA, Protect yourself from scams; legislation.gov.uk, Conveyancing and Feudal Reform (Scotland) Act 1970, section 9. All accessed 18 October 2026.