Regardless of the type of equity release product you choose, interest is paid monthly. The difference is that with pay monthly (serviced) mortgage, you pay the monthly interest rate every month, much like an interest-only mortgage. Since you are repaying the interest payments, the amount of debt for these items remains the same over the duration of the mortgage. If you had a joint mortgage and decided to make payments in the beginning and one person passes away then you can call the lender to let them know you will no longer be able to afford the payments because one person is no longer around, they will agree to just roll up the interest and you will not have to make payments any more, unfortunately you will be unable to start making payments again once you have exercised this benefit but you may be able to make overpayments if the lender permits.
The term “interest roll-up” refers to the fact that you don’t make any monthly payments and allow the interest to be applied to the mortgage balance each month. Every month, interest is added to the mortgage balance and the balance increases every month so your interest payments will increase because the balance increases also. This can appeal to many people who want to stretch their monthly budget as far as possible. The amount of debt will increase, but since we only work with lenders who are members of the Equity Release Council, you can rest assured that you will never be in a negative equity situation.