In this article we discuss what compound interest is and explain how it works. We also show you how interest accumulates with our equity release compound interest calculator.
Now you understand more about how the compound interest works on a lifetime mortgage, you can see how much cash you can release with our calculator.
It's easy to use and shows you in seconds how much cash you could release from your home. The actual amount however will depend on your personal circumstances including the age of the youngest borrower and the value of your property.
When you use the calculator there is no obligation to proceed and there are no credit checks so your credit score will not be affected. Alternatively you can will find further calculators on most broker and provider websites.
In January 2026, equity release interest rates are typically between 6.40% and 7.85%
Yes, an equity release compound interest calculator can be a useful tool to compare different lifetime mortgages. By inputting the initial loan amount, interest rate, and the term of the loan, you can compare the total amount that will need to be repaid for each plan. See our equity release interest rates article for the latest rates.
Yes, some plans allow you to make monthly repayments against some or all of the interest and it’s now an ERC requirement that all plans must allow customers to make penalty-free partial repayments against their loan. These are typically limited to a maximum amount each year, usually around 10%, but each plan will be different.
For example, in our table above, repaying £5,000 on a £50,000 loan with a 6% interest rate could save you £11,551 in rolled-up interest (£16,551 including the £5,000 repayment amount) over 20 years.
If funds allow, repaying some of the loan could be worth considering if you want to keep the overall cost of your loan down.
Alternatively, you could opt for a drawdown lifetime mortgage that allows you to draw down an initial cash sum and keep additional funds in reserve until needed. This reduces compound interest because you only accrue interest on the money you access.
Compound interest increases the overall cost of equity release because interest is charged on both the original loan and previously added interest. Over many years, this can significantly increase the final repayment amount. Using an equity release compound interest calculator helps you see how quickly costs grow over different time periods.
The speed at which compound interest builds depends on the interest rate, the length of the loan, and whether any repayments are made. Higher interest rates or longer terms result in faster growth of interest. Choosing a plan with optional repayments or a lower interest rate can help reduce the impact of compounding.
Next steps
Equity release can be a useful financial product for those looking to release the equity from their homes in retirement. However, it is important to understand the impact of compound interest on the loan and the total amount that will need to be repaid.
By using an equity release compound interest calculator, you can get a better understanding of the total amount that will need to be repaid and make an informed decision about whether a lifetime mortgage is right for you.
You can then check to see how much cash you could release from your home, by using our equity release calculator or speak to an equity release specialist if you want to receive free advice before deciding to proceed.