A number of homeowners with a lifetime mortgage are making monthly payments to reduce the interest on the loan.
According to data from provider OneFamily, 32 per cent of its lifetime mortgage customers either pay up to 100 per cent of the monthly interest, or over the course of a year, up to 10 per cent of the initial loan amount.
This means that the property capital will increase over time in a similar way to a traditional mortgage.
OneFamily’s data also found when it comes to equity release, homeowners’ main concern was not leaving an inheritance to younger relatives.
The lender stated by paying interest those aged over 55 could protect that desired inheritance.
Nici Audhlam-Gardiner, managing director of Lifetime Mortgages, said: "Homeowners are increasingly realising that compound interest is a choice when it comes to lifetime mortgages.
"The rise in the flexibility of the types of mortgages available has created a change in the way that homeowners are using the loans and giving them more options for what to use the money for and when."
She added: "Lifetime mortgages are also commonly used to give younger family members a helping hand onto the property ladder.
"As people live longer, inheritance is now passing down much later in life, which may mean when people reach financial milestones such as buying a first home, they are many years from receiving any kind of inheritance.
"Lifetime mortgages can help address this gap and share existing wealth across the generations."
The OneFamily data, taken from its Lifetime Mortgage data 2019, showed the payments were usually made by the homeowner, but in some cases an agreement was made where interest was paid by younger family members that have benefited from a lump sum from their older relations to buy a property.
Greg Cunnington, director of lender relationships and new homes at Alexander Hall, said: "This report is not a surprise. As there has been a large increase in later life mortgages products available, both on a standard mortgage or RIO mortgage basis, it has become apparent there is a real client demand to pay the interest and retain the capital in the property.
"The payments tend to be quite minimal and clients like that this protect this equity. As with everything in the later life lending space the best option will depend on the clients circumstances, hence it is so important that clients receive holistic advice of all of their available options as compound interest will continue to the best route for a lot of clients still with an equity release type product."
