The traditional set up of a lifetime mortgage is on an compound interest basis however the flexibility of these schemes is changing all the time and many provide the ‘option’ of making payments of interest (in varying ways) to avoid the compound interest and typically up to 10% of what you originally borrowed meaning you could even reduce the capital without penalty. There are also schemes within the market that are set up very much like a mortgage product also but of course these have an income and affordability calculation which the compound schemes do not. In terms of rate majority of these are fixed so you would know exactly what the effect of the compound interest would be from the outset. There are however many other factors to consider and so advise from an independent equity release specialist should always be sought.