A new service that allows homeowners to extend their lease through a lifetime mortgage has launched today.

Lifetime Mortgage Gateway (LMG) is aimed at older homeowners who have a lease that has 75 years or less remaining.

The process created by LMG involves the firm paying for a lease extension through a short term loan, which is then paid off using a lifetime mortgage. It also deals with all of the administration involved in the extension.

This, LMG says, will counter the rapid value destruction a mid-term lease introduces.

By way of example, LMG shows a property with a total value of £800,000 with 50 years remaining on the lease, of which the freeholder owns close to £200,000.

Within 15 years, assuming 1% house price growth per annum, the overall asset value falls with the leaseholder surrounding £136,998 in value to the freeholder.

With a lease extension purchased through LMG pushing the remaining term to 140 years, at 125 years remaining (after 15 years have passed), and under the same economic conditions, the overall asset value increases to close to £1.2m. In this example, the leaseholder saves £62,079 in surrendered value.

The extension process is carried out through partnerships. These include Key, Vantage, Egerton and Ince.

This is the first such service launched in England and Wales.

LMG Logistics director Guy de Jersey says: “The government estimates there are 4.8m leasehold properties in the UK and about 500,000 of those are held on sub 75-year leases, against which leaseholders cannot access equity release. This is a major issue, and practical assistance and options for these unserved people is long overdue.

“Too many leaseholders end up caught in this ‘mid-term lease trap’ and are left with little option but to sell their home or sit on an asset losing value.

“We are delighted to be working with a coalition of distinguished partners at the forefront of the market in terms of credibility, integrity and scale to ensure we deliver this new and innovative service to the many thousands of people needing it.”

And Key Group business development director Jason Ruse adds: “Extending a lease can be a significant financial burden at any age but it is particularly worrying if you are retired and forced to watch the value of your home – and your family’s inheritance – gradually decrease.

“The innovative LMG approach uses a combination of different financial options to help older borrowers solve this problem and enjoy a more secure retirement.”