Legal & General Home Finance has launched a Payment Term Lifetime Mortgage, an equity release deal that offers “substantially higher” loan-to-value ratios than its other products.
The payment term product allows borrowers access property wealth from 50 — rather than 55 – and offers a tax-free cash lump sum in return for fixed monthly interest repayments up until retirement or age 75, whichever comes first.
Borrowers can then choose to make voluntary repayments in retirement if they wish, but unlike a retirement interest-only mortgage, they’re not required to make payments for life.
Any unpaid interest is added to the total amount owed and is typically repaid from the sale of the home when the customer passes away, or moves into long-term care.
More than half of outstanding interest-only mortgages are between 25% and 55% LTV, according to Financial Conduct Authority data in August.
The regulator points out that around one million outstanding interest-only mortgages; borrowers are typically aged 56 with £140,000 left to pay.
The lender says that its new product is able to allow homeowners “to borrow up to 55.3% LTV — substantially higher than LTVs” in its current equity release range.
It says that homeowners can use its payment term offer to replace an existing mortgage, such as a standard interest-only mortgage, helping customers on expiring interest-only deals who may have a shortfall in the repayment plan they have in place.
Borrowers will need to pass affordability checks, but the firm says its new product “offers more flexibility by assessing pre-retirement income, helping those with stable earnings to qualify, even if they expect income to reduce in their retirement”.
The lender has set up a dedicated Payment Term Lifetime Mortgage Concierge team to help advisers use the product and underwrite cases.
Legal & General Home Finance chief executive Craig Brown says: “This launch signals our commitment to lead the way and offer more choice for homeowners who are sitting on equity in their homes but can’t access this because of their age.
“There’s a sizeable group of homeowners who fall between traditional lifetime mortgages and retirement interest-only solutions.
“Payment Term Lifetime Mortgages bridge this gap, offering a great solution to individuals over 50 with substantial home equity who want access to this earlier via a mortgage that is paid for from their current income.
“This not only gives younger borrowers more options to live the life they want, but it’s also an answer for interest-only mortgage holders seeking a repayment plan to stay in their homes.”
