‘First-of-its-kind’ lifetime mortgage launched for over-50s

Legal and General Home Finance has launched a new lifetime mortgage for over-50s whose interest-only deals are due to expire.

The Payment Term Lifetime Mortgage (PTLM) is being hailed by the lender as the first of its kind – not least because lifetime mortgage products have always required borrowers to be 55 or over.

It 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 (RIO) 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.

Borrowers will need to pass affordability checks, but Legal & General said the product will offer more flexibility by assessing pre-retirement income therefore helping those with stable earnings to qualify, even if they expect income to reduce in their retirement.

Who can benefit from the new mortgage?

Homeowners can use the PTLM to replace an existing mortgage, such as a standard interest-only mortgage.

According to the FCA there are around one million outstanding interest-only mortgages. Borrowers are typically aged 56 with £140,000 left to pay.

One in five borrowers in this situation intend to sell their property, said Legal & General but many would prefer to seek an alternative solution.

More than half of outstanding interest-only mortgages having 25% to 55% of the property value to repay – and these are the very people the PTLM is most likely to support.

Indeed, homeowners will be able to borrow up to 55.3% LTV – substantially higher than LTVs in Legal & General’s existing later life mortgage range.

Craig Brown, CEO, Legal & General Home Finance, said it aimed to offer more choice for homeowners who were sitting on equity in their homes but couldn’t access it because of their age.

“There’s a sizeable group of homeowners who fall between traditional lifetime mortgages and Retirement Interest-Only (RIO) solutions,” he said.

“PTLM bridges 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.”

Customers who wish to take advantage of this deal should speak to an equity release adviser.