Legal & General Home Finance has launched a payment term lifetime mortgage (PTLM), a new type of lifetime mortgage which improves the options available for borrowers over 50.
PTLM helps borrowers access property wealth earlier – 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 then choose to make voluntary repayments in retirement if they wish, but unlike a retirement interest-only (RIO) product, they are not required to do so.
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 must pass affordability checks, but PTLM 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.
Legal & General’s PTLM product can replace an existing mortgage, such as a standard interest-only mortgage, to help those who may have a shortfall in their retirement plan.
The Financial Conduct Authority (FCA) reported around one million outstanding interest-only mortgages, with borrowers typically aged 56 and with £140,000 left to pay.
One in five interest-only borrowers intended to sell their property to repay the loan.
More than half of outstanding interest-only mortgages were between 25% and 55% loan-to-value (LTV), and it is this bracket that PTLM was primarily designed to support.
Homeowners are able to borrow up to 55.3% LTV – substantially higher than LTVs in Legal & General’s existing later life mortgage range.
The product was built following adviser feedback, and the firm set up a ‘PTLM Concierge’ to help advisers use it.
Craig Brown, CEO of Legal & General Home Finance, said: “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 (RIO) solutions.
“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.
“Customer needs are evolving, which means the products available need to align to meet changing circumstances.
“It’s our responsibility as a leader in the market to listen and respond to adviser feedback, and make sure that innovative, tailored products are on offer, and the market continues to flourish and adapt to a changing world.”
