The Retirement Lifestyle Booster is designed for borrowers between the ages of 60 and 79 and will pay out a fixed sum every month for up to 10 years.
In return, borrowers will make a payment each month to cover the average interest due and after 10 years, assuming all payments have been made, the amount owed is exactly what has been borrowed.
The loan is designed so that any outstanding balance can be repaid by selling the house and moving somewhere less expensive and mortgage free.
The minimum amount that can be borrowed is £45,000 up to a maximum of 25% of the property’s value.
For example, a loan of £60,000 will give the borrower an extra £500 per month for 120 months. At the current interest rate of 3.44% (linked to the variable Family Building Society Managed Mortgage Rate) this requires a monthly payment by the borrower of £83.
The two key differences between The Retirement Lifestyle Booster and a standard interest-only mortgage are:
- The loan is paid out in monthly installments on the 10th day of each month and the same amount is paid every month.
- The homeowner pays the lender an amount each month that covers the average interest due over the 10-year period of the loan. Thereafter any outstanding amount is paid back, usually from the sale of the property as the borrower downsizes.
Keith Barber, director of business development at Family Building Society, said: “The Retirement Lifestyle Booster is a real alternative to the default equity release solution for older borrowers.
“Whilst the equity release market is growing, there is a need for a wider range of financial products for retired borrowers who do not wish to see their housing wealth eroded by the roll-up of interest which can be a feature of lifetime mortgages.”
