One of the most important USPs we can offer in the specialist packager/distributor arena, is to continually work with lenders, to innovate and fill gaps in the mortgage marketplace and provide solutions to customer needs and broker requests.
Towards the end of 2011, one high street lender withdrew their retirement mortgage product leaving a large gap in the more senior customer sector. This had the dual effect of causing potential difficulties for those nearing the end of defined mortgage terms or for those looking to raise a mortgage but who did not want to take equity release or lifetime options.
Around this time we were meeting a lender and discussed with them the large hole that now existed in this area of mortgage opportunity. It was becoming patently obvious that many lenders were not willing to extend terms for those reaching retirement age and this was bound to have a serious impact for those customers.
Similarly, many lenders did not wish to concern themselves with the fact that there really is no true retirement age anymore and borrowers are working much longer.
Equity release may be the obvious option yet the percentage loan-to-value a borrower can obtain is quite low at 65 and the effect of the increased mortgage debt daunting over a long term roll up of interest so it was apparent that many potential customers would be looking for an alternative solution.
Equity release may well be the right answer, but perhaps in years to come rather than now.
Working together with the lender we agreed some initial parameters which seemed to make sense and which would be suitable to both parties and which was felt met the tenants of treating customers fairly as well:
– A maximum LTV of 50%
– Min age 65
– Maximum income multiples of four times across all income sources, including the potential of siblings support
– All participants to take independent legal advice
– A minimum of £150,000 equity remaining in the property
– Clearly defined affordability across the whole piece
Against this landscape the lender was happy to consider a ten-year renewable interest-only product although encouragement to take a repayment mortgage was initiated as a viable option.
And so the AToM Retirement Mortgage was born. Within minutes of the first flier being emailed out to our database, the phone started to ring and it has not stopped since. It’s such a straight forward product and one which fulfils increasing demand.
There are many thousands of borrowers still approaching the end of their mortgage term and, who may, for whatever reason, need to extend their mortgage by a few more years. This product caters for many of those customers and, unlike equity release, it has a defined monthly payment and term which means that the debt does not increase.
The requirement for 50% equity with a minimum of £150000 makes this a low risk product and one which is designed to meet what undoubtedly will be a substantial and increasing demand.
