The advised lifetime mortgages will be offered to borrowers aged 55, and could provide an option to borrowers finding it hard to make repayments post-retirement.
It is also an option for those who are unable to switch to a capital repayment loan, so-called mortgage prisoners.
But the products will also be available to customers who are looking for extra cash in retirement.
It is estimated that people over the age of 55 in England hold £1.5trn of equity in their homes.
Equity release booms
Growing levels of property wealth have helped the equity release market balloon in recent years, with growth of 44% year on year, according to industry data.
LGHF launched a similar partnership with Santander in July last year.
The Co-operative Bank’s interest-only customers will not be charged an advice fee, and those that do decide to take out a lifetime mortgage won’t pay any valuation or arrangement fees.
Co-op customers will be offered advice by The Retirement Lending Advisers (TRLA), who are part of Key Retirement Solutions but can only give advice on L&G products.
Steve Ellis, managing director, LGHF said: “There are still a significant number of borrowers who have not set aside the necessary funds to repay the outstanding capital once their interest-only mortgage matures, and a lifetime mortgage could be one solution for these individuals.
“With two of these partnerships now under our belt, Legal & General Home Finance will continue to explore the possibility of more agreements of this type, to help these borrowers to manage their interest-only mortgage and get the most out of later life.”
Legal & General entered the lifetime mortgage market in 2015, and generated sales of £715.1m in the first three quarters of 2017.
Alternative options for customers
Matthew Carter, director of products and communications at The Co-operative Bank UK said: “Since joining the lifetime mortgage market, Legal & General Home Finance has shown a strong commitment to developing flexible solutions that enable cost effective ways of borrowing in retirement, which has seen them become the market leader.
“This new agreement is the next step in The Co-operative Bank’s developments in providing an alternative and sustainable option for our interest–only, end-of-term customers who are approaching or who are in retirement.
“We look forward to working with Legal & General Home Finance to help more of our customers create a better, more secure, retirement, through increasingly effective ways of managing their finances in later life.”