The payment term lifetime mortgage (PTLM) is available up to 55.3 per cent loan to value (LTV), which is higher than other later life products the lender offers. It is expected to serve borrowers whose needs fall in the gap between a traditional mortgage and a retirement interest-only (RIO) deal.
The younger borrower age of 50 could help homeowners access their property wealth earlier, the lender said.
The PTLM offers a tax-free cash lump sum in return for fixed monthly interest payments up until retirement or the age of 75, whichever comes first.
Borrowers can then make voluntary repayments during retirement if they choose to, but are not required to make payments for life like they would with a retirement interest-only (RIO) mortgage.
Unpaid interest is added to the total amount owed and repaid from the sale of the home on death or entry into long-term care.
Borrowers’ affordability will be assessed on their pre-retirement income. L&G said this would allow those with “stable earnings” to qualify even if their income drops in retirement.
The product can be used to replace an existing mortgage, like a standard interest-only deal, to assist those with expiring interest-only mortgages who may have a shortfall in their repayment plan.
L&G said, according to Financial Conduct Authority data, most of the outstanding interest-only mortgages are held by borrowers aged 56 with £140,000 left to pay. Around half of the one million outstanding interest-only mortgages are between 25 per cent and 55 per cent LTV.
Bridging the gap
Craig Brown (pictured), CEO of Legal and 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 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.”
He added: “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.”
Mark Lambert, director of Viva Retirement Solutions, said: “There’s definitely a need for this kind of innovation, particularly in the current economic climate. The PTLM is good to have alongside other products, especially for those who, at 50, would be too young for existing options. Having a bigger array of options available gives real peace of mind to clients.”
