"There’s a sizeable group of homeowners who fall between traditional lifetime mortgages and retirement interest-only solutions."
- Craig Brown, CEO of Legal & General Home Finance
Legal & General Home Finance has unveiled its Payment Term Lifetime Mortgage (PTLM), a new kind 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 can then choose to make voluntary repayments in retirement if they wish, but unlike a retirement interest-only (RIO) mortgage, they’re not required to make payments for life. 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 will need to 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.
Homeowners can use PTLM to replace an existing mortgage, such as a standard interest-only mortgage, helping people on expiring interest-only deals who may have a shortfall in the repayment plan they have in place.
The FCA reports around one million outstanding interest-only mortgages; borrowers are typically aged 56 with £140,000 left to pay. While one in five interest-only borrowers intend to sell their property to repay the loan, while many want to seek alternatives. More than half of outstanding interest-only mortgages are between 25% and 55% LTV, these are the borrowers PTLM is most likely able to support, with homeowners able to borrow up to 55.3% LTV – substantially higher than LTVs in Legal & General’s existing later life mortgage range.
This new wave of home loans is also providing more choice to homeowners wanting to access property wealth earlier – often for home improvements or for separating couples where an individual wants to remain in the home.
There will be a dedicated team set up under the ‘PTLM Concierge’ to help advisers use the product and underwrite cases.
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 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.”