Key Introduces Payment Term Lifetime Mortgage

Key Later Life Finance has unveiled a new financial product designed to offer older homeowners a more flexible and advantageous way to access the equity tied up in their homes. Dubbed the “payment term lifetime mortgage,” this innovative offering stands out by allowing for higher loan-to-value (LTV) ratios and providing enhanced flexibility compared to traditional equity release schemes.

What Makes It Different?

The payment term lifetime mortgage is a novel twist on equity release, crafted specifically for older homeowners who wish to unlock more tax-free cash from their properties than what standard lifetime mortgages typically allow. It achieves this by offering lower interest rates, thereby enabling homeowners to retain more of their hard-earned money.

Easing the Burden for Older Borrowers

Key’s new product is tailor-made for homeowners who find themselves caught in the crossfire of escalating monthly mortgage repayments, especially as their fixed-rate deals come to an end. It’s also a beacon of hope for those at the “younger” end of the later-life borrowing spectrum, who might be transitioning from full-time employment to retirement and finding it challenging to meet their financial needs.

Solving a Common Dilemma

Many homeowners exploring equity release options have previously found it difficult to secure the necessary funds to clear their existing residential mortgages. The payment term lifetime mortgage addresses this issue head-on, offering an additional cash boost to help homeowners pay off their current loans.

How It Works

Borrowers opting for this new mortgage type must commit to a period of mandatory payments, which continue until the oldest applicant reaches the age of 66. However, these payments are limited to partial monthly interest payments, making them more manageable than those associated with a standard residential mortgage or a retirement interest-only mortgage.

The Benefits Unveiled

This product can increase the LTV ratio by up to 8%, translating to an extra £23,000 or more for an average property. This feature is particularly beneficial for ‘younger’ later-life homeowners who might be navigating the tricky waters between ending their full-time work life and entering full retirement.

Insightful Research Backs the Need

Key’s research highlights a significant trend: half of the homeowners aged between 55 to 64 with outstanding mortgages have over six years left on their loans. Moreover, data from UK Finance reveals that more than half of new mortgage borrowing extends beyond the borrower’s 65th year, indicating a shift towards longer mortgage terms extending into later life.

A Call to Action for Advisers

Will Hale, CEO of Key, emphasises the importance of this new mortgage option, “The new payment term lifetime mortgage addresses a growing group of older borrowers who are struggling with their monthly mortgage payments. All advisers, both mainstream mortgage advisers and equity release specialists, must broaden their offering and consider all options for customers over 50 looking to borrow into retirement. The new product gives customers access to more of their home’s value while ensuring they remain protected throughout later life, even if their circumstances change. Making some mandatory repayments in pre-retirement is a sensible thing to do for many borrowers as this can significantly reduce the cost of borrowing and can provide greater financial flexibility in the future.”


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