Legal and General Home Finance has unveiled a pioneering financial product specifically designed for those over 50 years old: the Payment Term Lifetime Mortgage (PTLM). This innovative offering stands out as it targets individuals whose interest-only mortgage deals are nearing their end. What makes the PTLM truly unique is its break from the traditional requirement of lifetime mortgage products, which typically necessitate borrowers to be at least 55 years old.
How Does the PTLM Work?
The PTLM operates by providing a tax-free lump sum in exchange for fixed monthly interest repayments. This arrangement continues until the borrower either retires or reaches the age of 75, whichever occurs first. Post-retirement, the borrowers have the choice to make voluntary repayments, but unlike the Retirement Interest Only (RIO) mortgage, these payments are not a lifelong commitment.
Should there be any unpaid interest, it accumulates and is added to the total amount owed. This debt is usually settled through the sale of the property when the borrower either passes away or moves into long-term care.
Eligibility and Affordability
To qualify for the PTLM, borrowers need to successfully pass affordability checks. Legal & General has emphasized the flexibility of this product, particularly in its approach to assessing pre-retirement income. This assessment allows individuals with stable earnings to qualify, even if they anticipate a reduction in income post-retirement.
Who Stands to Benefit?
This mortgage option is especially beneficial for homeowners looking to replace their existing mortgage, such as a standard interest-only mortgage. The Financial Conduct Authority (FCA) reports that there are approximately one million outstanding interest-only mortgages, with the average borrower being 56 years old and having £140,000 left to pay.
Legal & General notes that while one in five borrowers in this situation plans to sell their property, many are seeking alternative solutions. The PTLM targets those who have to repay between 25% to 55% of their property value, offering them the opportunity to borrow up to 55.3% Loan-To-Value (LTV) – a significant increase compared to the LTVs in Legal & General’s existing later-life mortgage range.
Aiming for More Choice and Flexibility
Craig Brown, CEO of Legal & General Home Finance, highlights the PTLM’s role in offering more choice to homeowners. This product is particularly aimed at those with substantial equity in their homes but are unable to access it due to age restrictions. The PTLM bridges the gap between traditional lifetime mortgages and Retirement Interest-Only solutions, providing a practical option for individuals over 50 who wish to utilize their home equity through a mortgage paid from their current income.
Next Steps for Interested Customers
For homeowners interested in exploring this new mortgage option, consulting with an equity release adviser is the recommended first step. This will help in understanding the specifics of the PTLM and how it can align with their financial goals and retirement plans.