Legal & General has today launched a lifetime mortgage that gives customers the choice of paying monthly or waiting until they die or move into care.
The firm’s optional payment lifetime mortgage is aimed at those caught between traditional equity release and residential mortgages.
An example is a borrower lacking the retirement income for a residential mortgage but where a lifetime mortgage may not be the right choice.
The interest rate is fixed for life and paid monthly.
An L&G statement says: “The problem of eligibility in retirement has been eased. Customers will not need to pass any affordability assessments or have a capital repayment strategy in place, as the amount owed is repaid from the sale of the property upon death or moving out of the home into long-term care.
“In the event that they can no longer afford or want to pay their monthly interest repayments, the customer can choose to stop and instead the interest is added to the loan each month.”
The product requires advice and will only be sold through brokers. It is available to customers aged 55 and over.
Legal & General Home Finance chief executive Steve Ellis says: “At Legal & General, we often hear the same question from customers with interest-only mortgages – ‘can’t I just continue to pay my interest?’.
“These customers feel let down by the mortgage market – they have always paid their interest, but no longer qualify for a new mortgage because of affordability assessments or, more simply, their age.
“OPLM is a direct response to this growing customer need for a different kind of retirement mortgage, one that provides flexibility for borrowers and which also has the potential to address the interest-only shortfall that remains a fundamental issue for the mortgage market.”