Legal & General’s new Income Lifetime Mortgage aims to give customers more flexibility when accessing the value of their property in later life
By paying customers a fixed monthly income the mortgage is aimed at people who want to supplement their income.
The new product aims to offer a mortgage solution for those people who would rather have a monthly income instead of a lump sum, or who have not been able to save the amount into their pension as they had hoped.
The lender believes this makes it compelling for those people who want to bridge a gap in their retirement income in order to be able to benefit from a standard of living in later life that is more comfortable.
The mortgage is designed so that the interest will roll up through the life of the loan. Then both the loan and the interest will be recouped by the lender when the property is sold after the last surviving borrower’s death or move into long-term care.
With Income Lifetime Mortgages compound interest’s effect is reduced because funds are released on a monthly basis, rather than as lump sums.
People aged 55 and over who own a property with a minimum value of £100,000 are eligible for Legal & General’s new Income Lifetime Mortgage. Those that take it up will be offered an interest rate that is fixed for life at the outset. Then the monthly income generated by the mortgage will run for a term of 10, 15, 20 or 25 years that is agreed and then cannot be extended.
When the fixed term ends so will the monthly income but interest will continue to roll up until when the mortgage has been repaid. Mortgagees can choose to end the income at any point, but when it is stopped it can’t be restarted.
Steve Ellis, L & G’s Home Finance CEO says that the mortgage will provide that little bit of extra income to pay for things like a day out with the grandchildren or weekends away in the country. Ellis adds that he and his colleagues know how useful this could be for keeping people “doing the things they love”.
He believes it’s a new option giving consumers a chance to enjoy the benefit of their housing wealth with a fixed interest rate for life, along with the security of a regular monthly income for as many as 25 years.
Ellis says that retirement lending has “a bright future ahead for” and L&G is intent on seeing more people enjoying the positive role the value of their homes can play when they get older.
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