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What types of Later Life Lending are available?
Lenders in the Later Life Lending sector constantly adapting to change, and as a result, there has been a real push in innovation with the types of products that are now available.
Below is a selection of some of the options that are available to borrowers over the age of 55. Not all of the products will be suitable for every person, so if you would like to know more, click on the button below to get a free guide to Later Life Lending.
Traditional mortgages for over-50s
According to UK Finance, new lending where the term extends into retirement (65) accounted for around 60% of all lending in the UK in August 2023. Compared to when the later life lending sector was first created, many traditional mortgages now have age caps that extend well into a borrower’s retirement. For clients looking to remortgage, these can offer valuable solutions but are more limited by income and ability to make repayments than specialist later-life products.
Equity Release
Equity release is an umbrella term for Lifetime Mortgages and the lesser-used Home Reversion Plans. When a customer takes out a lifetime mortgage, they retain full ownership of their home, and any interest on the loan can either be paid monthly, on an ad-hoc basis, or rolled up into the loan amount. The loan and any outstanding interest are repaid when the borrower dies or moves to long-term care and plans that adhere to Equity Release Council Standards cannot exceed the value of the property providing the terms and conditions have been adhered to.
Retirement interest-only Mortgages (RIOs)
Only available on a main residence, a RIO is similar to a standard interest-only mortgage, however, the loan is usually only paid off when the borrower dies, moves into long-term care, or sells the property. Affordability is based on the ability to meet monthly interest payments, and the property can be at risk if repayments are not met.
Payment Term Lifetime Mortgages (PTLMs)
A lifetime mortgage under which the customer commits to a regular payment at the outset which reflects all or part of the interest to achieve a higher LTV at the outset than would otherwise be available. Whilst the product will provide security of tenure from the outset this is dependent on maintenance of the agreed payment.
Optional Payment Lifetime Mortgage (OPLMs)
A lifetime mortgage under which the customer commits to a regular payment at the outset which reflects all or part of the interest. Depending on the specific terms of the product the payment may or may not generate preferential terms and also may or may not have commercial implications in the event the payment ceases, but in any event security of tenure is not dependent on maintenance of the payment.
Hybrid Product
A Hybrid product is a product that includes, after an agreed period, conversion into an interest roll-up, but does not satisfy the regulatory definition to be classified as a Lifetime Mortgage. This may for example be a product designed very similarly to a PTLM, but where the payment during the mandatory payment term is greater than full interest only and therefore includes a period where both capital and interest are being repaid before moving into roll-up.
Equity release may involve a home reversion plan or lifetime mortgage which is secured against your property. To understand the features and risks ask for a personalised illustration.