What is L&G’s New Payment Term Lifetime Mortgage (PTLM)?
Legal & General have released a new equity release product, called a Payment Term Lifetime Mortgage.
This type of mortgage is available to anyone aged 50 or over, who are currently still working but looking to retire in the near future. So, what exactly is Legal & General’s new Payment Term Lifetime Mortgage?
This product allows over 50’s the chance to release equity from their home, whilst paying off some of the interest on their loan for an agreed period of time.
When the payment period ends, your loan will continue and your interest will roll up and compound, as with any other lifetime mortgage [1].
This type of product is ideal for anyone who needs or wants to release equity from their home and is currently able to afford to contribute towards the interest on their loan, but won’t be in this position forever.
What is L&G’s New Payment Term Lifetime Mortgage and how does it work?
Legal & General’s new Payment Term Lifetime Mortgage works similar to any other type of lifetime mortgage, in that you borrow money against the value of your home, which is then repaid once you pass away or move into long term care, upon the sale of the property.
With L&G’s new Payment Term Lifetime Mortgage, clients are able to repay some of the interest on their loan. This is only for a set period of time.
Most people agree to repay the interest on their loan until they retire. This means that you are able to borrow more, compared to other, traditional lifetime mortgages.
This means that your loan-to-value ratio will be higher with Legal & General’s new Payment Term Lifetime Mortgage [2].
This type of product has been designed for those who want to pay off the interest on their loan until they retire. So, the earliest you are able to stop your interest payments is 55 years old.
If you fail to keep up with your interest payments, then your home might be repossessed. This is why Legal & General will always carry out an affordability assessment before offering anyone this type of equity release product.
Who is able to qualify for Legal & General’s new Payment Term Lifetime Mortgage?
As with any type of lifetime mortgage, there are a set of qualification criteria you will need to meet. Legal & General’s New Payment Term Lifetime Mortgage’s qualification criteria is listed below for you [2,3].
- You must be aged 50 or over, with at least one owner still in employment
- You must pass L&G’s affordability assessment
Your home must be worth at least £70,000, or £100,000 if you own a flat, maisonette or ex-council house
- You must have sought advice from an adviser or solicitor and discussed what the impact on your inheritance might be, what compound interest is, the chances of any early repayment charges and if there are any alternative solutions to equity release.
Property eligibility for Legal & General’s new Payment Term Lifetime Mortgage
Not only will you have to meet Legal & General’s qualification criteria in order to qualify for their new Payment Term Lifetime Mortgage, but your property will also have to hit certain qualification criteria.
These factors are listed below [2,3]:
- Your property must be made and constructed out of traditional materials
- Your property must structurally be in good condition
- Your property must be currently valued at least £70,000 for a house and at least £100,000 if you own a flat, a maisonette or an ex-council house.
- Your property must be on mainland England, Wales or Scotland.
- If your property is leasehold, then you must have a number of years left on your lease, or at least pay for a lease extension if your lease is coming to an end
- You will not qualify for Legal & General’s new Payment Term Lifetime Mortgage if your property is a bedsit, a part freehold or if your property has any agricultural ties or connections.
What are the Advantages of Legal & General’s new Payment Term Lifetime Mortgage?
As with any time of equity release, Legal & General’s new Payment Term Lifetime Mortgage has a number of benefits.
For example, taking out Legal & General’s new Payment Term Lifetime Mortgage means that you will gain access to the equity inside your home, without having to move. You are able to spend this money on whatever you want.
Likewise, with Legal & General’s new Payment Term Lifetime Mortgage, your loan to value ratio (LTV) will be higher than other traditional equity release plans, as you are able to repay the interest on your loan for a set amount of time. This means that you are able to release more money from your home, to spend on whatever you want.
As with any type of lifetime mortgage, with Legal & General’s new Payment Term Lifetime Mortgage, your interest rate will be fixed for life, giving you peace of mind and some reassurance [2,3].
Legal & General will also always carry out an affordability assessment, which will assess your income now and your interest payments.
This means that you won’t be approved for their new Payment Term Lifetime Mortgage if you can’t afford it [2].
With Legal & General’s new Payment Term Lifetime Mortgage (PTLM) you will not be expected to pay the interest on your loan once you retire, meaning that your post-retirement income will not be assessed [2].
As with any type of equity release loan [3], your Payment Term Lifetime Mortgage with Legal & General will be repaid once you pass away or move into a care home, upon which your property will be sold and the loan will be paid off, including any interest that has compounded over your retirement years [2].
L&G’s New Payment Term Lifetime Mortgage – FAQS
Below, we provide answers to commonly asked questions around L&G’s new Payment Term Lifetime Mortgages:
1. What is the current interest rate for Legal & General’s New Payment Term Lifetime Mortgage?
As with any type of lifetime mortgage [3], interest rates for Legal & General’s new Payment Term Lifetime Mortgage will be fixed for the duration of your loan. This means that although your interest will compound over time, your interest rate will not increase.
When it comes to calculating the interest on your loan, each month will be treated as 1/12th of a year, meaning that each month, the amount of interest you pay on your Payment Term Lifetime Mortgage will stay the same [2].
2. How long will the interest payment term be?
With Legal & General’s new Payment Term Lifetime Mortgage, customers get to decide how long the interest payment term will be. You will decide a date or year when your interest payments will stop, which will usually be once you retire and your income stops [2].
3. Will they check my income during the underwriting process?
Yes, Legal & General will require at least 3 months of bank statements or payslips to prove your income. You will also have to send them your work and employment contract.
4. Does Legal & General’s compassionate repayment feature apply to their new Payment Term Lifetime Mortgage?
Yes, Legal & General’s new Payment Term Lifetime Mortgage offers a compassionate repayment feature. This means that you are able to repay your lifetime mortgage without being charged an early repayment fee if one of the owners of the property passes away or moves into long term care [2].
5. Does Legal & General’s new Payment Term Lifetime Mortgage offer a drawdown facility?
No, Legal & General’s new Payment Term Lifetime Mortgage does not offer a drawdown facility. This means that if your property increases in value significantly, you won’t be able to release more equity on this basis [2].
6. What if the owner passes away during the payment term?
If one owner passes away, then you might need to continue to repay the interest on your loan until your payment term ends. When the second owner passes away, then the property will be sold and the loan will be repaid.
References
[3] https://www.ageuk.org.uk/information-advice/money-legal/income-tax/equity-release/
