David Forsdyke, Head of our Later Life Finance service, explains why the introduction of a Payment Term Lifetime Mortgage (PTLM) paves the way for fundamental change in the equity release industry.
What is a Payment Term Lifetime Mortgage (PTLM)?
A Payment Term Lifetime Mortgage (PTLM) is the latest addition to an already growing suite of borrowing options for older homeowners. A PTLM is available to those over 50 and does not have a mortgage term. Instead, the mortgage lasts until the borrower passes away or moves into care.
Why do we need new products like PTLMs?
Since the 1990s, homeowners have been opting for interest-only mortgages or longer product terms that extend beyond retirement age as a way to reduce monthly outgoings. However, this presents tricky decisions when homeowners approach retirement, where income tends to dip, as most are unable to meet the lenders’ strict affordability criteria when it comes to extending or renewing their mortgage term.
With a PTLM, the affordability assessment only applies to the initial payment period, meaning more older homeowners can access longer-term borrowing solutions.
The case for change in equity release
Mortgage lenders are increasingly becoming aware of the aging population and their borrowing needs. The introduction of a PTLM is just one example of product innovation that provides more choice to homeowners in their 50s, 60s, 70s, and above.
The term ‘equity release’ captures a few solutions, and firms who only offer advice on equity release need to evolve into Later Life Finance firms, so homeowners receive appropriate advice on all the choices and alternatives available to them, including:
• Retirement Interest Only Mortgages (RIO)
• Regular mortgages
• Hybrid mortgage products
• Private banking facilities
• Bridging Loans and second charges
• A lump sum lifetime mortgage
• A Payment Term Lifetime Mortgage
• A flexible drawdown Lifetime Mortgage
• Unsecured loans
• Home Reversion Plans
If you are thinking about your borrowing options in later life, or have a client whom we can help, please do get in touch with our Later Life Finance team. We have access to the major lenders in the industry and can help you find the most suitable solution in today’s market