Equity release lenders target Gen X with new interest repayment deals

  • Lenders launch new lifetime mortgages for borrowers in their 50s and 60s
  • They must make interest payments for a certain number of years 
  • Request a copy of the Mail on Sunday’s guide to equity release

Equity release lenders are targeting borrowers in their late 50s and 60s with new products that would see them pay off some of the interest in their lifetime.

Normally, borrowers with a lifetime mortgage — the popular form of equity release — don’t pay any interest or capital until their home is sold when they go into care, or it is repaid when they die.

Borrowers can sometimes make payments to keep interest costs from mounting, but this is optional.

However, lenders are now introducing plans with mandatory interest repayments for a certain number of years.

Generation X: New ‘payment-term lifetime mortgages’ could enable those in their late 50s and 60s to be eligible for equity release, where they may not have been in the past

This could see Generation X homeowners making monthly payments from age 55, the minimum allowed for equity release, until they hit retirement, for example.

Eligibility would also be assessed based on pre-retirement income. On retirement, the loan would convert to a standard lifetime mortgage and the interest would roll up until they die or go into care. 

Providers offering these ‘payment-term lifetime mortgages’ include More2Life, Legal & General Home Finance and Key Later Life Finance.

Some younger borrowers in the past have been denied equity release because, with potentially many years left to live, the value of their home on death may not be enough to repay the loan, plus accrued interest. So the new plans could attract more customers.

Current rates on equity release plans are between 6.5 per cent and 9 per cent. 

Stuart Powell, of Advice Guru, says: ‘Compound interest can be a problem. An 8 per cent interest rate with no interest payment made can double a £100,000 equity release debt in just seven years. 

‘With new products the debt remains the same if interest is paid monthly. Standard Life Home Finance and More2Life have taken this product innovation further.

‘Standard Life offers a discount of up to 0.75 per cent on its standard rate if you pay the interest for up to 15 years. 

‘More2Life allows some customers to borrow more if they pay the interest in the initial years.’

The Mail on Sunday has produced a guide to equity release by Jeff Prestridge. For a free copy, call 0808 239 7433 or visit mailfinance.co.uk/unlockcash. 

Read more at DailyMail.co.uk