Pure Retirement has introduced an interest servicing option across its Emerald lifetime mortgage range, allowing borrowers to reduce the interest added to their loan by making regular monthly payments.
The option is available on both lump sum and drawdown products and is aimed at borrowers aged over 55 who have sufficient income to make some mortgage payments but may not meet conventional residential mortgage affordability requirements.
Customers who pay at least 25% of their monthly interest receive a discounted interest rate, reducing the amount of interest rolled up into the loan and potentially lowering their total borrowing costs.
Unlike conventional repayment arrangements, customers can stop making monthly payments if their financial circumstances change, although doing so means losing the interest rate discount.
FLEXIBLE REPAYMENT ARRANGEMENTS
The Emerald range also allows borrowers to take payment holidays of up to three months each year. Customers can make additional partial repayments of up to 12% of the original amount borrowed annually without incurring early repayment charges.
Other features include a seven-year fixed early repayment charge period and no upfront initial loan fees.
The introduction follows research conducted by Pure Retirement which found that 92% of existing interest servicing customers regarded the ability to make repayments as either their principal reason for selecting a lifetime mortgage or an important factor in their decision.
The lender believes the option could be particularly relevant to borrowers approaching retirement who expect their income to fall, as well as those unable to demonstrate a suitable capital repayment strategy for a conventional mortgage.
Simon Hayton (pictured), managing director at Pure Retirement, said: “Mortgage advisers are likely to have clients for whom a mainstream residential mortgage is no longer available or suitable, who are unable to evidence a capital repayment strategy, or who expect their income to reduce before the end of the mortgage, for example at retirement.
“If advisers are not considering interest servicing lifetime mortgages as part of the later life lending conversation, they may be missing an important option for clients who still have some income and a preference to make monthly payments.
“Interest Servicing on Emerald has been designed to support those conversations and provide greater flexibility for customers who may have fewer borrowing options.”
Pure Retirement has also made an online calculator available to advisers to illustrate how different levels of monthly interest payments could affect the outstanding lifetime mortgage balance and overall borrowing costs over time.
