Payment Term Lifetime Mortgage: Setting the scene

What is PTLM?

Payment Term Lifetime Mortgage (PTLM) is our newest product that allows people aged 50+ to borrow against their home by paying off the interest for a fixed period. At the end of the payment term, which can be up to their retirement or age 75, whichever comes first, they stop making payments and the interest starts to roll up. PTLM is a loan secured against your client’s home.

How can PTLM benefit your customers?

PTLM is designed to meet the needs of younger clients who want to release some equity from their home but may not be able to afford to pay the interest when they stop working or retire. It can help them with various financial goals, such as:

• Paying off an interest-only mortgage that is coming to an end
• Supporting their children or grandchildren with education or housing costs
• Improving their home to make it more comfortable, energy-efficient or suitable for home-working
• Divorcing and needing to keep the family home for the children

These are some advantages of PTLM:

• A higher loan to value (LTV) ratio than our other lifetime mortgages, which means your clients can borrow more
• A fixed interest rate for life, which gives your clients certainty and peace of mind
• Because of the payment term, there’s an affordability assessment. This doesn’t look at the period after retirement as with a Retirement Interest Only mortgage, for example, which means fewer of your clients need to be turned away. Payments are set for the payment term and your clients need to keep these up. There’s a repossession risk if they don’t
• The Payment Term cannot go beyond the client's expected retirement date, so we do not need to consider their post-retirement income. A first death stress is not applied as the customer's payment term must end by age 75
• The loan is usually repaid from the sale of their property when they or the remaining applicant (if it’s a joint mortgage) dies or moves into long-term care

How can you help your clients with PTLM?

As an adviser, you want to be able to help all your clients, especially those who are underserved by the current market. PTLM opens up new possibilities for your 50+ clients who are looking for a flexible and affordable way to access the equity in their home.

Considerations when helping your clients with PTLM:

• Understand their financial situation, needs and goals
• Explain the features and benefits of PTLM and how it differs from other lifetime mortgages
• Conduct an affordability assessment to check that they can make the monthly interest payments for the chosen payment term, full details of this can be found on our Assessing affordability PDF: 129KB document
• Discuss the risks and implications of PTLM, such as, the risk of repossession if they do not keep up payments, the impact on their inheritance, tax and benefits
• Provide them with a personalised illustration and a suitability report
• Support them throughout the application process and beyond
• There may be cheaper ways to borrow money

Thanks to you and our lifetime mortgages, more clients can embrace the future with confidence.