A new service that allows landlords to extend their lease with a lifetime mortgage was launched today.
Lifetime Mortgage Gateway (LMG) is for senior homeowners with a lease term of 75 years or less.
The process created by LMG Logistics involves the company paying for a lease extension through a short-term loan, which is then paid off with a lifetime mortgage. He also takes care of all the administration involved in the extension.
According to LMG, this will counteract the rapid destruction of value that a medium-term lease introduces.
As an example, LMG presents a property with a total value of £ 800,000 with 50 years remaining on the lease, of which the owner holds almost £ 200,000.
Within 15 years, assuming house price growth of 1% per year, the overall asset value decreases with the tenant around £ 136,998 in value for the free owner.
With a lease extension purchased through LMG pushing the remaining term to 140 years, 125 years remaining (after 15 years) and under the same economic conditions, the overall asset value increases to almost £ 1.2million . In this example, the tenant saves £ 62,079 in cash value.
The extension process is done through partnerships. These include Key, Vantage, Egerton and Ince.
This is the first such service launched in England and Wales.
LMG Logistics Director Guy from Jersey said: ‘The government estimates that there are 4.8 million leasehold properties in the UK and around 500,000 of these are held on leases for less than 75 years, against which tenants can not access the release of equity capital. This is a major problem, and support and practical options for these unserved people are long overdue.
“Too many tenants find themselves caught in this ‘mid-term lease trap’ and have no choice but to sell their home or sit on an asset that is losing value.
“We are delighted to be working with a coalition of distinguished partners at the forefront of the market in terms of credibility, integrity and scale to ensure that we deliver this innovative new service to the thousands of people who need it. “
And Jason Ruse, Key Group Business Development Director, adds: “Extending a lease can be a significant financial burden at any age, but it’s especially worrying if you’re retired and forced to see your home’s value – and your family’s inheritance – gradually diminish.
“LMG’s innovative approach uses a combination of different financial options to help older borrowers solve this problem and enjoy a more secure retirement.