Blog > Pure Retirement adds interest payment option to its Heritage plans

Pure Retirement adds interest payment option to its Heritage plans

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By Clare Yates • 14th October 2024 • 3 min read

Extra flexibility and interest rate discounts for homeowners

Written in line with our editorial policy.

Pure Retirement has introduced an interest-servicing option on its Heritage lifetime mortgage range. Borrowers can now reduce their future loan balance and benefit from interest rate discounts.

By making monthly payments towards the interest on their lifetime mortgage (the most popular form of equity release), customers have more control over the cost of their equity release. Making interest payments reduces the overall debt and protects more of the equity in their home for passing on to beneficiaries.

A key benefit of the new option from Pure Retirement is the interest rate discount available to those making monthly payments. Depending on how much of the monthly interest the homeowner chooses to pay – between 25% and 100% – they can receive a discount on their interest rate of up to 1%.

The option is flexible, too. If circumstances change, borrowers can stop making payments at any time without penalties. Additionally, they can take up to three months off each year with a payment holiday. 

This interest-servicing option is available on both lump sum and drawdown lifetime mortgages. Customers can also make payments on interest from drawdowns or further advances.

In addition, up to six voluntary partial repayments of the loan itself can be made each year without incurring early repayment charges. There is a minimum of £500 per payment, totalling up to 10% of the advance amount per year. This gives homeowners the opportunity to reduce the original loan in addition to servicing the interest. 

According to Mortgage Strategy, Chris Buchanan, Pure Retirement’s head of product, said: 

“The lifetime mortgage market is evolving to meet more diverse customer needs and circumstances. Our ambition was to develop a leading interest servicing lifetime mortgage, with interest rate discounts delivering meaningful customer savings, but at the same time keeping it simple for advisers and customers, with no complex payment term commitments to navigate.”

What is interest servicing?

Interest servicing is when an equity release plan allows homeowners to pay off some or all of the interest on their lifetime mortgage each month, rather than leaving it to roll-up each month. These plans are usually referred to as interest-only lifetime mortgages

By servicing all or some of the interest on your loan, you can help keep the debt from growing – or growing as quickly – leaving more equity in the property for inheritance or future needs.

There are typically flexible features built into interest-only plans that allow you to stop making the voluntary interest payments at any time. From that point on, the interest is typically ‘rolled up’ each month on a compound basis and added to the loan amount, in the same way as with a regular plan.

Other equity release providers offer interest-servicing options, too. For instance, Just and Aviva offer similar products, though details such as interest discounts and payment breaks vary between providers. Seeking specialist advice or guidance is best to find the right option for you. 

The importance of comparing plans

With more interest-servicing options available, it’s important for homeowners to compare plans before making a decision. Different lenders offer varying interest rates, repayment terms and additional features. By exploring and considering your options, you can find a plan that suits your unique needs and fits your financial goals.

To explore which equity release product might best suit your needs, speak to one of our selected advisers who can compare a range of plans, including interest-payment options, on your behalf.

To find out if you might be eligible for a plan, check here or talk to one of our friendly consultants by calling 0808 178 3055 or request a call back.

Sources:

Pure Retirement adds interest payment option to Heritage Plans: Heritage Product Range in Detail. Pure Retirement. Accessed 15 October 2024.

Quote from Chris Buchanan, Pure’s head of product: Pure Retirement launches interest servicing across Heritage range: Mortgage Strategy. Accessed 15 October 2024.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn

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