Santander Lifetime Mortgages

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    Santander is set to launch lifetime loans for pensioners who are unable to repay interest-only mortgages – but children would wave goodbye to family home.

    Borrowers who find themselves unable to repay interest-only mortgages when they expire, will have the option to take on a mortgage until they die. Santander confirmed these plans to offer lifetime mortgages from 2015.
    These new products would let customers continue to pay off just the interest on their debts until they die, when the bank would then recoup the outstanding amount by selling the property from under the families’ noses.
    Properties would be in large part effectively owned by the bank and any beneficiaries in the family would only inherit the remaining funds from the sale of the property, once the lender recovers what it was owed.

    Interest-only mortgages give borrowers cheaper monthly payments on their home loan, but they’re not paying back any debt, or acquiring equity in the home, and are still expected to pay off the capital at the end of the term, which is around 25 years.

    Roughly 150,000 interest-only mortgages are set to mature every year between now and 2020, with the first peak in the market expected in 2017/2018, when endowment mortgages sold in the 1990s and linked to these products expire.

    Santander’s life-time mortgages, would be designed for those whose people who have mortgages expiring in the coming years and who do not have the funds to repay them and would therefore face repossession of their property.
    This plan could let them stay in their current home without having to sell the property or downsize.
    A spokesman for Santander said: ‘As a responsible lender it is right we consider all options for allowing customers to stay in their homes and we are doing this. Offering a lifetime mortgage is one option we are considering for 2015. The concept is still in development. However, our current thinking is that we would expect interest to be paid, as this is not a forward purchase of the property, and we would need to be satisfied that the borrower could continue to pay the interest.

    Experts have warned that before borrowers take on this ‘lifetime mortgage’, they urgently need to talk with their families as this could mean parting from some or all of their inheritance.
    Andrew Montlake, director of mortgage broker Coreco, said there is ‘definitely a place in the market’ for what Santander is considering.

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