Lifetime Mortgage Gateway (LMG), a new service facilitating lease extensions for large numbers of older homeowners trapped with short leases, is launched by LMG Logistics (LMGL) today.
Older homeowners with a ‘mid-term’ lease (75 years or less to run) can find themselves trapped as their property loses value every year unless the lease is extended, while at the same time they are unable to release the equity built up in their property to boost their finances in retirement.
The only way they can stop their property losing value and put themselves in a position to qualify for equity release is to extend their lease. However, the lease extension process – known as enfranchisement – is complicated and can cost tens of thousands of pounds, making it unaffordable for many retired homeowners on fixed incomes.
The LMG service helps older homeowners extend their lease and secure the value of their home. It also allows them to release additional money to pass onto loved ones, clear debts or boost their pension income – with only modest financial outlay up-front.
With the help of a small group of highly respected and trusted partners, LMG arranges a short-term loan to pay for the costs of extending the lease. After that, a lifetime mortgage is put in place to cover the cost of the short-term loan and fund the 90-year premium or in some cases the freehold.
While the lifetime mortgage provided via LMG is designed to cover the cost of the lease extension, the leaseholder has the option to release further capital from their home should they need it.
LMGL estimates there are around 500,000 homeowners with leases that have 75 years or less to run – many thousands of whom will be aged 55 years and over and will at some point need to release the equity in their property to boost their retirement savings.
The LMG process brings together respected partners from the world of financial services, property and legal services in order to deliver, including Key, Vantage, Egerton and Ince. This is all with the aim of tackling this disparity and helping those stuck in this ‘mid-term lease trap.’ The LMG service can be accessed via financial advisors and intermediaries, and is the first and only of its kind in England and Wales.
Guy de Jersey, a director at LMGL, the provider of LMG, says: “The government estimates there are 4.8m leasehold properties in the UK and about 500,000 of those are held on sub 75-year leases, against which leaseholders cannot access equity release. This is a major issue, and practical assistance and options for these unserved people is long overdue.
de Jersey continues: “Too many leaseholders end up caught in this ‘mid-term lease trap’ and are left with little option but to sell their home or sit on an asset 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 we deliver this new and innovative service to the many thousands of people needing it.”
Jason Ruse, Business Development Director at Key Group said: “Extending a lease can be a significant financial burden at any age but it is particularly worrying if you are retired and forced to watch the value of your home – and your family’s inheritance - gradually decrease. The innovative LMG approach uses a combination of different financial options to help older borrowers solve this problem and enjoy a more secure retirement.”
Joseph Aston, National Sales Manager at Vantage Finance says: “This area of the market is simply unserved and so we are delighted to work collaboratively with the other organisations involved to offer something truly unique and necessary. At Vantage Finance our collective culture is to strive to ensure every one of our customers gets the best possible service and we are sure this will help more people get the outcome they need and want when it comes to their leasehold property.”
Tom Hutchinson, FRICS and Director at Egerton says: “As property experts, particularly in leasehold enfranchisement, we have seen at first hand the very real impact of the mid-term lease trap. Too often people are stuck and options are limited, so it’s fantastic that we have been able to come together with the other organisations in this process and to play our part in offering people more choice than simply selling up.”
