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Equity-release loan offers guarantees

Legal & General Bank is offering an equity-release mortgage for people aged over 60 with guarantees to safeguard them against negative equity, eviction and repossession.

It is designed to ensure that a borrower can live in their property for the rest of their life or until they permanently leave home, for example, to go into care.

To qualify for the mortgage, which can be used to raise money for any purpose and has a fixed rate of 7.3 per cent, borrowers must have a home worth at least £40,000.

L&G says retired homeowners can use the mortgage to increase their income if they have a small pension.

Affluent borrowers can reduce the value of their estate for inheritance tax purposes while releasing capital for themselves and their families. People whose long-term financial plans have been affected by divorce can use the money to restore their plans.

No monthly payments are made on the product. Instead, interest is compounded monthly and added to the outstanding loan to be repaid when the mortgage is paid in full.

L&G Bank managing director Mike Bury says: “With lower investment returns expected over the longer term and pressure on annuity rates, many older homeowners will be looking for attractive ways to support their lifestyles. Using equity locked up in their homes may be a suitable way to do this.

“The safeguards in our new equity-release mortgage mean financial advisers can reassure their customers that, no matter what happens, they will be able to continue to live in their homes as long as they want.”

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