Family Building Society has unveiled an alternative to equity release called the Retirement Lifestyle Booster.
The product is designed for older homeowners who intend to downsize but aren’t ready to do so.
It allows them to borrow between £45,000 and up to 25% of their property’s value and then receive a fixed sum every month for 10 years.
Rather than allowing the interest to roll up borrowers will make a payment each month.
Keith Barber, director of business development at Family Building Society, said: “The Retirement Lifestyle Booster is a real alternative to the default equity release solution for older borrowers.
“Whilst the equity release market is growing, there is a need for a wider of range of financial products for retired borrowers who do not wish to see their housing wealth eroded by the roll-up of interest which can be a feature of lifetime mortgages.
“This is a real opportunity for advisers to demonstrate the value they add by considering the Retirement Lifestyle Booster as a tool when helping older people draw on their accumulated wealth.
“The combination of pension freedoms, later life lending options and low investment returns along with the need for IHT management, make this a key area for advice.”
Borrowers get paid on the 10th day of each month, with payments continuing for 10 years unless they opt to stop the loan.
After the 10 year period the outstanding amount is paid back, with the idea being that homeowners will downsize to cover the mortgage.
Any existing mortgage is repaid at the start of the Retirement Lifestyle Booster.
An example of the product in action: A loan of £60,000 will give the borrower an extra £500 per month for 120 months. At the current interest rate of 3.44% (linked to the variable Family Building Society managed mortgage rate) this would require a monthly payment of £83 per month.