Santander is working out the details on a new remortgage product that will offer pensioners a unique way to pay off their mortgage debt when their current deal comes to an end.  The remortgage would basically be an interest only loan that will be endure for the lifetime of the pensioner.  No debt would be coming off of the mortgage but instead only interest would be paid.  Once the homeowner passes away, the bank sells the home to recover the value due on the mortgage.  Remaining profit, if any, would go to the pensioner’s estate.

Experts warn that this situation is not for everyone because it basically takes away the inheritance of the family home.  Because the homeowner is only paying interest on the loan, the bank owns the property until it is sold and the debt is paid.

This remortgage will be offered to those homeowners that are currently on an interest only mortgage.  Many of these types of mortgages are going to be ending soon as they were popular years ago with the assumption the homeowner would save enough money to pay off the loan at the end of the term.  The problem is that interest only remortgages are not available by lenders any longer (few, if any, exist on the market) and homeowners would likely find it impossible to afford a regular remortgage monthly payment.  This solution of a lifetime loan offers the homeowner the ability to stay in their home and avoid repossession. 

It is estimated that there are approximately 150,000 interest only mortgage deals set to end every year up until 2020.

Santander said through a spokesperson, “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.”

Meanwhile, for those seeking a cheap interest rate on a remortgage, there are many to be found on the market.  Lenders are competitive currently for the attention of borrowers and some of the deals have the lowest interest rates seen in years.