Canada Life has introduced a new type of lifetime mortgage that is gaining traction among younger borrowers. This innovative product, known as the Advantage lifetime mortgage, allows customers to make regular monthly interest payments, making it particularly appealing to those looking to manage their finances more effectively.
TL;DR: The average age of Advantage lifetime mortgage customers is 66, three years younger than traditional options; 86% of these borrowers are opting to pay 100% of their monthly interest.
What is the Advantage Lifetime Mortgage?
The Advantage lifetime mortgage, launched by Canada Life in February, offers a discounted interest rate for borrowers who choose to service their interest payments. Customers can select to pay 25%, 50%, 75%, or 100% of the interest, with greater discounts available for higher payment percentages.
Who is using the Advantage mortgage?
Analysis from Canada Life indicates that the average borrower using the Advantage product is 66 years old, compared to 69 for those opting for the traditional Capital Select lifetime mortgage. Notably, 86% of Advantage customers are paying 100% of their interest monthly, while only 1% are choosing the lowest payment option of 25%.
What this means for borrowers
This new mortgage option is particularly attractive for younger, low loan-to-value borrowers who demonstrate strong payment discipline. The most common reasons for borrowing include repaying existing mortgages (48%) and debt consolidation (31%). In contrast, only 9% of Advantage customers plan to use the funds for everyday expenses, compared to 27% of Capital Select customers.
What should brokers and investors watch?
The shift towards interest-serviced lifetime mortgages could reshape the market. As younger borrowers increasingly seek to manage their financial commitments effectively, brokers should be prepared to advise clients on these options. Investors may also want to monitor how this trend influences overall lending patterns in the mortgage sector.
Frequently asked questions
What are the benefits of the Advantage lifetime mortgage?
The Advantage lifetime mortgage allows borrowers to manage their interest payments actively, potentially reducing the overall cost of borrowing compared to traditional options.
Who is most likely to benefit from this mortgage type?
Younger borrowers with low loan-to-value ratios and a strong commitment to servicing their interest payments are likely to benefit the most from this product.