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Archive for January, 2010

How To Fund The Purchase Of A New Property With An Equity Release Scheme

Wednesday, January 20th, 2010

The advantages of equity release being used to raise capital from property have been widely advertised. It is commonly known that their uses have been to enhance retirement lifestyles by way of home improvements, holidays, debt consolidation etc.

 

However, a further function of this increasing popular over 55’s mortgage is its ability to assist with a house purchase.

 

In essence, an equity release scheme is a mortgage secured on ones property; however unlike a conventional mortgage there are no monthly payments. Instead, the interest charged by the lender is added to the loan & compounded over the term. Therefore, similarities between equity release & a household mortgage co-exist. Furthermore this similarity extends to the house buying process.

 

When funds need to be raised to assist with a house purchase, a conventional mortgage is normally utilised to bridge the shortfall between the purchase price & any deposit already held. Equity release can also assist a house purchase by using exactly the same principles as a mortgage.

 

Experience has shown that as people move through their retirement years their health may deteriorate & disability may result. As a consequence, their existing property may become less accessible if stairs or even property location is an unsuitable feature.
Aspirational requirements may dictate that a move to a more ‘up market’ is required. Many reasons for a move in retirement exist.

 

Upon review therefore, it may be necessary to look for an alternative property which meets the new objectives of accessibility, which could either be buying a bungalow or even moving nearer to children, who can take more care.
As the purchase price of a bungalow or new house could be more expensive, there may be a cash shortfall to fulfill the transaction.

 

Equity release can therefore be applied for on the new property to bridge the difference between the equity available from the sale of the existing house & the purchase price of the new house. At this point, it would be advisable to approach an experienced independent equity release adviser such as Equity Release Supermarket, who can source the most suitable equity release scheme available for house purchases.

 

The adviser will need to make calculations to ascertain exactly how much capital will be required, as not only is there the equity shortfall, but also whether any additional costs including solicitors fees, stamp duty, removal costs even home improvements may be required to be included in the equity release application?

 

A recommendation can then be made as to which equity release scheme would offer the best terms for the purchase; be it lowest interest rate, flexibility via drawdown or early repayment charges & taking advantage of any special lender offers that are currently available.

 

Other factors which need to be considered are whether any existing mortgage needs to be deducted from the sale proceeds, as this will reduce the equity that can be used as a deposit. Once these calculations & recommendations are made, the application can be submitted to the prospective equity release company.

 

The equity release application process is virtually the same as any mortgage: –

  • Valuation carried out by a independent surveyor appointed by the lender
  • Solicitor instructed to commence legal work & enquiries made on behalf of the applicant
  • Upon satisfactory valuation, an offer is then made by the lender
  • Upon receipt of the offer, the paperwork is drawn up by the solicitor which is signed by the client in due course
  • Exchange takes place & completion date set.
  • On the day of completion, the solicitor requests funds from the equity release provider & along with the client’s deposit, transfers the proceeds to the vendor’s solicitor to complete the legal process & purchase.

In summary, an equity release plan can be used to actually move up market to a more expensive or suitable property to meet future retirement needs. This could be for disability reasons, live in close proximity of the children or even aspire to a house of your dreams!

 

How To Minimise The Setting Up Costs Of An Equity Release Plan

Monday, January 4th, 2010

Keeping the initial equity release set up costs down to a minimum will be of great benefit in maximising the gross release from the lender… & in turn your pocket.

 

It will also have an immediate impact on the APR (annual percentage rate) of the equity release scheme in that the lower the set up costs, the lower the APR. Traditionally, there are four main associated costs involved: –

  • Valuation Fee
  • Lenders Application Fee
  • Solicitors Fees
  • Adviser Fee

These will be discussed in turn & assistance given on where to look for potential savings.

 

  • Valuation Fee – paid upon application & can vary significantly from lender-to-lender.

The fee as with any mortgage is directly related to the property value & can vary from a percentage of the property value to a banding system. One area of savings here would be in the banding system. First establish what the bands are from the potential equity release lender & ensure that you have not placed your property value into a higher band than required. Dropping to the one level below can save at least £30 – £100.

However, bear in mind the valuation of the property will affect the maximum release so don’t jeopardise this figure if you are looking for as much as possible. The biggest savings you can make is with a free or subsidised valuation which some independent brokerages like Equity Release Supermarket can obtain. Certain lenders will make these special offers from time to time & would result in NO upfront costs being incurred.

 

  • Lenders Application Fee – these are usually fixed no matter the size of the release or value of the property.

Some home reversion companies have no fee, as this is accounted for in the full or partial transfer of ownership. Lifetime mortgages application fees however can vary from £500 up to £695. Again, special offers can be made by lenders or even cash-backs can be obtained to reduce the net costs overall.

 

  • Solicitors Fees – due to the fact the solicitor can be selected, considerable savings can be made here.

Local or family solicitors can be contacted & a quote for equity release conveyancing requested. Borne within the quote would be the solicitors flat fee & any disbursements including VAT. Consider obtaining several quotes from solicitors or take the recommendation of your independent adviser as they may have special fixed cost arrangements with solicitors from ERSA (Equity Release Solicitors’ Alliance).

*Equity Release Supermarket has a fixed fee arrangement of £395 + VAT & disbursements with a leading equity release legal firm.

 

  • Advice Fee – dependent upon which brokerage advice is being sourced will determine how much the adviser is charging.

Care should be taken here. Fees of £1495 can be levied for taking out the same equity release plan as another brokerage charging only £595! Some companies will also charge an upfront fee, some will offer an initial consultation free of charge. Establish with the adviser how they are remunerated & shop around if you feel a better deal can be found elsewhere.

 

In summary, considerable savings can be made by conducting in depth research & dealing with a specialist independent firm of equity release advisers such as Equity Release Supermarket.

 

If you have any queries regarding equity release fees & costs, please contact Mark Gregory on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

Just Retirement Become The First Company To Reduce Equity Release Interest Rates In 2010

Monday, January 4th, 2010

With immediate effect Just Retirement has reduced their equity release interest rates  from 6.79% to 6.59%.

 

This news arrives in conjunction with the departure of Prudential from the equity release market at the end of 2009 & is a bold move readdressing the negative moves on interest rates at the back end of last year. The interest rate reduction applies across all age ranges & as a consequence Just Retirement  now becomes one of the lowest drawdown equity release  schemes in the market.

 

In addition to this rate reduction, Equity Release Supermarket can also obtain a generous £450 cashback for the client on completion of the plan. This certainly assists in reducing the overall set up costs of the plan.

 

For further information or quotation on the Just Retirement Roll-Up Lifetime Mortgage, please contact Mark Gregory on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk.

 

 
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