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Archive for April, 2012

How Easy is it to Remortgage My Equity Release Plan?

Sunday, April 22nd, 2012

Equity release schemes have now been in existence for over 15 years in their current format. Here we answer some common questions such as – ‘Can I get a better interest rate?’ & ‘Can I borrow additional funds? ’.

 

Equity release schemes allow you to free up some or all of the equity tied up in your property and use the tax free cash for lifestyle reasons. This can be a particularly useful option for those who do not have enough cash flow and own a property, but do not wish to sell it.

If you already have an equity release scheme but for some reason you’re thinking, ‘should I remortgage my equity release?’ it may be worth your while to compare equity release rates & deals to find a more suitable product.

 

The equity release market is constantly changing, with interest rates rising and falling, and new innovative equity release schemes becoming available all the time. For instance, interest rates at the moment are much lower than they were just a few years back. So if you decide to remortgage your equity release just now, the fall in interest rates could result in significant savings for you over the long term, even when you take into account the setting up costs, which include solicitors fees, application fees etc. Not only that but you may have released all the money from your original plan & now find you require a ‘top-up’ to continue enjoying your retirement.

 

Why should I review my existing equity release plan?

With equity release schemes becoming increasingly popular, equity release providers are developing new products and schemes all the time. Something that was not an option a few years ago may now have become entirely possible. Therefore, a more suitable and pragmatic product may now be available. This means that by reviewing your existing equity release UK plan and shopping around for new options is a good idea, especially at this point in time.

 

What should I look out for?

Equity release schemes are defined as a lifetime mortgage. As such all plans have some form of in-build early repayment charge which is differentiated by the company offering the equity release plan. These penalties can exist for a set number of years on a fixed basis, or alternatively they can be linked to an investment such as government gilts or Bank of England base rate.

Particularly government gilts seem to be a favourable barometer used in today’s equity release marketplace. The two largest lifetime mortgage companies – AVIVA & Just Retirement have decided to use them, so you need to be aware of potential back end penalties if the equity release mortgage is paid off early.  Other potential suitors such as LV= (Liverpool Victoria) & New Life Mortgages will only charge a fixed percentage penalty over either 5 or 10 years, with no penalty thereafter.

 

What is the next step?

If you are considering remortgaging your existing equity release scheme you must seek the professional services of an equity release adviser who has the experience of remortgage work. The adviser should be independent, so as to have the whole range of equity release schemes at their disposal. This is important as to remortgage again will incur a new round of equity release set up costs which need to be minimised as much as possible to ensure the new equity release deal is viable.

Before you decide to proceed with an equity release remortgage, it is important to consider several factors.

Remortgaging an existing equity release plan is not just a matter of switching to a new policy.

 

The following areas all need to be assessed & equity release comparisons made: –

Current value of the property – this may have changed since the original valuation, particularly in light of recent market conditions
Age of the youngest applicant – since the original equity release plan was taken out, you will be older, thus the loan-to-value ratio’s will have increased also meaning you can borrow a higher percentage of the house value
Balance of the existing equity release scheme – this can be based on your last annual statement or by requesting a redemption statement from your lender
Whether any early repayment charges would apply? – this can be ascertained from the redemption statement that should be ordered from your existing lifetime mortgage provider. This figure can be the difference between staying & switching plans dependent & the size & duration thereof.

 

Upon collating this data your equity release adviser can make an informed decision as to whether to stay put, or it’s in your best interests to switch plans. This is where the adviser’s independence becomes important. With any new equity release application comes a new set of set up costs. However, if your adviser can obtain a free valuation, cashback or any other incentive current available, then this will mitigate some of the new charges & make the whole process more worthwhile.

Professional financial advisers from Equity Release Supermarket will have all these tools at their disposal. With years of practical experience & many advisers having worked at the likes of AVIVA & Prudential, we know how these plans can be remortgaged & transacted quickly & cost effectively. With our current crop of best equity release deals we ever had, now is definitely a good time as any to consider saving yourselves, & your beneficiaries £1000’s by switching your existing equity release plan.

 

For a FREE no obligation equity release remortgage analysis, please contact the Equity Release Supermarket team on 0800 678 5159.

Alternatively, please complete the ‘find an adviser’ contact form to book an appointment with your local equity release adviser.

 

Equity Release Supermarket is one of the leading independent, over 55’s equity release specialists who have won awards for quality & impartial advice.

They can be contacted at mark@equityreleasesupermarket.co.uk where your enquiry will be treated with strictest confidence.

 

Stonehaven Equity Release Schemes – Now Available In Scotland

Friday, April 20th, 2012

 

News today in the equity release sector, is that Stonehaven’s range of equity release schemes are now available in mainland Scotland.

 

Stonehaven have been providing equity release mortgages in England and Wales since August 2006. However, due to strong demand for its range of interest only lifetime mortgages entitled ‘Interest Select’ plans, they have now incorporated the Scottish legal process into their equity release application. Therefore, with previous limited availability in Scotland for interest only lifetime mortgages, this should come as a great relief for many over 55′s in Scotland needing financial support for their retirement.

 

Why Has the Stonehaven Interest Select Plan Become So Popular?

Opinion is split whenever deciding to take a release of equity from a retiree’s property. Gone are the days when a one-off tax free lump sum was the only option. With the increasing flexibility in the market such as the drawdown lifetime mortgage & new enhanced equity release schemes, lenders are looking more towards ‘niche’ equity release plans.

 

Having captured the interest only mortgage market for the over 55′s, Stonehaven who were originally funded by Santander have come, gone, & are now back with there revised range of Interest Select Options & Lump Sum Plans. With healthy lending for 2012 & with the backing of a large mutual enhanced annuities provider, Stonehaven are now broadening their horizons & diversifying into Scotland.

 

People over the age of 55 are looking at different means of releasing equity from their property. Not only that, there are different financial attitudes towards their property & ultimate inheritance. This has increased awareness of the impact that roll-up equity release schemes have had on people’s inheritance on schemes previously taken out. Due to the compounding effect of the interest on roll-up schemes, many retirees have turned up their noses to conventional equity release mortgages.

 

This is where Stonehaven as an equity release company has benefitted. Possibly due somewhat to the demise of the Halifax Retirement Home Plan, Equity Release Supermarket advisers have seen a significant rise in enquiries for an interest only lifetime mortgage. There is a strong demand for an interest only mortgage for the over 55′s, and this signifies the fact that a majority of pensioners still have income to support a retirement mortgage. This age group has many advantages to prospective mortgage lenders, however for reasons discussed later in this article, they are significantly overlooked.

 

Why have Mortgages for Pensioners been Overlooked?

With a large proportion of equity in their properties, hence low loan-to-values, usually a good credit history & repayment record, the over 55′s are favourable for a mortgage where interest only repayment is only required. The Stonehaven range of Interest Select Plans have given this situation much thought, not only to the positive aspects, but also to the negatives in particular if someone encounters financial difficulties during the term of their plan. They have a specific ‘safety net’ in place that has the option that upon missing 3 monthly payments, or the planholder opts not to make anymore monthly payments, the plan can converted over to a roll-up lifetime mortgage. This removes any concern over incurring a poor credit record & eliminates any risk of repossession.

In addition the Protected Equity guarantee is available which can ensure that your beneficiaries receive a percentage of the final sale value of the property. Peace of mind for sure.

 

The Interest Only Mortgage Ticking ‘Timebomb’

Previous articles have discussed the FSA (Financial Services Authority) crackdown on mortgage lenders offering interest only deals. Correctly, this has made pre-retirement applications for interest only mortgages more stringent & more capital & repayment mortgages are now taken as a result.

However, this sweeping clampdown has also impacted on the post-retirement mortgage market. It seems the old adage ‘tarred with the same brush’ has been applied to the whole demographic mortgage population. It shouldn’t, as a different set of rules & principles apply to mortgages in retirement. Retirement mortgages should be made more available on an interest only or capital & repayment basis. There should be more understanding from the powers that be that the needs of pensioners are significantly different than those pre-retirement.

 

Retirees do not necessarily need, or want the eventual repayment of capital. Considering the FSA are regulating & accepting the principle of roll-up equity release schemes, then why the reluctance for interest only mortgages in retirement?

Exceptions should be made & this sector of the mortgage market be subject to a further review.

 

Nevertheless, one company who has received FSA & SHIP (Safe Home Income Plan) approval for its interest only retirement mortgage is Stonehaven. With foresight of circumstances to come & which were conceived over a decade ago, Stonehaven are currently, & will be, reeping the benefits.

Endowment shortfalls are now becoming more evident & with Aviva only expecting 1% of its low cost endowment plans to meet their targets in 2012, then we can see why mortgages into retirement are going to become a common occurrence. In addition for many reasons people are approaching retirement with a mortgage and no form of repayment. With lenders such as Santander, Woolwich, Halifax & Nationwide not extending terms for those reaching the end of their interest only mortgage terms, a solution for their plight needs to be found.

 

Stonehaven Solutions

Well, this is where Stonehaven see’s how their interest only lifetime mortgage can resolve such issues. Dependent on the size of the mortgage & property valuation, Stonehaven maybe be able to assist. By using the Stonehaven equity release calculator, one can ascertain the maximum amount they could lend & hopefully assist in remortgaging from the previous lender. This would be the ideal situation, but not always the best. Alternatives should be considered such as downsizing, using savings or getting assistance from family & friends, however this may not be in the best interests of the mortgagors & family ties may over rule such as decision.

 

If Stonehaven can raise sufficient equity on your property to repay the mortgage, it would mean transferring onto a lifetime mortgage product which then eliminates any concerns over repayment in the future. In fact repayment is only required upon 2nd death or moving into long term care. The only obligation during the term is to maintain interest only payments which will remain EXACTLY the same for life due to the lifetime fixed interest rate which currently start from 6.08% (6.40% typical APR).

 

Therefore, someone borrowing £25,000 on the Stonehaven Interest Select Lite plan would find their monthly payments at just £119.96pm fixed for life!

 

Next Steps

To discuss your interest only lifetime mortgage options & alternatives as to whether the Stonehaven equity release plans are suitable to meet your requirements, contact your local independent adviser at Equity Release Supermarket by calling  freephone 0800 678 5159.

 

Additionally, visit the Equity Release Supermarket website & read the dedicated Stonehaven Interest Select page detailing the product features & current rates available. Here you can request a Stonehaven quote & gain a greater understanding of all Stonehaven’s schemes.

 

Home Reversion Can Still Play a Part in the Whole Equity Release Scheme of Things

Saturday, April 7th, 2012

Home reversion schemes have literally had their nose pushed out of the equity release market upon entering the year 2012. There has been a significant rise in the popularity of lifetime mortgage plans; including drawdown equity release schemes, enhanced equity release schemes & interest only lifetime mortgages.

Figures produced by SHIP (Safe Home Income Plans) show that home reversion plans now only account for 2% of the whole equity release sales. Drawdown lifetime mortgages popularity has captured 62% of applications & conventional lump sum equity release sales amount to 36%.

It is clearly evident to see the sincere lack of home reversion applications. Here we look at the mis-conceptions surrounding home reversion schemes & why they must still be considered in the overall equity release scheme of things!

 

First let’s look at the home reversion plan basics..

The home reversion scheme requires the property owner to sell part or all of their property in return for a tax free lump sum. The lump sum offered by the reversion company will always be at a discount to the percentage sold. The reason for this is that the applicants can remain living in the property for the rest of their lives, rent free. Significantly, it could be some time before the home reversion lender receives their money.

No interest element is attached to home reversion schemes. Unlike lifetime mortgages, home reversion offers guarantees as to the percentage of the property that will pass to the beneficiaries at the end of the day. This stems from the initial decision made as to how much of the property’s title is transferred to the lender. For example, if 55% of the property is sold in exchange for a lump sum, then this will still guarantee 45% of the eventual sale proceeds will pass to the beneficiaries. This is a major advantage of home reversion schemes over lifetime mortgages & provides peace of mind.

 

So why the lethargy surrounding home reversion plans?

Perhaps one of the major stigmas attached is the fact that you will not own your property 100%. The reversion provider will co-own the property with you, thus having a greater say in its maintenance & future planning of the home. They will have the right to inspect the house at regular intervals to ensure it is maintained adequately, thus protecting their security. Any major home improvements will also need their permissions in case you were thinking of extensions or knocking down walls!

Another consideration would be upon moving home or wanting to sell. At this point an equity release calculation would need to be undertaken to establish how much equity you own based on current value upon transfer across to the new abode. Therefore independent valuations would need to be conducted to ascertain current market value. This could prove difficult in today’s market with a lack of sales & depressed housing market.

The one danger of home reversion plans is upon early death. Home reversion would prove expensive should you die or move into care in the earlier years of inception. Effectively, you have given up a large portion of your home based on average life expectancy. If you fail to reach this date, then home reversion could prove a poor decision. On the flip side, if longevity is in your family genes, then home reversion could be a great decision. Oh the virtues of a crystal ball!

Nevertheless, this aspect of the housing doldrums could actually have a positive accent as to why a home reversion plan could be more advantageous than a lifetime mortgage scheme.  By taking out a home reversion scheme in anticipation that property values will remain static could prove beneficial. Afterall you are guaranteed that at the end of the day some equity will remain as you have a percentage of the property value guaranteed.

Compare this to lifetime mortgage schemes where the roll-up of interest compounds yearly & will continue escalating until the plan expires. In this situation, should property values remain static, then with a continuously rising mortgage balance & static house prices, will lead to the eventual erosion of the equity. This could be so much so, that NO equity remains at the end of the day with a lifetime mortgage.

 

So why should you consider a home reversion scheme?

As you can see the home reversion plan offers a sense of assurance which is not possible with many other equity release schemes. With the progress in medical science, the human body is capable of living much longer. Age therefore plays a major role in this equity release plan with a minimum starting age of 65. Indeed, the older one gets before taking out a home reversion scheme the better the terms that will be offered by the lender. The resultant effect of this is the older the homeowner, the more is paid as a capital lump sum.

 

Some of the negative issues surrounding home reversion schemes have been addressed by the providers – Bridgewater, New Life Mortgages & Hodge Lifetime. Particularly Bridgewater have considered many of these issues & allayed such fears by building in a series of plan options. Similar to drawdown lifetime mortgages, Bridgewater offer a flexible equity release plan which allows you to sell less than 100% of the home & still provide the guarantee of future withdrawals in the future.

 

Another home reversion plan flexible feature could be a ‘secured escalating release’ option which allows you to release a lump sum of cash now, together with a future income over a number of years. This is achieved with the use of annuities.

Finally, some home reversion plans could also offer protection on early death, so always make the necessary enquiries before entering into a long term financial commitment.

 

Home reversion redemption

The home reversion company will eventually receive their money by selling the property when the occupier has died or moved into long term care. Additionally, this type of home equity scheme offers the property owner the ability to change properties. This is a requirement of SHIP (Safe Home Income Plan).

Always take the assistance of an independent financial advisor so that they can help estimate the value of your property and help you decide on the scheme best suited to your requirements. Equity release is very beneficial for retired individuals who do not have a steady flow of income or require a capital lump sum for lifestyle improvements. One of the products that could succeed with these bequests could be the home reversion scheme as it offers stability, guarantees for your children and allows you to enjoy a worry free, rent free retirement.

 

For home reversion advice contact the specialists at Equity Release Supermarket on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

No Early Repayment Charge Equity Release Plan Launched by Hodge Lifetime

Monday, April 2nd, 2012

Following in the steps of the Stonehaven Interest Select plan, Hodge Lifetime are launching a new equity release plan with repayment options that include NO early repayment charges.

Previously, only Stonehaven equity release had created a niche in the lifetime mortgage market by offering an interest only lifetime mortgage. Stonehaven allow you the facility to repay the interest charged monthly, thus maintaining a level balance.

However, Hodge Lifetime has now created their own niche product, by offering a roll-up equity release plan with a spin. The unique feature of the plan is the facility of allowing partial repayments of upto 10% per annum with no penalty. This is a first in this previously inflexible early repayment charge equity release UK market.

 

The Mechanics

The option to repay without penalty applies after the plan has been running for at least 12 months. You then have the possibility of repaying all of the interest & an even an element of capital, if you wish. The minimum repayment is £500.

The major advantage of this lifetime mortgage is that no penalty would apply to this repayment as long as no more than 10% of the initial capital borrowed is repaid.

An example of this would be someone borrowing £25,000 initially. After, 12 months of the plan running they can then repay upto £2,500 each year thereafter. With a launch interest rate of just 6.31% annual equivalent, by paying the full 10% allowance would allow you to repay not only the interest but also the capital. The Hodge Lifetime Plan could then effectively be even used as a form of flexible lifetime repayment mortgage!

 

Background to Hodge Lifetime

Hodge Lifetime introduced the very first equity release plans in 1965 and have continued to earn a reputation for reliability ever since. Hodge Lifetime is a subsidiary of Julian Hodge Bank and is a founder member of SHIP (Safe Home Income Plans).

 

Plan Facts

The Hodge Lifetime Lump Sum Lifetime Mortgage allows you to take a single cash lump sum with a fixed interest rate for life. Plans start at age 60 & there is a minimum property value of £100,000 with a £20,000 minimum initial withdrawal limit. The plan is available in England, Wales & mainland Scotland.

Hodge Lifetime’s standard early repayment charges only apply for the first 5 years on a 5,4,3,2,1 basis. There is also an additional potential variable repayment charge dependent upon the movement in 25 year interest rate swap rates.

However, this variable penalty will be waived after 5 years. This ‘Downsizing Protection’ feature allows you to repay the Hodge Equity Release Plan with NO penalty if you move home after 5 years.

However, the main focus surely on the Hodge Lifetime Lump Sum equity release plan will be possibility of repayment the interest with a choice of when & how much.

No other equity release schemes provider will permit this at present with so much flexibility. Hodge will allow two payments per annum subject to the 10% maximum repayment & no penalty.

 

Who Would the Repayment Facility Benefit?

People who maybe wish to inhibit the traditional roll-up effect of their equity release plan would find the Hodge Lifetime plan of benefit.

Those unable to commit to a fixed monthly repayment as their preferred choice would be to make ad-hoc repayments once a cash sum has been saved.
People who may receive an unexpected windfall in the future
Parents who may wish to gift to their children for financial reasons (e.g. house purchase) knowing they will be repaid over a future term
Those at Pre-state pension age, need a capital lump sum now, but may wish to repay chunks back in the future from their extra income
The list could go on…

 

What to do next…

If you have been dissuaded by equity release early repayment charges in the past, then take a close look at this exciting new plan from Hodge Lifetime. The ability to repay 10% off the balance each year with NO penalty is unique.

With an opening offer of a reduced valuation fee of £99 for property values upto £350,000, this certainly looks likely to follow hot on the heels of Stonehaven’s Interest Select Plan.

 

For further information or to request a quote please visit Equity Release Supermarket’s dedicated Hodge Lifetime Lump Sum equity release page. Alternatively call the team on 0800 678 5159.

 

 
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