Equity Release Supermarket can today announce the launch of the new Hodge Lifetime Retirement Mortgage Plan.
Only available through a selected number of intermediaries, the plan aims to provide a solution to the crisis surrounding the repayment of interest only mortgages.
Many articles have been written highlighting the plight of 2.6 million interest only mortgage holders who have no repayment strategy in place at the end of their mortgage term. Today marks the equity release industries response to this crisis.
On 1st August 2013, Hodge is launching its alternative interest only lifetime mortgage solution called the Hodge Lifetime Retirement Mortgage Plan.
Reasons for the Hodge’s launch
Hodge Lifetime has identified the growing crisis in people approaching retirement with interest only mortgages and no exit strategy. There have been many reasons for this situation such as poorly performing endowments, pension plans, ISA’s or simply that no repayment plan was ever in force.
The question for interest only mortgagors is how are they ever going to repay the mortgage balance?
Equity Release Supermarket is experiencing an increasing number of enquiries by people looking for an emergency repayment route from their existing mortgage provider. Where once lenders were willing to extend the mortgage term, under new FCA guidelines there is now a reluctance to extend the mortgage term, leaving repayment as the only option.
The options available to repay this debt include downsizing property, remortgage to an equity release scheme, transfer to another interest only mortgage, or cash in any available investments. Each of these can present their own set of problems.
For those looking to downsize is the ability to sell the property within the timescales provided by the mortgage lender. Equity release schemes may present limitations as to how much they can lend as they are based on a loan-to-value ratio. Depending on age, a conventional mortgage may not be available as they will not usually lend beyond age 75. Investments may not be available if used for income, or even present at all.
How The Hodge Retirement Mortgage Plan Can Help
Hodge Lifetime is launching a mortgage product to compare to the Halifax Retirement Home Plan which proved immensely popular until its withdrawal in August 2011.
Similar in concept, it enables people between the ages of 55-70 to remortgage their properties for any purpose. The amount borrowed is based on income multiples rather than a loan-to value ratio, as with equity release schemes.
Monthly payments of interest are then made to the lender until age 80, effectively maintaining a level mortgage balance. At that point a decision can be made as to whether you wish to continue with the payments for life, or cease & allow the interest to roll-up thereafter. The latter option would result in the mortgage balance thereafter increasing for the duration of the term.
The Hodge Lifetime Retirement Mortgage is eventually repaid upon death, or sale of the property.
By using affordability as the basis for lending criteria means people on good retirement incomes can borrow upto 50% of the property value with Hodge, subject to income. Compare this to the current interest only lifetime mortgage lender – Stonehaven, who would only lend a maximum of 19% at age 55.
Therefore, on a property valuation of £250,000 the difference between the two schemes is a significant £77,500.
Features of the Hodge Lifetime Plan
- Flexible Repayment – Hodge will allow 10% capital repayment each year upto year 6 with no penalty
- Fixed Early Repayment Charge (ERC) – over the first 5 years the penalty decreases from 5% down to 1% of the capital repaid. No ERC exists after year 6.
- Fixed Interest Rate – 4.75% for 5 years, renewable thereafter (5.1% APR)
- Minimum Loan – £20,000; Maximum Loan – £500,000
- Eligible Income – basic state pension, pension schemes, annuity payments, SERPS or S2P
- No Negative equity Guarantee – ensures the loan can never be greater than the property value
- Location – available in England, Wales & mainland Scotland
This a lifetime mortgage. To understand the features & risks please ask for a personalised illustration.
Your home maybe repossessed if you do not maintain repayments on a mortgage secured on your home.