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Archive for July, 2013

Hodge Lifetime Launch New Innovative Retirement Mortgage Plan

Wednesday, July 31st, 2013

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.

 

For further details, or to request a quote on the Hodge Lifetime Retirement Mortgage Plan please call the equity release team on freephone 0800 678 5469 or email mark@equityreleasesupermarket.co.uk

 

Equity Release Becomes the New Inter Generational Equity Vehicle

Wednesday, July 17th, 2013

With changing attitudes towards inheritance planning, and generational gifting becoming increasing common practice, we look at why equity release is being more widely used as the retirement vehicle of choice.

Having advised on equity release schemes for the past 14 years, we’ve witnessed firsthand the sea change in perceptions over how much of an inheritance parents are now wishing to leave their children.

 

Couple this with the growing acceptance of retirement equity release schemes by the over 55’s, we are now seeing real evidence through equity release enquiries the lengths parents are actually prepared to go to for their children.

 

Why a shift towards equity release?

In the early days of lifetime mortgage & home reversion plans, people were looking towards a release of equity mainly for lifestyle purposes; a new car, holiday or extra income. Today’s economic environment throws a different light on the real purposes for releasing equity – necessity (mainly debt consolidation) and generational gifting.

 

Equity release schemes are now providing a vehicle of choice for many that were once looking towards the retirement mortgage market when they reached state pension age. With schemes such as the Halifax Retirement Home Plan now being made redundant & mortgagees reigning in their lending criteria on the much maligned interest only mortgage, it has left little scope for retirees to find a route into secured lending.

 

How can equity release schemes assist?

Basically anyone over the age of 55, with a main residence valued above £70,000 could become eligible for an equity release mortgage. Further criteria does apply, such as any existing mortgage, property type etc, however in principle age & valuation are the main eligibility factors.

 

To ascertain your maximum release, tools such as our equity release calculator are available on the Equity Release Supermarket website. Based on the age of the youngest applicant & the current sale value of your home, the equity release calculation will prove of assistance as to whether you can raise sufficient funds to meet your financial objectives.

 

For those with an outstanding mortgage leading upto, or actually in retirement, equity release schemes have become a get out of jail card. Having a mortgage at retirement is not a crime, however the ability to repay it has become a problem for many as lenders are beginning to tighten their belts on mortgages into retirement. We have instances of clients anticipating renewal of their mortgage at retirement, only to see panic set in when their lender refuses to extend & then rub salt in the wound by demanding repayment. This would ultimately result in either a remortgage, which is becoming increasingly difficult, or sale of the property to downsize. Neither offer stress free options!

 

Bearing in mind these mortgages were actually set up with a final repayment end date, one cannot always expect in today’s economic environment the banks to be that sympathetic in such instances. However, some leniency would be welcomed, or maybe that’s just wishful thinking.

 

Equity release functionality

We have therefore seen how people are entering retirement still tied down with a mortgage. However, there are also an increasing number with unsecured debts, predominantly credit cards which people have trouble shifting once their income drops entering retirement. Perhaps realisation that there income has fallen hasn’t yet set in, which coupled with household spending continuing apace, sees the error of their ways without re-addressing the fundamental principle of ‘budgeting’.

 

The ‘equity release safety net‘ is becoming a credible solution for many in such situations. By taking a lifetime mortgage scheme, whether on a roll-up basis or more commonly an interest only lifetime mortgage, the debts can be consolidated into a secured loan fixed for the rest of their life. Depending on affordability once the debts were cleared, and attitude towards children’s inheritance, would determine whether the interest only, or roll-up version is selected.

 

Choosing roll-up means NO monthly payments. This has a benefit in leaving a household budget with a greater disposable income, particularly if all debts have been repaid. The negative aspect of roll-up is that the balance will increase over time therefore eroding, all or some of the kid’s inheritance. There are other factors that could affect the size of the inheritance, the main one being how much property values could increase by over their lifetime. Everyone has their own opinion on that.

 

Selecting an interest only lifetime mortgage engages an element of future discipline in that regular payments need to be maintained. However, there are significant advantages. These are that as the interest is being paid monthly, the debt will remain level for the duration. This has the added benefit that if house prices do increase, there could be an even larger inheritance to leave, even after you have taken a release of equity for yourself. With interest rates on these schemes starting at 5.59% (6.0% APR) and fixed for life, interest only lifetime mortgages now offer a credible equity release solution for many that were starting to despair at their lack of options.

 

Equity release gifting acts as a form of ‘early inheritance’

Finally, we touch on the growing realisation that children seem to have of accessing their inheritance now, rather than later. With difficulty for first time buyers in the current property market, the younger generation have turned to the bank of mum & dad for the answer to getting on the property ladder – using equity release.

 

This has been the biggest change in attitude we have seen in the 14 years of equity release schemes.

 

It has been two-fold: –

  1. the acceptance of parents to gift an inheritance now rather than later
  2. that the stigma of having to leave an inheritance when they die has gone

 

Increasingly, parents are taking equity out of their properties to gift to their children, mainly to invest in another property, occasionally for business or divorce purposes. It maybe all too easy for the children to say they would like their inheritance now, which is all well & fine if this is being taken out of their parents house & re-invested into their first property. Couple this with the governments help to buy scheme & providing 20% deposits leaves some children not having to strain themselves too much financially these days, judging by the many options available.

 

A great idea or not?

Some may say so; others may feel that the younger generation gets it too easy these days. Mortgages of old were also hard to come by & you had to save over a long period of time to find your deposit. Your lender even had to be the bank you held your account with!

It just seems the ‘I want it now’ attitude has arrived & the old fashioned ways of striving to find the deposit seem to have disappeared.

 

Whatever the consensus of opinion is, equity release is here to stay and finding such helpful scenarios of inter-generational gifting to become an advantage is certainly to be welcomed.

 

To discuss the topical areas within this article, or find out more about equity release and its uses, please contact the Equity Release Supermarket team on Freephone 0800 678 5159.

 

If you prefer to discuss in confidence, please send your email to mark@equityreleasesupermarket.co.uk

 

Lowest Equity Release Interest Rate From Just Retirement

Thursday, July 11th, 2013

The most common research feature that customers consider with regards to equity release schemes is the interest rate.

Over the past 12-18 months with increasing competitiveness in the equity release market, interest rates have reduced significantly & are now lower than 6%.

 

However, today Equity Release Supermarket have secured funds with one of the leading equity release companies to secure a fixed rate deal for its customers that is just 5.48% (5.6% APR).

The equity release provider is Just Retirement.

 

This is the first deal of its kind below 5.5%, whereby an equity release company can offer a single priced product for anyone between the ages of 60-75. This limited tranche of funds is available on a drawdown basis, with a minimum initial withdrawal of £20,000.

 

Just Retirement have been in the equity release market for 7 years now & provide a drawdown lifetime mortgage plan which enables an overall cash reserve facility from which you can take withdrawals as & when they are required. This flexibility means that you are only charged on the monies actually withdrawn, not on any funds left in the reserve facility.

 

The minimum withdrawal from the cash reserve is just £2000 & once the equity release plan has been set up, there are NO further charges for withdrawals. Properties situated in England, Wales & Scotland are eligible with a minimum property value of £70,000.

 

Additional perks of this limited offer is a FREE valuation & £500 cashback payable on completion. Therefore, there are no upfront fees to submit this Just Retirement application through Equity Release Supermarket.

 

To request a Just Retirement quote on the new 5.48% interest rate please click here or call one of the Equity Release Supermarket team on Freephone 0800 678 5159.

 

As stated these are limited available funds at this rate so please do not hesitate in contacting us.

 
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