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Archive for October, 2013

Equity Release, Divorce and a Solution for ‘Silver Splitters’

Thursday, October 24th, 2013

Equity Release on divorceA new and rather unusual expression has recently emerged which is the term – ‘silver splitters’.  It hasn’t made the Oxford Concise Dictionary yet, but I suspect it’s just a matter of time!

 

Figures released by the Office for National Statistics (ONS) for the year 2011 reveal that 8% of all men divorcing in the UK were aged 60 and over. The equivalent figure for women aged 60 and over was 5%.  Compare this to 2001 when these figures were 4.6% and 2.6% respectively.

 

While overall figures for divorce have been falling, divorce amongst the retired and elderly have been increasing significantly, resulting in financially strained circumstances for many at a time when they should be enjoying life.

 

This increase in the number of silver splitters appears to be the result of the ‘baby boomer’ generation reaching retirement, experiencing the empty nest syndrome with children departed, looking at each other and deciding that they have little in common. Matters take their course and separation is followed by divorce.

 

Next follows the murky area known to the legal profession as ‘ancillary relief’ which is quite separate from the divorce itself (or ) and is concerned with the financial settlement between the parties. In the absence of an amicable agreement the family court can dictate how the assets in the marriage are shared out, and that includes the matrimonial home irrespective of whose name is on the deeds.

 

This is where help from equity release can come into play to facilitate the financing of any payment between the divorced parties and to alleviate the prospect of poverty and homelessness for either ex-spouse.

 

Silver Splitters Case Study

Let us take an example.  A couple, both aged 65, jointly own a property valued at £300,000 and they have paid off their mortgage. They decide to divorce but the wife wishes to remain in the family home and as the split is amicable the husband is willing to accommodate her wishes, but in exchange for a cash payment. By applying for a lifetime mortgage at the age of 65 the wife can raise up to 30% of the value of the home, i.e. £90,000. The property is transferred into her sole name and simultaneously the lifetime mortgage proceeds of £90,000 are paid over to the husband.

 

This leaves the husband with £90,000 cash which he can use as a deposit on a property for himself. Being 65 he can also raise a 30% lifetime mortgage on his new home and this enables him to buy a property  for say £128,500 (i.e. cash £90,000=70% and lifetime mortgage 30%=£38,500).

 

Alternatively, if both parties in my example agreed to sell the matrimonial home and split the proceeds equally then prospects look brighter. With say £150,000 each as a deposit and with a 30% contribution from a lifetime mortgage, my divorced couple would each be looking to buy new homes in the region of £214,000. (These examples do not take fees into account but these would be roughly £1,800 for both parties, plus moving costs).

 

The husband and wife could have two options on the types of equity release schemes available. They could elect to make no further payments to make for life and opt for the roll-up lifetime mortgage which would see the balance increasing yearly.

 

Alternatively, they can apply to take out an interest only lifetime mortgage and repay the monthly interest which would render the lifetime mortgage balance the same throughout. This is ideal should they be considering leaving a fixed inheritance for their beneficiaries.

 

How is the equity release mortgage repaid?

Dependent on which type of lifetime mortgage is selected, the final balance is usually upon repayment of the loan and any accrued interest takes place on death, entry into residential care or earlier sale of the property.

 

And the option to avoid monthly interest payments could be very attractive to divorced ex-spouses on reduced pension incomes. This is maybe the reason why the roll-up equity release types are the most popular?

 

Equity release is increasingly being used to fund divorce settlements, either by the parties themselves or by concerned parents. If you find yourself in a similar situation in experiencing divorce in retirement and need financial advice on how to separate the matrimonial home then please contact Mike Vicary of Equity Release Supermarket on 07795 195302.

 

All discussions will be kept in strictest confidence and any initial consultation will be FREE of charge. I look forward to speaking with you.

 

e: mike@equityreleasesupermarket.co.uk

m: 07795 195302

Are you Releasing the Potential from your Retirement Apartment?

Sunday, October 20th, 2013

Releasing equity on a retirement apartmentWith an ever increasing ageing population, more and more retired homeowners find that their properties are becoming too big to live in. In conjunction with this another significant financial burden is the ever increasing energy costs associated with heating larger properties.

 

This could mean that they make a choice whether to ‘eat or heat’.  An old cliché yes, but a very apt and true one.

 

Specialist housing, or retirement apartments have been around for more than 30 years and just 1% of over 60’s are estimated to live in these types of properties.  For most, moving to a retirement property can ease the pressure of excessive bills, plus give a new lease of life and community spirit.

 

For others though, a retirement apartment could be seen as not being financially prudent or comes with some uncertainty for a number of reasons:

  1. Location: Specialist retirement apartments may be more expensive than the value of your own home.
  2. Service charges: These are payable annually, and in line with inflation, they tend to be an increasing sum.
  3. Pension income: May suddenly be reduced upon the demise of an occupier.

If you already live in a retirement apartment, you may have the concern that with increasing costs and service charges, you may not be able to maintain your cost of living, and have the worry of potentially needing to sell.

 

Did you know however, that there could be a solution?

 

As an Equity Release Specialist, I have over the last 12 years been able to provide homeowners with an alternate way of being able to purchase a retirement apartment or to raise funds to cover on-going costs and services if you already reside in one.

 

Firstly, if you are looking to purchase a retirement apartment, by releasing equity, you could raise the shortfall between the sale of your current home and the purchase price of your proposed new property.  The equity release could be raised on your new property and would complete at the same time as your sale and purchase. The equity release application could also be on a roll-up, or even interest only lifetime mortgage basis to fit in with one’s inheritance requirements, or household budget.

 

Secondly, if you are already residing in a retirement apartment, you could have the option of releasing equity to cover your annual service charges.  This could be by way of a lump sum lifetime mortgage which additionally has the option of a cash drawdown facility. This would particularly suit those looking to take annual withdrawals to supplement their income & cover the costs of maintaining residence in their retirement home. The drawdown facilities with many equity release schemes can allow as little as £1000 withdrawals at a time to suit those not wishing to withdraw too much.

 

Case study 1

Mr & Mrs F lived in the West Midlands, but had always dreamed of retiring to the coast and live out their remaining years in the peace and tranquility of a property with a sea view.  Their 3 bedroom house was worth £175,000.00 and they wanted to downsize.  Mr F was not in particularly good health and he wanted to make sure that Mrs F didn’t have the financial worry or burden that their large home would have if he pre-deceased her.  Downsizing though didn’t necessarily mean down-pricing.  The purchase price of their dream apartment by the sea was £200,000.00, meaning a shortfall of £25,000.00 plus the associated moving costs.

By giving Mr & Mrs F full impartial equity release advice and recommendation, I was able to offer them a Lifetime Mortgage lump sum through a specialist interest only lifetime mortgage lender for £35,000.00.  This allowed them to cover both the £25,000.00 shortfall to facilitate the purchase, plus £10,000.00 for moving costs. Overall, this not only assisted with the purchase of their retirement apartment by the sea, but also enabled them to live there in financial comfort.

 

Case study 2

Mrs S was already living in her retirement apartment when there was the untimely demise of her husband.  Now just in receipt of her own pension, Mrs S was concerned that she would not be able to cover the on-going living expenses.

The service charges amounted to £2,704.00 per annum (£52.00 per week) and being on a reduced pension, Mrs S would struggle to maintain her standard of living plus pay her normal household expenses.  Being a specialist in equity release, I was able to advise Mrs S of her options, including a full benefits check.

 

Mrs S was just over the threshold for benefits, therefore I could look at the option of a drawdown lifetime mortgage.  Mrs S released an initial amount of £10,800.00 to cover four years’ service charges, leaving her with a remaining cash reserve of £21,600.00.  The drawdown facility allowed Mrs S to release sufficient funds each year thereafter to pay her service charges on an annual basis.

 

How Equity Release Supermarket can help…

Over the years, I have helped many clients in the same or similar situation and have such pride in doing the job I love and being able to assist purchasers and homeowners alike. Being independent lifetime mortgage advisers Equity Release Supermarket have vast experience in assisting its clients with retirement apartment purchases or releasing equity on them.

 

In addition we have access to the best equity release deals including cashback, free valuations and specially reduced interest rates. We always offer a free initial consultation, to see whether we can assist the over 55’s with retirement mortgages and financial help.

 

If you would like more information on how these equity release plans work, please contact Marcelle on 0800 783 9652. Alternatively, please email mark@equityreleasesupermarket.co.uk

 

What Leasehold Property Criteria is Acceptable to Equity Release Companies

Friday, October 18th, 2013

Equity release on leasehold propertiesWhen meeting new clients who are interested in releasing equity from their home, I’m often asked whether equity release companies will accept leasehold properties. The answer is more often than not…yes, however with certain caveats.

 

Around 2 million properties are currently owned on a leasehold basis in the UK. These leases are often originally set to 99 years or 999 years from the date the lease was set up. Older properties in the UK tend to have leases arranged to expire in 999 years, whilst new builds or retirement developments are usually shorter and can be typically around 99 years+. Typically flats tend to be leasehold, as freehold flats do incur issues with ownership, particularly when there is more than one floor.

 

Equity release providers usually require a minimum of 75 unexpired lease years in order to qualify for an equity release scheme. Just Retirement and more2life insist on a minimum of 75 years. Likewise LV= and Aviva equity release like to see 80 years left on a lease while Hodge prefer 90 years of unexpired lease years.

 

For properties built with a 999 years lease, these don’t usually cause any problems at all as they are unlikely to expire within one’s lifetime! However, for properties arranged on a 99 year lease, it may mean that the lease has reduced below 75 years depending on when the property was built. For equity release purposes this is where problems can arise as if the remaining leasehold term is below the lenders minimum then action needs to be taken.

 

In this instance, there are two possibilities: –

  1. It may be possible for you to buy the freehold. Further good news is that the cost of acquiring the freehold can be paid for from the proceeds of the equity release application.
  2. Extend the lease for a term of 90 years on top of the unexpired term of the existing lease.

 

Both the aforementioned solutions will not only enable meeting the criteria for the equity release companies, but also will invariably add value to your property. Basically, as the term of a lease reduces, it can have an impact on the property value and can be especially significant with expensive leaseholds in London.

 

The legal paperwork necessary to either extend or buy the lease is relatively straightforward and is done by the same solicitor who is acting on behalf of the equity release client. Ashford’s solicitors specialise in leasehold extensions and freehold purchase. They are one of the former members of ERSA (Equity Release Solicitors Alliance).

 

Peter Barton, a partner at Ashfords said “I have seen over recent years an increase in the number of clients using equity release to extend their lease. Whilst the process may appear daunting we at Ashfords can take you through the process at the same time as dealing with the equity release, and it can be timed to complete at the same time.”

 

Additionally Peter Barton of Ashfords advises the following –

 

“We would always recommend speaking with your Landlord/Managing Agent to ascertain their costs in extending the lease. If those costs seem excessive it is always worthwhile speaking with any neighbours who may have extended their lease to see if they were charged the same, alternatively there are websites that contain calculators to give you an estimate of Landlord costs for extending the lease. We have found those very useful and have saved clients many thousands of pounds by enabling clients to negotiate with their Landlords.”

 

Leasehold properties can present a challenge with regards to applying for an equity release mortgage, however upon inspection of the deeds including the lease document can unravel the exact lease criteria. Additionally, by checking the lease can also clarify any unusual rules in relation to retirement properties or sheltered accommodation. These could include such clauses such as a sinking fund, where the freeholder can make provision for improvements or repairs, or even age restrictions on who can live there.

 

Other issues that leaseholders are obliged to pay for, & can be too prohibitive to some equity release companies, are the service charges.  These are often paid for via maintenance charges and are usually determined by the freeholder or their agent who can decide the work that needs to be done, who will does it and the ultimate cost. All these issues should be investigated beforehand, so that if issues do exist they can be resolved as part of the equity release process.

 

For any questions about leasehold properties or to check your eligibility for equity release, please contact Mark Rumney at Equity Release Supermarket on 07957 974826. Mark can also be emailed directly at markrumney@equityreleasesupermarket.co.uk

The Many (Sometimes Unusual) Reasons to Release Equity from Your Home

Monday, October 14th, 2013

Unusual reasons to release equityDuring my 10 years as a Lifetime Mortgage specialist I have come across a plethora of reasons to make genuine use of equity release schemes. There are the most obvious and popular reasons such as remortgaging and debt repayment; but there are also some that aren’t so obvious.

 

Equity Release Case Study #1

One that springs to mind is a case whereby I helped an individual back in 2007. This was a 74 year old male who lived in South Cheshire. The situation was terribly sad, but not without hope and possible happiness on the horizon.

 

His only child had been his son, who had unfortunately died a few years previous in a car crash. To compound matters further he had sadly lost his wife within the last 6 months of our meeting. Their greatest pleasure when they were together, was to go on cruises around the Mediterranean and Caribbean which they could fund from their regular income.

 

Following on from these unfortunate events, he re-evaluated his retirement plans with a positive outlook. He therefore decided that his life would now be split between 6 months at home and 6 months cruising, and it was now just a case of being able to finance his revised situation.

 

He decided he would like to raise a total of £150,000 by releasing equity after calculating that figure would cover his costs for the next 10 years.

 

I therefore arranged a flexible drawdown lifetime mortgage, with just an initial £15,000 and a large enough cash reserve facility that he could then draw upon, as and when required. This suited him perfectly and for a couple of years at least, I got postcards from around the world. The drawdown lifetime mortgage plan was his ideal plan and met his requirements not only now, but also into the future when further cruises and retirement expenses would be required.

 

That’s what we, at Equity Release Supermarket call an aspirational equity release case. That is one that helps someone to attain their goals in life and we are only too happy to help advise on such cases.

 

The other side of the coin is a needs based equity release case. This is where there is an urgent need to raise equity in order to stave off potential severe financial repercussions such as mortgage repayment, insolvency or even bankruptcy.

 

Equity Release Case Study #2

From my experience, such a case was with a 68 year old lady in North Derbyshire who had accumulated personal loans and credit card debts amounting to over £80,000. The strange part was that these were from gambling regularly on the Canadian Lottery of all things. Her family had contacted us to see if we could help which indeed we could. However, in order not to fall into a similar trap, I advised the family to remove or better still destroy her credit cards.

 

In circumstances like this, equity release schemes can act as an almost immediate relief from stress and worry and several times over the years I have had a letter from the client’s family. This provided me with personal satisfaction as they were thanking me for my considerate actions and telling me how not only does the client feel and look better, but I may have also added another few years to his life expectancy.

 

Being an lifetime mortgage adviser can sometimes transform people’s lives for the better and is one of the many reasons that I feel so passionately about the equity release marketplace I work in.

 

These are just two case studies whereby I have been able to assist retirees with their financial issues in retirement. Have it be known they are two relatively extreme cases, but I use them to show the diversity of reasons for using lifetime mortgages.

 

The reason I have been exclusively involved with equity release schemes for the last 8 or 9 years and intend to stay so until I retire, is because of the instant reaction to either attain the wherewithal to achieve ones goals, or to remove the stress and strains of financial problems in retirement.

 

About the author

Barry Adnams is the author of this article. Barry is one of the most experienced equity release advisers at Equity Release Supermarket, having previously worked as an adviser & manager at NatWest/Royal Bank of Scotland Equity Release.

 

Having worked with RBS Equity Release in 2005, Barry has much experience in dealing with retirees financial situations and is fully aware as to the importance that a release of equity can be. Barry endeavours to meet all his clients face-to-face, if not only for a cup of tea!  Dealing with his many clients this way enables Barry to discuss both the pros and cons of equity release and is always open to family members being present at such meetings.

 

If you wish to discuss anything in relation to Barry’s articles or any general questions about lifetime mortgage or home reversion plans, then please contact Barry Adnams at Equity Release Supermarket, on 07989 281108 for a free initial consultation.

 

Alternatively, Barry can be contacted by email at barry@equityreleasesupermarket.co.uk.

 

To evidence the quality of Barry’s advice & feedback from his clients please check his testimonials on the Feefo link on the homepage (bottom right corner).

 

 
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