Archive for the ‘Lifetime Mortgage’ Category
Wednesday, October 14th, 2015
The equity release marketplace in 2015 has been undergoing a period of growth and innovation which has been long overdue. There are major factors influencing this potential golden generation of competitive equity release plans. Helping matters has been a new big brand household name – Legal & General who are aiming to take a large share of equity release business, but not necessarily in the conventional manner.
Realising the lifetime mortgage market needs a sea change in order to reach the heady predictions made, Legal & General are almost starting with a blank canvas & fresh approach to how equity release UK plans are marketed & advised. These ideas I’m sure will soon be rolled-out to the equity release broker community, who need to awaken to the concept of change, not much of which has really been seen over the past few years.
Personally, equity release brokers & lenders need a complete overhaul of its thinking & messages it needs to portray to the consumer to build confidence. Conventionality needs to be erased & brought into the 21st century using the latest of technology & wider distribution. This shouldn’t be just by one or two brokers strangling the marketplace, effectively restricting the entry of new lenders/funders, but an across the board approach by everyone (brokers & providers) working together.
Furthermore, for growth, new advisers are needed to be brought in from outside the industry & trained to meet the rigorous measures imposed by the Equity Release Council to ensure safe route to market for the consumer. There is a shortage of quality equity release advisers which needs immediately addressing, otherwise how can the market grow?
Legal and General Home Finance ‘Sea Change’
Let’s analyse what Legal and General Home Finance have achieved since entering the equity release arena by acquiring NewLife Mortgages in early 2015. They have provided a series of plans which have effectively matched the best crop of products in the market at entry point. Features such as the 10% voluntary repayment option, lowest interest rate, high loan-to-value products & inheritance protection facility have competed significantly well against its peers, such as Aviva Equity Release.
Understandably Legal and General had to start somewhere & their efforts so far are commendable. With product research underway & their own analysis of how the market should look moving forward, we welcome a fresh voice & innovative product development. With electronic applications & valuation instructions to commence in the New Year, these are exciting times for the industry, but not before time. Branding themselves as Legal & General Home Finance indicates their proposition will be more diverse than just traditional equity release plans.
Areas where development is needed is greater flexibility for all pre & post retirement homeowners and remedying the issues for the over 55’s sensibly borrowing into retirement which MMR has stunted. We have seen how the Marsden Retirement Mortgage has filled a niche in post lending advice & this gap between equity release schemes & residential mortgages is a void that needs consideration. Equity release plans in their current state, albeit the most flexible ever, will not meet the future needs & demands for all retirees. New ideas and new forms of retirement mortgages are needed, but maybe one’s that somehow interact with lifetime mortgages, switching between as the homeowner’s future circumstances dictate.
Can Legal & General Exert Influence?
There is a vision for the expected growth in post-retirement lending, which some market analysts have projected could reach £5billion by 2020! This is still a mere drop in the ocean compared to the residential mortgage market of over £200 billion, yet there is still almost £1 trillion in untapped equity remaining in the over 55’s property portfolio’s. Is the figure even realistic? Not in its current format & lenders thought process. This is why Legal & General’s introduction could be what the market needs.
We are aware of the history of equity release schemes, resulting in the lack of confidence with many retirees & press alike. However with the efforts from Nigel Waterson from the Equity Release Council & the voice of important members of the equity release sector such as Andrea Rosario, the market is starting to answer back. In essence, the external adverse publicity maybe due to lack of knowledge of equity release and of how the newer breed of lifetime mortgage schemes work in practice & how it’s strictly regulated by the FCA. But this is where the equity release industry has plotted its own downfall. Lenders themselves should stand up more & be accountable, especially when adverse publicity arises, as it tends to be the market correspondents alone who respond.
Frustration ensues when column inches and comments about equity release are misconstrued. But that will happen when the market is so inhibited by a few brokers who have their own interests at heart. We already have an ‘equity release club’ in the industry, but designed for brokers for equity release referral purposes. Equity release brokers themselves should form their own ‘club’, thus joining forces and work out they can ALL assist the growth in the equity release sector. A new era of consumer openness and transparency needs to develop so there is a clear voice representing the industry, with a collective approach from ALL, not just the monopoly of a few.
A Sea-Change of attitude, products, innovation and lenders is what’s required for equity release & retirement lending as a whole, to progress. At least one of these requirements seems to have been met, with the household name of Legal and General becoming a new lifetime mortgage provider. The next 12 months may define the future of this industry. These could be exciting times for all those involved from brokers through to lenders, but not forgetting the true beneficiaries to all this – homeowners over the age of 55 who genuinely need a mortgage vehicle to enhance their retirement!
For further information on the range of Legal & General equity release schemes, please contact Mark Gregory – email@example.com or call 07966 889597.
Thursday, December 11th, 2014
Here at Equity Release Supermarket we occasional experience children and attorney’s contacting us asking whether they can take out equity release on behalf of someone they hold an Enduring or Lasting Power of Attorney over? The answer is yes.
However, there are systems in place from equity release companies to protect the homeowner and ensure that any release of equity is being utilised for the correct reasons and correct legally. Looking after someone else’s affairs financially is a big responsibility, not only in looking after the homeowner, but also the responsibility to their beneficiaries.
Being an independent equity release adviser with Equity Release Supermarket, I recently dealt with an Enduring Power of Attorney case which was being utilised to meet ongoing long term care costs that were being provided to enable the homeowner to remain in her home. The following case study illustrates the steps involved in helping the attorney take equity release on behalf of someone they were looking after, due to the onset of Alzheimer’s and the inability for the homeowner to contract themselves.
Equity Release & Power of Attorney Case Study
Initially, I had a call from a solicitor who held an Enduring Power of Attorney over a frail lady in her late 80’s. The lady had nominated the solicitor to be Power of Attorney over 15 years ago as the only family she had was a son living abroad. The solicitor contacted me as the lady had now developed Alzheimer’s and needed 24 hours a day care and was concerned that the lady was about to lose her home and be forced into a care home.
The homeowner was unable to live on her own and the cost of paying for full time carers to stay in the property was costing over £2,500 per month. Due to the ongoing nature of these costs and the fact her income was insufficient to cover much of these expenses, her savings were rapidly reducing and apart from the bungalow, she had no other assets. The attorney, who was also the solicitor had looked into all other options including help from the state, alas none were available.
Additionally, moving home was not a viable option due to the lady’s poor health and she did not want the upset of leaving her bungalow of 20 years and she still had something recognisable to her which was her Labrador. Therefore, with only £15,000 left in savings, time was running out to find a solution as to how to finance the remainder of her years.
The Equity Release Advice Process
I basically dealt with the solicitor as if they were my client taking out the equity release scheme. After taking suitable identification for both the homeowner & the attorney I was able to gather the background to the older lady’s finances. This gave me an insight as to how much was required monthly in order to meet the ongoing long term care costs. My job then was find a suitable equity release scheme that would fulfil the needs of maintaining the payments for the long term care for the first 12 months and then beyond.
After conducting my initial equity release research I advised that a guaranteed lifetime mortgage drawdown scheme was the best option. One particular lifetime mortgage meeting these requirements was from Liverpool Victoria. LV= offer an equity release scheme with a guaranteed drawdown facility, so no matter what happens in the next 15 years money can still be taken from the creation of a cash reserve facility, to guarantee money for future care costs would be available.
This is the advantage of taking completely independent equity release advice as we can research the whole of the marketplace to find the correct scheme to fit with clients individual circumstances. The LV= Flexible Lifetime Mortgage scheme ticked all the right boxes to meet the Attorney’s requirements as a concern of hers was that money would be need to be guaranteed in the future to guarantee the future of her care.
The next step to save time & possible heartbreak later was to check the legal paperwork of the Enduring Power of Attorney was suitable from the lenders perspective. Therefore, I sent a copy of the Enduring Power of Attorney document to LV= legal department who checked over & made sure it was registered with the Court of Protection. It was & met their requirements which enabled me to pass on the good news to the solicitor which gave the green light to continue the process to application.
Not only were LV= happy that the Power of Attorney was registered with the court of protection, but also that there was no conflict of interest between the attorney and the homeowner with the Alzheimer’s. The only other concern for LV= was that there was full time carers living in the property, but who rotated their shifts on a weekly basis. The carers were employed by an agency and after seeing a copy of the agency employment agreement, LV= were happy to proceed as long as the agency would sign a letter to state that upon the death of the homeowner they would cease to remain in the property. This they had no issue agreeing to.
Why Should Equity Release Clients Take out a Power of Attorney?
I always recommend Lasting Power of Attorney to my clients (changed from Enduring Power of Attorney in 2007) as you can nominate someone you trust; family member, friend or solicitor to make decisions on your behalf if needed in the future. However, most people think they will never need it and do not want to think about it is reassuring to know as in the above case that your best interests are being looked after by someone that you trust.
There are two elements to this in England and Wales – the Property and Financial Affairs & the Health and Welfare. This enables attorneys to provide cover for permanent or temporary control of finances and also medical treatment consent. The attorney also has the power to make the decision as to whether the homeowner should be taken into care, or stay in own home & be looked after there.
It is not compulsory with equity release, but is recommended that a Lasting Power of Attorney (LPA) is taken out, so if you get to a stage either through Alzheimer’s or any other reason if you cannot make financial or medical decisions then someone you trust can be nominated on your behalf to make decisions for you. LPA’s can even be used on a temporary basis where then can be utilised if a situation arises and you are unable to sign documents due to a temporary event such as illness, holiday or even broken wrist!
In the above equity release case the advantage of having Power of Attorney in place ultimately enabled the lady to stay in her own home in the first instance and with a guaranteed lifetime mortgage drawdown scheme from LV= it enabled her to stay in her own home for the foreseeable future. This would be via an initial lump sum covering the first 12 months costs, with the option if still required a cash drawdown facility, sufficient to cover a further two years costs, subject to any changes.
My name is Glen Pike & I am a specialist in equity release case studies such as this involving Power of Attorneys.
If you have a similar decision to make on behalf of a parent, or someone close to you and would like a free initial equity release consultation, please contact me on 07510 835613 or email firstname.lastname@example.org
Tuesday, May 20th, 2014
Anytime housing values begin to increase, it is time to assess the home buying situation. Retirement has been a topic of some concern for those heading into their 60s. In fact, over 55s are starting to realise while they have worked hard, they may not have enough in their pension portfolio to live on. The reason is all down to living longer – longevity. The average life is no longer to 70, but closer to 90 for females. Even in London families are cash poor, but property rich. Take advantage of new housing statistics and use a UK equity release calculator to determine if there is an equity release solution for you. London equity release schemes are being called upon because of their ability to help those who need cash, but own large amounts of equity in their property.
Equity Release Defined
Equity releases most popular form is the lifetime mortgage. This mortgage comes in various guises and can either come with or without a method of monthly repayment until the property is sold, either because the homeowners move, pass away or end up in long term care. The mortgage can be taken out from the age of 55. These lifetime mortgages do collect interest based on a fixed APR that adds up each year until the mortgage is repaid.
The London Housing Market
London housing prices have increased by 17.7 per cent in the last year. New and pre-owned homes in London are continuing to increase rather quickly. While housing prices are increasing, mortgage interest rates have actually decreased in the last few years, however storm clouds are on the horizon with news that early 2015 could see an interest rate rise. The monthly cost even on equity release is lower than in previous years. Now with lifetime mortgages it is true you do not make a monthly repayment; however, it is important to use an equity release calculator to compare the cost of your lifetime product against a standard mortgage.
By comparing the two you can determine if the low monthly cost stacks up against the equity lifetime release. Standard mortgages in London offer a loan to value of 75 per cent, meaning the other 25 per cent has to be a down payment for the purchase of the property. Even the LTV has been increasing over the last few years and markedly in the last few months. What this means for lifetime equity release is a higher percentage of lump sum tax free cash available for homeowners.
The increase of housing prices means more value is in the home, thus more money can be released with any form of available equity release product. Even though there is a potential for more money to be available, it does not mean all homeowners will take the larger lump sum. It is just important to know it is available and there as a back-up should anything untoward happen.
Agenda – Lifetime Mortgage
Lifetime mortgages are defined and the London housing sector is ripe for the picking. You have an idea of the solution, but why might lifetime mortgages continue to rise in popularity even in the Big Smoke?
Younger generations tend to spend more during an average week than older generations, say those in their 80s. Many retirees are in their 60s, which means they are still spending money as if they were working.
If you add the expenditures that occur each week to the recession issues of the past couple of years, there is a detriment to retirement funds for most individuals, even those in London. Especially people living in London, considering the expense of daily living without being overly effusive with spending.
Housing costs to run a large home, food purchases, travel, and entertainment are all going to be more in the capital city. As retirement pensions and other retirement investments lost a great deal with stock market troubles, it has left many retirees without enough funds to sustain their retirement life.
More so has been the fundamental flaw in endowment mortgage schemes whereby large shortfall are being evidenced upon maturity of the endowment plan. This has left many London homeowners with shortfalls on the repayment of their interest only mortgage. Therefore, London equity release schemes have come to fruition with the likes Of Stonehaven, more2life & Hodge Lifetime whom can provide an escape route via remortgaging onto their London lifetime mortgage schemes.
It puts lifetime mortgages on the agenda because they are a way to gain cash for mortgage repayments, general living, extravagant holidays, and any other type of entertainment retirees might wish to enjoy. The cash poor situation suddenly becomes obsolete as the property rich gain a little of that hard earned money back to use as they grow older.
Inheritance Factors are Imperative
As you consider whether a lifetime mortgage is right for you, it is imperative to think about inheritance, especially with the associated property values in London borough’s. A large estate when provided to family all at once is subject to inheritance tax over & above the £325,000 allowance for each party. This tax can be so large that it wipes out the entire inheritance. It is the reason those with a huge estate set up trusts and other tax planning instruments which can alleviate some of the IHT burden.
A lifetime mortgage can work in one of two ways, both as detrimental to any inheritance you may want to leave behind, but can also be used as a successful vehicle for mitigating IHT issues. Even in London, equity release can threaten an inheritance depending on the type of loan. For instance, the roll-up lifetime mortgage has the interest compounding as long as the mortgage is outstanding. On the other hand it is an opportunity to disperse inheritance without fear of taxes. By using a UK equity release calculator, can help you calculate the percentage of loan to leave as an inheritance.
Before entering into any equity release contract, you must seek independent equity release advice from a reputable company. For a full list of equity release brokers visit the Equity Release Council website, where using a postcode search can identify a London equity release brokerage near to you.
Saturday, March 22nd, 2014
Pure Retirement recently became the latest equity release provider to enter the lifetime mortgage market. Launched in January 2014, it signalled the re-emerging confidence & growing popularity in the equity release market.
However, it makes no sense for a new lender to enter the market without finding a niche for itself. So, over the past few months Equity Release Supermarket advisers have encountered practical experience of where the Pure Drawdown Plan has fitted in providing best advice scenarios. Here we help explain where we feel the Pure Retirement Plan wins, in an already competitive equity release marketplace.
First, the Pure Drawdown Plan in Detail
Before we enter the wheres & wherefores of how the Pure Plan fits in with equity release recommendations, let’s look at the Pure Retirement plan facts…
The Pure Retirement Drawdown Plan is the first offering from the new lender formed by funding assistance from equity release brokerage – Age Partnership. This follows the similar relationship that exists between more2life & Key Retirement Solutions and represents a growing trend where brokers have become equity release providers. This similarity is also evidenced from where the funding source is derived, in that Pure Retirement relies also on the same annuity backed insurer to give it the ability to fund its lending – Partnership Assurance.
The Pure Drawdown plan is a lifetime mortgage that starts later in life than most equity release schemes with a minimum age at commencement of 70. It’s aimed towards the higher end of the loan-to-value ratios without any medical underwriting, which the enhanced lifetime mortgage plans have the advantage of.
The starting percentage is 36% of the property value at age 70, which compares favourably with other high LTV products. Albeits not the highest maximum equity release plan out there, it has a neat trick up its sleeve with how it can still compete with these maximum lifetime mortgage plans. Details of how are explained later in this article.
As a member of the Equity Release Council, the Pure Drawdown Plan offers a free no-negative equity guarantee and 100% ownership of the home. Portability enables you to still move house once the plan has been set in force and the interest rate is fixed for life, launched at a reasonably competitive 6.74% monthly rate (7.1% representative APR).
The minimum loan is higher than most at £25,000, which is where Pure Retirement’s market lies and is available in England, Scotland & Wales.
This is a roll-up lifetime mortgage plan with the option of a cash reserve facility. Therefore, Pure Retirement will calculate the maximum release possible, from which an initial amount can be withdrawn. Any funds untaken, remain in a cash reserve held by Pure Retirement at no cost until needed in the future. Should it later be necessary to access these funds, they can be drawndown in minimum amounts of £5,000 with no further charges.
Where Pure Retirement Lifetime Mortgage Strengths Lie
As an independent equity release adviser, one of the most common reasons for client objection lies in the costs of implementing an equity release scheme. Here is where the Pure Drawdown Plan wins – set up costs!
Only one equity release company has previously offered a scheme whereby the standard terms dictate a cost effective route to market for any client taking out a lifetime mortgage, & that’s Partnership’s Enhanced Lifetime Mortgage. Some lenders will temporarily create pockets of time whereby a cashback exists or a reduced interest rate for a limited period, but these come & go.
However, Pure have created these features as a permanent fixture & all credit to them in seeing this gap in the market and understanding what the consumer requires. Afterall, many applicants want a release of equity to help them financially as they have limited funds in the first place. By asking them for more money up front, it makes the process more difficult for them to get the whole application underway. Pure Retirement alleviate these areas, both pre & post application stages, let me explain how and why.
Pure’s Set up Costs
Pure Retirement provide a two tier set up cost operation; one for equity release loans between £25,000 & £44,999, the other based on loans in excess of £45,000.
All equity release schemes will normally incur set up fees in four main areas – Valuation, application, solicitor & adviser charges.
Pure approach this differently in the sense they aim to cover the majority of costs; the more one borrows, the greater the help provided. For loans over £45,000 the cost is enhanced furthermore by them providing: –
- FREE valuation
- NO application fee
- Contribution of £600 towards legal costs
- Contribution of £500 towards the advice fee
Therefore, dependent upon how much the advice fee being charged is, which in the case of Equity Release Supermarket its £895; the net advice fee cost would only be £395. Bearing in mind we can source an ERSA equity release solicitor, for a reasonable £495 + VAT & disbursements (including home visit) the £600 contribution from Pure Retirement should cover this on a standard freehold property. This effectively means to implement a Pure Drawdown Plan with Equity Release Supermarket would only cost approximately £395!
Where Does the Pure Retirement Plan Offer Clients Best Advice?
As previously stated, Pure Retirement Drawdown Plan has been targeted to meet those clients looking towards a maximum equity release in order to assist them with their retirement needs.
A recent example of how the Pure Drawdown Plan can still offer a client a greater net amount, even though the maximum release is lower than a competitor, can be illustrated by a case I recently encountered: –
Pam, aged 79 was looking to move property & required a lifetime mortgage to help her with the purchase. She was in good health & needed the maximum release possible to not only help with the purchase but also the moving costs & legal fees.
The purchase price for the 3 bedroom flat in Cornwall is £140,000.
Pamela requires the maximum release possible which following extensive research would point towards the Just Retirement Lump Sum Plus plan which would release £64,400 at an annual interest rate of 6.75%. This comes with a free valuation, £600 application fee, legal costs & advice fee.
Looking further down our research table identifies the Pure Drawdown Plan with a 6.74% monthly interest rate. However, the maximum release Pure would offer would be a lower amount of £63,000. But upon delving deeper into this product & by analysing the charging structure it shows that the actual Pure Retirement net release could be higher.
Fee Type /Provider
| Just Retirement
Evidently, the Pure Retirement plan has £1700 reduced set up costs, compared to the Just Retirement plan. The next part of this calculation is then offsetting this £1700 advantage that Pure Retirement has against the £1400 extra that Just Retirement can release as their maximum.
The final result therefore shows that Pure Retirement will have a greater net release to Pam of £300 and therefore proceeds with the recommendation as the £300 would be more advantageous in her pocket.
The message therefore is never look at the top line maximum amount, but always to consider any incentives that may help improve the net offering.
Existing Equity Release Customers Looking for Additional Funds
Other areas where Equity Release Supermarket customers have already benefitted from the new Pure Retirement lifetime mortgage is under two scenarios: –
- Where they have an existing equity release plan & need further funds.
- If looking to obtain a lower interest rate, yet no lender can provide sufficient funds to enable the equity release remortgage
Following the routine check to see if any additional borrowings are available with their existing lender, it’s then our duty to research the whole of the market to see if any other equity release providers could assist.
One of the issues against switching equity release schemes is usually the set up costs that prohibit the transfer. Under the two scenarios, in the first the charges could swallow up any of the spare cash being targeted, and in the 2nd scenario the set up costs make any transfer non-profitable as these costs offset any future savings in interest.
Its therefore the case that set up costs can prevent future maneuverability with any home equity scheme.
This is where the Pure Retirement Drawdown Plan can come into its own with its lower set up costs. Under both scenarios, Pure’s reduced set up costs will help with the switching of equity release schemes. Under the 1st scenario it will lead to more funds being available to withdraw & secondly in obtaining a lower interest rate its helps bring forward the break-even point.
Set up costs are an important aspect in the consideration of accepting any equity release recommendation. However, your adviser should consider the whole picture and features necessary in your meeting your requirements. This is why any equity release adviser should be experienced, qualified and importantly independent too.
If you feel that the Pure Drawdown Plan could be of benefit to you, please contact Mark Gregory on 0800 783 9652 or email email@example.com.
Request Pure Drawdown Quote | Pure Product Specs | How Much Can I Borrow? | Contact Us
Thursday, October 24th, 2013
A 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.
m: 07795 195302
Sunday, October 20th, 2013
With 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:
- Location: Specialist retirement apartments may be more expensive than the value of your own home.
- Service charges: These are payable annually, and in line with inflation, they tend to be an increasing sum.
- 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 firstname.lastname@example.org
Monday, October 14th, 2013
During 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 email@example.com.
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).
Monday, September 30th, 2013
We often read comments in newspapers, or see reports on TV, that before taking equity release you should always consider your alternatives, as there maybe financial solutions that have not been previously considered. One of these which has created much debate recently is the possibility of downsizing.
This article, discusses the advantages of downsizing and how equity release schemes can still have an important role to play in such situations.
Equity Release versus Downsizing
The practice of downsizing, effectively means selling one property at a higher value than the one you wish to move into. Therefore, the equity generated from the price differential can be used to support you financially during retirement. This is usually the main reason for people deciding against taking equity release.
Downsizing is fine in principle, and it is one of the options Equity Release Supermarket advisers always discuss with clients. However, for economic and personal reasons, the idea of downsizing can be impractical.
Equity Release Case Study – How downsizing works in principle
Take for example Peter and Clare, both aged 73 and living in their semi-detached house worth £275,000 which they’ve owned for over 30 years. They are settled in the area, their family and friends are local to them and they feel comfortable and safe in their current surroundings.
Unfortunately, they still have a mortgage of £100,000 and the lender has informed them they will need to repay this by the time they reach the age of 75. Like many people in their situation, they do not have the money set aside to do so. Their family are in no position to help as they too are struggling to keep their own heads above water!
So what are their options?
- They could sell up, pay off the mortgage and look for another lower valued property. After taking into consideration the costs of moving this would mean considering properties around £165,000. Unfortunately, there are no properties of this value nearby, as even smaller properties locally that would still cost them in the region of £200,000.
- Consider a remortgage with another lender. This would involve switching their £100,000 mortgage to another lender. However, most high street banks & building societies will not allow borrowing beyond the age of 70, or even 75.
The only option it would seem is to have to move further away, to an area they would not feel comfortable with, and considering this would be their last ever move, it must be the right decision as happiness during retirement is key. This situation leads to anxiety and stress for the couple as their network of friends and family would no longer be around them and they would be moving to an unknown location which may turn out to be both undesirable and unpopular.
Therefore, only option 1 is feasible, but there is still the issue that the property would not be entirely suitable for their requirements moving forward.
Revised Case Study – The maths of upsizing
Let’s revisit option 1 again, as there is some good news for those that wish to downsize.
Equity release schemes can actually allow you to ‘up-size’ when moving house by using the equity release tax free cash to help fund the purchase of the new property. This would mean Peter & Clare still purchasing of a lower valued house. However, by using a new equity release plan in conjunction with the purchase, they can now attain property values of around £200,000+, which they needed to stay near to where they currently live.
Taking Peter & Clare’s example again. The couple are both aged 73. Using the Equity Release Supermarket calculator, they could borrow upto £78,000 on a property worth £200000, on a roll-up lifetime mortgage basis.
This would enable them to purchase the £200,000 property; by using £165,000 of their own equity, plus the difference coming from an equity release plan. In fact given the equity release calculation figures they could go even higher if they wished to do so, or even use some of the surplus to have a small emergency fund for the future which is missing at the moment.
Now Peter & Clare have come to terms with the downsizing, the couple can now consider fine tuning their equity release solutions.
In fact, they could consider a lender allowing interest payments – commonly known as an interest only lifetime mortgage provided by companies such as Stonehaven. These off-set the effect of the rolled up interest, but unlike their existing mortgage which comes to an end in two years’ time, a scheme such as Stonehaven’s Interest Select Plan would be open-ended and therefore run for the rest of their life.
In some cases, depending on their state of health, Peter & Clare may be eligible for more money if they could take advantage of enhanced lifetime mortgage rates offered by some lenders. These enhanced lifetime mortgage schemes can lend more than any standard lifetime mortgage & give that extra amount making all the difference.
So as a solution, what does this up-sizing option offer: –
- The opportunity for the couple to repay their existing mortgage in full
- To move to a location near to their current property, ensuring that they can maintain the support of family and friends
- To continue to live in a safe environment with familiar surroundings including local amenities which have become increasingly important to them, such as their doctor and local hospital along with good transport links and shop
- To purchase a property which they’re happy with rather than taking on a property ‘because they have no choice’
To down-size is an option which may be suitable to some, but like all decisions taken it needs careful consideration. This is where specialist equity release advice can make all the difference to retirees making such important financial decisions in retirement.
Having an alternative in the form of equity release scheme or interest only lifetime mortgage may enable them to make a decision based on a more practical solution and providing clients ‘peace of mind’, something which is not commonly advised upon in the news.
Equity Release Supermarket has experienced advisers who have dealt with such situations & can therefore make all the difference to people over 55 & in retirement.
If you wish to ask, or discuss anything with regards to his article with our team please call Freephone 0800 678 5159 or email firstname.lastname@example.org