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Stonehaven Equity Release Rebrand to ‘Retirement Advantage’

Friday, May 29th, 2015

Stonehaven + MGM Advantage rebrand as Retirement Advantage
Further evidence of the progress & changes within the equity release industry has been witnessed this week after Stonehaven rebranded its name to ‘Retirement Advantage’. With effect from 26th May 2015, all Stonehaven’s equity release plans will come under the umbrella of Retirement Advantage.

 

 

Who are Stonehaven?

Stonehaven equity release was formed in 2006 as a provider of not just traditional lump sum lifetime mortgages, but innovative interest only lifetime mortgages with a difference. Their concept of being able to service the interest, thus rendering a level lifetime mortgage balance outlived the more conventional mortgage products such as the Halifax Retirement Home Plan which was withdrawn in August 2011.

 

Stonehaven = Innovation

To date, the Stonehaven range of interest only lifetime mortgages have stood the test of time. It is only recently that new hybrid versions of the Stonehaven Interest Select plans have been developed & now introduced. These voluntary repayment plans from the likes of Hodge Lifetime, Aviva, Newlife & now following suit – Stonehaven, have revolutionised the way equity release is perceived. It is now just the general public & journalists who need to take note of the new wave of flexible lifetime mortgages that can be tailored to any client’s requirements.

 

Stonehaven’s Recent history

Stonehaven’s success resulted in the company being taken over by MGM in 2014 and slowly their products have been redesigned & renamed accordingly, with a simplification of their offering – Interest Select, Lump Sum & Voluntary Select. Each product now has two further options depending on the level of borrowing required (loan-to-value) & ultimately also affects the interest rate applied. Board level changes have since occurred and the people who were at the core of their initial operation and built their model around the wider distribution model of using mortgage intermediaries as a source of referral business, have since departed.

 

The New Retirement Arena

We now have a new era in retirement planning & finances. With the demographics of the UK changing, longevity & health factors all combining to make insurers change the way the retirement landscape is evolving. The recent annuity changes have impacted severely on annuity providers of which MGM Advantage has been a major player in this market. These annuity & life insurance companies have had to rethink how retirees will need to manage their finances and stretch them further into retirement. This is probably only the start of what is to come for the over 55’s in the new retirement arena as new products are developed to cater for their needs.

 

MGM and Stonehaven Together = Retirement Advantage

Bringing together two successful retirement companies should lead to a complement of retirement products that can provide retirement solutions. Both MGM Advantage’s annuity and Stonehaven’s lifetime mortgage products are therefore suited to this retirement solution goal. The new retirement brand of Retirement Advantage will further strengthen their retirement proposition with a new retirement account launching soon.

 

Retirement Advantage is therefore one of the first significant mergers we may see in the retirement arena as equity lenders & insurers vie for the ever more lucrative retirement space. Equity release and annuities are changing for the better, hopefully the sign of more innovative thinking ahead.

 

For details on Retirement Advantage product range visit our website here where all their lifetime mortgage deals are listed along with a quote request facility.

Alternatively, please call Mark Gregory on 07966 889597 or email mark@equityreleasesupermarket.co.uk to discuss this further.

Stonehaven Equity Release Re-Launch With 8 Year Fixed Early Repayment Charges

Monday, March 16th, 2015

Stonehaven Equity Release schemesWhen many equity release providers are competing directly in using their lifetime mortgage interest rates, Stonehaven have decided to compete in a different field by taking the bold step of moving away from Gilt-based early repayment charges (ERC’s) & introducing a fixed penalty basis covering the first eight years of the equity release loan.

With effect from 16th March 2015, Stonehaven will move its whole lump sum & interest only lifetime mortgage range of plans over to an 8 year fixed early repayment charge of 5% in the first 5 years, 3% in years 6-8 and none in the 9th year & thereafter.

 

Background to Equity Release Early Repayment Charges

Due to the nature of the product – ‘Lifetime’ Mortgage, the plans have been designed to run for the rest of the homeowners life. This can create uneasiness for some people taking out equity release schemes in retirement as they cannot always say with certainty what their future plans entail with regards to their property.

 

Equity release early repayment charges have historically been a mixture of fixed penalty, gilt based, Bank of England base rate related and even long term interest rates called SWAP rates. The majority of equity release schemes across the market today is predominantly linked to government gilts. This can be in the form of an individually selected gilt such as Aviva’s, which is based on the age of the youngest homeowner, or follow an index of gilts such as the FTSE UK Gilts 15 Year Yield Index with Just Retirement.

 

These gilt related penalties on paper can look extreme given that Aviva can charge upto 25% of the amount repaid dependent upon the gilts yield falling from inception. Additionally, companies such as Just Retirement & Pure Retirement can charge a maximum of 20% of the fall in the FTSE UK Gilts 15 Year Yield Index. Therefore, the nature of gilts leads to uncertainty of their future levels & consequently any prediction regards their future level is unknown & cannot therefore be relied upon for early repayment purposes.

 

Currently, only one equity release company offers the certainty of knowing exactly what the future penalty could potential be; this company is LV= (Liverpool Victoria). Charging 5% for the first 5 years of the amount repaid & then 3% in the next 5 years, they actually have no early repayment charges after 10 years. This have given them a niche position within the equity release marketplace.

 

Stonehaven’s Move to Fixed Equity Release Early Repayment Charges

However, LV= equity release now have fresh competition and this is the beauty of where the equity release industry is right now. Competition is driving this market forward and its with such innovations & product development that is going to extend the volume of lending in 2015, to beyond the £14 billion released in 2014.

 

Stonehaven have been considering this move previously, however with their takeover by MGM, its plans were put on hold. With a new team behind Stonehaven now, they have obviously decided the time is now right to introduce  fixed penalty equity release plan to the market. It will be interesting to see how these new fixed ERC’s are perceived. Historically, applying fixed rate early repayment charges can come at a cost and this is usually borne in the equity release interest rate with an extra levy on it.

 

At present Stonehaven have not indicated any changes to their interest rates with the lowest currently being the Stonehaven Interest Select Lite plan at 5.46% monthly (5.87% representative APR). Therefore, the fixed penalty charges look to have been absorbed into the current equity release deals on record.

 

So for anyone considering the equity release & uncertain regards whether an equity release scheme will be required over the longer term, the new equity release early repayment charge from Stonehaven could be a viable option to consider. Providing fixed, transparent & easy to understand  ERC’s with just 5% penalty in the first 5 years, 3% for the next two & zero after the end of the 8th year, Stonehaven have taken over LV=’s mantle of potentially the best early repayment charging system available in the equity release market today!

 

Further Information

To learn more about Stonehaven’s range of products attracting the new 8 year fixed penalty, please contact the Equity Release Supermarket team on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk.

Steps to Finding the Best Equity Release Scheme

Sunday, December 7th, 2014

Best equity release schemeEach year the equity release industry celebrates its achievements at the Merchants Taylors Hall with its version of the Equity Release Awards 2014. This year in particular, equity release schemes have been taken out in record amounts & have led to unprecedented growth. This has been for a number of reasons, but primarily the innovation of new equity release plans from the likes of Aviva, Hodge Lifetime & lately Stonehaven.

 

However, it is the Aviva Flexible Lifetime Mortgage Plan that here at Equity Release Supermarket has seen the greatest impact & has helped many of our clients achieve their retirement goals. It was therefore no surprise that Aviva won the category of Best Lifetime Mortgage provider in 2014. This followed a series of enhancements to their lifetime mortgage plans this year, coupled with the lowest equity release interest rates, currently starting as low as 5.63% (5.83% representative APR).

 

These successful changes include:

  • Allowing clients to voluntarily repay up to 10% of the original capital borrowed each year, in up to 4 installments with a minimum of £500 a time.
  • On joint life equity release cases they now allow the surviving partner to sell their home and repay the scheme without penalty as long as it’s within 3 years of the first person dying or entering long term care.

 

Thanks to these extra features, Aviva has increased their market share even further but despite winning their equity release award it would be wrong to view their product as the best on the market for everyone. In order to find the best equity release scheme for you it’s important to get independent, whole of market advice from a company like Equity Release Supermarket.

 

Equity Release Supermarket’s philosophy is to spend valuable time to find out exactly what you’re goals are so that we can recommend the most appropriate scheme based specifically on these requirements. So, once we’ve gathered sufficient information based on your current situation, identified no alternative solutions exist, it is only then that we would enter the realms of recommending equity release schemes.

 

But how do we work out which equity release scheme is the ‘best’ plan for my clients? We consider a range of factors, such as:

  • Equity release interest rates
  • Maximum equity release calculation including maximum cash reserve facility
  • Early repayment charges
  • Set up costs
  • Flexible repayment options
  • Health and lifestyle factors for enhanced lifetime mortgage plans
  • Future retirement plans
  • Inheritance plans – attitude to risk

 

Seven Factors to Help Find the Best Equity Release Plan

Equity release schemes are constantly innovating and keeping up with their progress can be a minefield for those looking for the best equity release plan today. To help provide guidance on understanding the various aspects of equity release plans that can influence this decision, I have provided seven features and areas of research that Equity Release Supermarket advisers would analyze and discuss with you.

 

  1. Best Interest rates:

There are some excellent online comparison websites such as www.EquityReleaseSupermarket.co.uk where you can compare the best equity release deals in the market at any given time. The equity release comparison sites will currently highlight Aviva as offering some of the lowest interest rates for both drawdown lifetime mortgages and their lump sum counterparts.

However, simply offering the lowest lifetime mortgage interest rate may not make their scheme the ‘best’. Aviva do charge a higher interest rate to access the funds in any cash reserve facility than the initial rate and they cap the reserve amount if you initially release less than 50% of the overall loan amount. This may not therefore be suitable if you are looking to have a maximum cash reserve facility for your future retirement needs.

 

Therefore, it is down to your equity release adviser to assess & understand what your priorities are in leading to their recommendation of the best equity release scheme for you.

 

For instance, if you need to take the maximum equity release loan from your property, interest rates tend to be higher than the drawdown lifetime mortgage schemes. Hence, the ‘best’ scheme could depend on any of the other factors names above. The possible reason for the higher interest rate for the maximum equity releases could be the potential of invoking the no negative equity guarantee is likely to be greater the higher the release borrowed. This cost being passed on by way of the higher interest rate to compensate.

 

Currently, at the time of writing, the lowest lifetime mortgage interest rate is 4.75% (5.10% representative APR) which is the Hodge Retirement Mortgage. If you want to make monthly payments of interest to maintain a level balance, this scheme is excellent but it wouldn’t be the ‘best’ scheme if you don’t want to make any interest payments. As you can see, the lowest equity release interest rate alone does not determine it being the best scheme.

 

  1. Maximum Equity Release Plans

Equity Release Supermarket would always recommend that you only release the capital that you need, rather than releasing the maximum loan. This one area alone, in assessing the best equity release scheme, can have the greatest influence on the final inheritance for your children or beneficiaries. In fact, this aspect we find is where clients need to be guided carefully by their adviser, as many do not understand the consequences of taking too much equity from their home.

 

In fact, drawdown lifetime mortgage plans are now the most common form of equity release taken in 2014 & will surely be for equity release 2015 aswell. By taking the home equity plan funds in small staggered amounts, rather than all upfront makes practical sense for your own future balance & the inheritance for your beneficiaries. These drawdowns can be taken in little amounts as an initial £10,000, and then followed by smaller £1,000 tranches from the likes of Hodge Lifetime. This can be utilised to suit any future spending plans as & when they arise.

 

During my 15 years of advising clients on equity release, one of the most common queries I receive is ‘Can I access further funds?’

Let’s look at an example:

 

Margaret and Graham are both 70 and live in a bungalow worth £300,000. They want to be able to take regular holidays and buy a new car. In the future they’d like to gradually improve their property and supplement their income. My advice was to take an initial loan of £25,000 and set up a reserve facility. In order to work out the ‘best’ scheme for them we discussed whether the interest rate or the size of the reserve was more important to them. They opted for a larger amount of money on reserve. Therefore, after the initial loan – Pure Retirement offered a cash reserve of £83,000, while the Aviva Flexi Plan with a lower interest rate only offered a reserve of £48,000.The clients therefore opted for the Pure Retirement Drawdown Plan based on the future reserve facility.

 

Another important factor to a recent client was that she wanted the certainty that the funds available on reserve were guaranteed to be in place. Many lenders do not ‘guarantee’ the future of their drawdown facilities in case of change of circumstances, economic reasons or they just decide not to lend again in the future.

 

My client was concerned in case the lender withdrew her cash reserve funds in the future. In her circumstances LV= proved to be the best equity release scheme for her as they’re the only company to offer a guaranteed drawdown reserve, which is guaranteed to be in place for a minimum of 15 years.

 

  1. Best Early Repayment Charges (ERC’s)

Equity release schemes are designed as a lifetime commitment and are not aimed for short term borrowings or people who wish to repay the balance before the plan ends; on death or the last person moving into long term care. That said, there are a growing number of people who would possibly repay their equity release scheme early; due to change in circumstances, future health reasons or maybe family reasons. Therefore the ‘best’ scheme would be one that offered flexibility on early repayment charges over a limited number of years, either none at all or the lowest fixed rate possible if acceptable to the client.

 

An equity release company plan that has considered the topic of early repayment charges has been Hodge Lifetime. Two of their lifetime mortgage plans have been carefully thought out on this particular subject. The Hodge Lifetime Mortgage Plan allows homeowners the ability to downsize after 5 years of taking their plan & repay their lifetime mortgage with NO penalties. In fact even leading upto this 5 year period, should one downsize the penalty reduces by 1% each year; from 5% down to 0% over this duration.

 

The second Hodge product that assists with early repayment charges is the Hodge Retirement Mortgage. This product is an interest only lifetime mortgage and has a fixed interest rate for a period of 5 years. The Hodge Retirement Mortgage therefore mirrors this time by aligning the early repayment charges (ERC’s) to match the same term. Subsequently, the early repayment charges are just 5% for the first 5 years of the retirement mortgage term.

 

Most equity release lenders use government gilts as a measure in working out any potential ERC’s. This means that the early repayment penalty is variable and could be as high as 25% of the initial loan amount. For the standard lifetime mortgage plans, LV= are currently the only company who offer a fixed early repayment charge, which is 5% for the first 5 years and 3% from years 6 to 10. After the 10th year you can repay the scheme without penalty, so this may prove to be the ‘best’ scheme for some clients knowing what their future holds, or the Hodge Lifetime schemes should they have plans for moving house after 5 years.

 

  1. Equity Release Set Up Costs:

Typically the lowest set up costs doesn’t necessarily mean the ‘best’ plan, although keeping a check & comparing equity release set up costs is important for a number of reasons, particularly to save money! Why pay more to a broker for their advice fee when another company can advise on exactly the same plan, but for a lower cost.

 

Equity releases set up costs are made up of a series of fees levied by different parties to the equity release process. These consist of the valuation fee, lenders application fee, solicitors’ fees & your adviser’s advice fee.

 

Valuation fees vary between lenders, however through certain specialist brokers such as here at Equity Release Supermarket there are now many lenders that will offer ‘free’ valuations by process you application through us.

 

Lender application fees can also vary, with some either being added or deducted from the release. Remember if the application fee is added this will cost more over the long run if the interest is to compound with no repayments made. The Hodge Retirement Mortgage application fee is the highest at £995, but they do offer the lowest interest rate. Pure Retirement offer a cash-back on some of their plans which can cover all of the set up costs, but their interest rate isn’t the lowest. Just Retirement offer one of the lowest admin fees at £500, but not necessarily the lowest interest rate either. As you can see this is an area where careful advice is needed to find the best equity release plan.

 

  1. Interest & Capital Repayment Options

The major change to equity release schemes in the past few years has been the ability to pay either monthly interest or voluntary interest payments in order to cover some or all of the accruing interest. Again, the lowest interest rate might not equal the best plan.

 

We have already identified that the Hodge Retirement Mortgage offers the lowest rate, but you need to maintain a fixed monthly payment throughout its whole term. However, companies such as Stonehaven & More2life will offer an interest only lifetime mortgage too. However, rather than the concern of possible repossession should payments not be maintained, both Stonehaven & More2life will allow the switch from monthly payments to roll-up (ceasing payments), thus removing the concern of repossession.

 

Schemes which offer voluntary repayments, such as the Aviva Flexi, Hodge Lifetime and with effect from 1st December Stonehaven Interest Select range all allow upto 10% capital repayments. They all charge a higher interest rate, but they do include greater flexibility with regards to permitting these 10% voluntary payments.

 

The Hodge Flexible Lifetime Mortgage Plan & Aviva offer these schemes, and have now been joined by Stonehaven. Having a flexible approach has proved a popular way forward for many that wish to retain control over their future balance. These voluntary repayment lifetime mortgages can be planned so that either just the interest is repaid, thus keeping the balance level, or repaying the full 10% and actual seeing the mortgage balance reducing & even repaid over a period of 16-17 years!

 

  1. Health & Lifestyle Factors

Your health & lifestyle won’t affect your eligibility for equity release but can actually improve the amount you receive, or the interest rate you obtain! There are currently four equity release companies that offer enhancements to their schemes.

 

More2life & Partnership Assurance specialise in enhanced lifetime mortgages, however they may not be the ‘best’ plans as the interest rates are often higher. However, this for some retirees interest rates may not be priority, but the maximum equity release lump sum is. Aviva also offer enhanced lifetime mortgages and can either offer a higher maximum release on its Lump Sum Max plan or alternatively reduce their interest rate, if the maximum is not required & taken on their drawdown flexi plan. Depending on your health criteria, some lending may not accept certain ailments. However, certain enhanced lifetime mortgage companies such as Just Retirement, will go deeper into their health & lifestyle questionnaire & consider illnesses the others won’t accept.

 

  1. Inheritance guarantees

It’s sometimes important that my clients can leave a set inheritance for their families and some lifetime mortgage providers, such as More2Life, Aviva & New Life offers such guaranteed inheritance features. The inclusion of these guarantees can impact the interest rate and the amount of capital available, so careful consideration is needed to work out the ‘best’ scheme.

 

On forgotten equity release scheme that is over looked by many advisers are home reversion plans. Companies such as Bridgewater, New Life & Crown still offer this older form of equity release. Its popularity has waned considerably over the years, however the major benefit of home reversion plans is their ability to guarantee an inheritance at the end of the day. This works by selling a percentage of the property to the reversion company in exchange for a cash lump sum. The proportion of the property not sold is guaranteed to be passed on to the heirs once the house is eventually sold.

 

Summary

Overall, equity release advice is a specialist area of retirement planning. As we’ve seen there isn’t one scheme which is the ‘best’ on the market or fits all. There are far too many features & personal issues to consider that could have relevance to your recommended equity release plan. Thankfully, there are plenty of different options from many different providers. By receiving quality, bespoke advice from Equity Release Supermarket we can work out the ‘best equity release scheme‘ for you, without any obligation.

 

If you are looking to source the best equity release scheme for your particular circumstances & in need of specialist advice then please contact me – Mark Rumney on 07957 974826 or email – markrumney@equityreleasesupermarket.co.uk

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New Plans, New Providers, New Horizons – Equity Release 2014

Friday, January 24th, 2014

Equity Release 2014 Having been in the equity release industry for the past 14 years, there has never been as much optimism & confidence in this sector as there is now. Against a backdrop of reductions & barriers to lending in retirement, the equity release marketplace is expanding faster than most other areas of financial services.

 

Equity release 2014 holds the greatest number of reasons why the over 55 age group are now considering equity release schemes as their route to financial freedom & lifestyle improvements.

 

But first we need to understand the issues arising in 2014 for many retirees and how the stress associated with managing retirement finances can be alleviated. Furthermore, we’ll discuss why there is a change in attitude towards equity release, people’s inheritance and how the equity release lenders are developing products to meet the future needs of today’s baby boomers.

 

So why now & what are the reasons?

 

Firstly, it looks like 2013 laid the foundations for the recovery of the equity release market. A record £106billion equity release lending took place, which was a 10% increase on the previous year and this takes us back to the halcyon equity release days of 2006. But the numbers do not explain the underlying reasons, only the resultant effect.

 

I believe the huge growth in demand is down to a number of factors as follows:-

 

 

1. Baby Boomers – Primarily there are a record number of so called ‘baby boomers’ who are reaching retirement age. It is estimated that up until 2018 record numbers of upto 700,000 people will turn 65 each year and begin to draw their pensions and purchase annuities.

 

At that point, once the new financial landscape is established, will it dawn on many that the difference that retirement has made to their disposable incomes & the sacrifices & cut backs that will need to be made. But surely retirement should be time to retire & relax & enjoy the fruits of one’s career?

 

The transition from a paid salary to a reduced fixed pension can be difficult and for some, one many never really come to terms with. There have been many cases at Equity Release Supermarket, whereby following the first few years of retirement we are arranging equity release for the consolidation of debts such as credit cards & loans. This was a result of continued spending following retirement without carrying out what should be a mandatory income & expenditure analysis.

 

 

2. Indebtedness – Many of these baby boomers reaching retirement have grown use to managing debt during their working lives. This generation have lived through vast fluctuations in the economy such as interest rates, inflation & the recent credit crunch. Having come through the worst of this & still showing such positive signs of equity, gives them the confidence of maintaining such debts into retirement. Afterall, this age group are probably the ones with the best repayment history, credit record, guaranteed incomes and all coming with security of tenure in their properties!

 

A recent study showed that one in six over 65’s expect to borrow money in retirement to meet their retirement goals. In fact in the last year alone, 16% of over 65’s applied for a loan or credit card. The issue nowadays is of course that credit is not as readily available and one in ten applications from over 55’s will be declined, as lenders become far less willing to lend into retirement.

 

This applies to mortgages also. Lenders are increasingly calling in mortgage balances from customers aged over 55. It’s estimated 1.3 million households over 55 are still paying their mortgage, of which 289,000 over 65 year olds are still saddled with a mortgage debt! These are the people who will be looking towards equity release solutions in 2014 & beyond.

 

 

3. Interest only Mortgage Prisoners – Worse still are the Financial Conduct Authority (FCA) figures confirming the size of the ‘interest only time bomb’ looming. Of the volume of interest only mortgages due for repayment by 2020, 1 in 10 of these mortgages have NO repayment plan and upto 1.3 million interest only borrowers face shortfalls averaging £72,000.

 

So how will these people find these shortfalls and where do they turn for advice?

 

Well as we mentioned, lending into retirement has been constricted by the FCA’s stance and with MMR (Mortgage Market Review) being implemented in April 2014, lenders are under further scrutiny as proof of affordability becomes entirely their responsibility.

 

Therefore, as we are already seeing by the upturn in the volumes of business, the equity release industry is becoming the saviour for the interest only mortgage short fallers. In providing an equity release safety net, many of these trapped borrowers have another option than having reluctantly to sell their homes to fund the shortfall.

 

However, the solution will only be made available should loan-to-values fall within lender criteria, which for lifetime mortgages are currently stand at a maximum of 30% at age 65, rising to a maximum of 54% by age 85. These calculations can be confirmed using the Equity Release Supermarket calculator.

 

However, two further factors could influence these results; health & lifestyle and incomes.

 

Firstly, should a history of adverse health be prevalent then a range of enhanced lifetime mortgage products are available which will release a greater lump sum than standard equity release schemes. Secondly, the signs are more retirement mortgages could be introduced during 2014. Already the Hodge Retirement Mortgage has been bravely launched against the tide of lenders withdrawing such products. Currently, the Hodge Retirement Mortgage will lend upto 50% of the property value at the current interest rate of 4.75% (5.1% APR), subject to income(s). Click here for details on the Hodge Retirement Mortgage or call 0800 678 5159.

 

 

4. House Purchase/Moving Home – we are seeing the data already in 2014 from mortgage lenders regarding the upturn in mortgage lending which has been due to the housing market improving significantly. With support from the government with its ‘Help to Buy’ scheme, this has stimulated the housing market from the bottom end and resulted in a knock on effect up the ladder.

 

We are seeing an increasing number of Equity Release Supermarket clients using interest only lifetime mortgage products to assist with their house purchase. We can advise on products from Stonehaven, Hodge Lifetime & more2life whereby the interest element & possibly more can be repaid back to the lender with no penalty, & are becoming a high percentage of our overall equity release plan recommendations.

 

Additionally, we are experiencing retirees at a critical point in their lives looking to downsize, or move nearer to their families. This could be for disability or financial reasons and moving into a retirement properties where less maintenance is required. Purchasing such property may still require finance to bridge any shortfalls, or create surplus funds for other financial/personal reasons.

 

 

5. Burgeoning Confidence & Optimism – There has been a silver lining to the issues of retirement finance…PROPERTY. Staggeringly, 69% of the over 65 year old population own their home outright & unencumbered. The most recent research has calculated the over 65’s own a combined £752 billion in housing wealth!

 

With this kind of security behind them and the changing attitude towards inheritance is beginning to shape the equity release landscape we are seeing & being developed as we speak. Traditionally, roll-up equity release schemes were the norm. Compounding of interest put many people off releasing equity. As a consequence, interest only lifetime mortgages have come to the fore. In being able to control the balance by making regular or ad-hoc repayments, one can now maintain a level balance, or even reduce it year-on-year. We have evidenced the growth in inheritance protection via lifetime mortgages and will become another of the factors affecting the growth in equity release for 2014.

 

Flexibility is key for many now entering the market. One major step forward for equity release mortgages came with the advent of drawdown lifetime mortgages. Here borrowers can withdraw tax free cash in stages from a pre-agreed facility. Drawdown equity release now accounts for over 64% of all plans written during 2013. Hence, another good factor to influence the popularity moving into 2014.

 

Finally, we have the latest news there will be a new equity release provider in early February – Pure Retirement will be entering the market with an initial 2 product launch, followed by more products they anticipate later in the year. This comes hot on heels of recent press murmurings over the weekend that L&G could soon be re-entering the equity release arena after originally departing in 2004 when they white labelled Northern Rocks equity release proposal. There is also much product development behind the scenes with Aviva revamping their lifetime mortgage. Details once known will follow on this website.

 

All this development and equity release press coverage stokes up the interest in a market that has previously been in the doldrums, but has listened to the consumer & now developing products to match retirement planning needs.

 

Summary – Equity Release 2014

Equity Release will take off in 2014 because providers have listened to their customers and they can be very demanding and rightly so. Customers want flexibility, they’ve got it, Customers want no early repayment charges, they’ve now got it, Customers want to repay capital without penalty, they’ve got it, Customers want to pay off the interest, they’ve got it, and customers want to partially repay the interest without being tied or committed, guess what? …they’ve got it!

 

There has never been a better time to consider equity release, so here’s to looking forward to 2014.

 

Call freephone 0800 678 5159 to discuss any aspects of this article or complete our contact form to register for 2014 updates as & when they are announced.

 

 

Can Equity Release Schemes Prevent you Becoming an ‘Interest Only Mortgage Prisoner’?

Sunday, December 22nd, 2013

Can equity release schemes help unlock interest only mortgage prisoners?It seemed such a sensible thing to do at the time. Perhaps you were just starting out on the property ladder or you wanted to move up market to afford that dream home and as a result your income was stretched?

 

Back then an interest only mortgage was a perfectly reasonable option for a few years until your earnings increased and then you could switch to a full repayment mortgage. Or perhaps, very sensibly, you set up a repayment vehicle such as an endowment plan or you relied on the anticipated growth of your pension fund to take care of the mortgage in the dim and distant future?

 

Reaching retirement with an interest only mortgage

Life never quite works out as expected and here you are, approaching or beyond retirement, with a mortgage still outstanding and with a mortgage lender demanding to know how you intend to repay. Either you never got around to switching to a repayment mortgage or, by reason of poor investment performance or poor advice, your repayment fund has fallen woefully short of target.

 

You are not alone! Earlier this year the Financial Conduct Authority report that that almost half of those borrowers with interest only mortgages, approximately 1.3 million people, may not be able to repay their mortgage. And the average shortfall is estimated to be £71,000.

 

Can the high street lenders help?

So how have high street mortgage lenders responded? Mainly by applying higher interest rates to existing interest only mortgages or by forcing borrowers into repayment plans, usually very short term for borrowers over 60, with little regard to affordability or even existing and adequate savings plans.

 

So how do you break free from this “mortgage prison”?

Firstly, you must consider your options for the future;-

  • If you have savings, do you want to use them to reduce the outstanding mortgage, bearing in mind that the cost of the mortgage will certainly outweigh any return you are making on your savings?
  • How much of your savings do you want to retain as a cash emergency fund?
  • Do you intend to move now or within the next few years and, if so, will this allow you to repay the mortgage, cover all the moving costs and leave sufficient finds to re-house yourselves?

 

Secondly, if these options are not available to you and you want to remain in the family home, then you could consider an equity release mortgage, preferably after eliminating all other possibilities and following consultation with your family.

 

How can equity release schemes help?

There are two types of equity release plans approved by the Equity Release Council and they come with the following written guarantees:

  • You can stay in your home for life or until you go permanently in to care. In the case of joint applicants, this is until the survivor dies or goes in to care.
  • The plans are portable to other acceptable properties if you want to move.
  • No further monthly interest payments to make, unless you elect to do so.
  • You will never leave a debt to anyone due to the inclusion of a ‘no negative equity guarantee’

 

The two types of equity release mortgages are

  1. Home Reversion Plans – where you sell a percentage share of your home in exchange for a cash lump sum or regular income.
  2. Lifetime Mortgage Schemes – where you release funds secured on your property with the option to either roll-up the interest with no monthly payments, or to pay monthly interest in full or part.

 

Case Study example

A couple aged 66 and 65 living in their home valued at £300,000 and desperately wanting to repay an interest only mortgage of £60,000. The maximum they could raise from a standard lifetime mortgage would be 29% of the property value, i.e. £87,000. They have options and the following are examples of mortgage products currently available:-

 

a)      They can choose to borrow £60,000 (plus more to cover fees) to repay the existing lender and have the interest rolled-up for life with no further monthly payments. The valuation fee could be free with some of the current equity release deals available. The other costs taken by lender, solicitor and adviser could amount to approximately £2,000 which could be deducted from the loan. The interest rate fixed for life on equity release plans such as the Aviva Lifetime Flexi could be as low as 5.62% (5.80% representative APR) and, in addition, they could have ready access to a cash reserve if they wanted to borrow more in the future.

 

b)      They can choose to borrow the £60,000 (plus more to cover fees) and pay the monthly interest for life or for a fixed number of years. Dependent upon income, the lifetime fixed rate could be fixed as low as 4.75% (5.10% representative APR) resulting in a maximum monthly interest payment of £238pm. However, if this is too much for their budget they could elect for alternative plans such as Stonehaven’s Interest Select range & opt to pay a lesser sum each month (minimum of £25). The remaining unpaid monthly interest would be rolled up and repaid at the end. The fees are approximately the same, but a valuation fee of £252 would be payable with the Stonehaven application form. Hence, we have interest only lifetime mortgage options to suit.

 

A new breed of lifetime mortgages

Recently, a new form of lifetime mortgage has been developed to help those looking for the maximum possible release. The enhanced lifetime mortgage, or ‘ill-health equity release plan’ has been developed with the maximum release in mind.

 

Although the maximum equity release isn’t suitable for everyone, it has its place for those who desperately want as much as they can release for either health reasons or a ‘needs must’ basis.

 

They differentiate from standard lifetime mortgage schemes by assessing someone’s medical history. Essentially, the worse one’s health has been, the greater the potential release. These plans are underwritten & are offered by actuarially based companies with experience in the field of pension annuities where similar principles are employed.

 

Therefore, an enhancement can make the difference between be able to repay that interest only mortgage, or not, so enhanced lifetime mortgages should always be considered with your adviser.

 

Summary

Equity release is a sensible option to escape becoming a “mortgage prisoner” but expert advice from a qualified equity release adviser is always essential. Explore the alternatives first and discuss matters with your family to obtain a second opinion.

 

If you would like a free initial consultation to assess your interest only mortgage options, please contact Mike Vicary of Equity Release Supermarket, on 07795 195302.

 

Mike has successfully helped people make the interest only remortgage transition, thus enabling retirees to remain in their home & avoid becoming an ‘interest only mortgage prisoner’.

 

How Equity Release Can Help You ‘Upsize’ while ‘Downsizing’

Monday, September 30th, 2013

downsizing in retirementWe 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?

  1. 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.
  2. 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.

 

Upsizing Summary

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 admin@equityreleasesupermarket.co.uk

 

Are Self Cert Mortgages Available in Retirement?

Tuesday, April 23rd, 2013

Self-certification mortgages are mortgages that are available without a formal income check. Self cert mortgages can be a good option for self-employed or independent professionals who would otherwise have a hard time finding a mortgage lender. Self-certification mortgages are also now available within the retirement sector, in conjunction with the right equity release advice.

 

In fact, lifetime mortgages and pensioner mortgages where the repayment vehicle is the sale of the property are all essentially self-certification mortgages as they do not depend on the income of the applicant. The lending criteria for these pensioner mortgages are mainly the age of the applicant and the property valuation.

 

For instance, Stonehaven’s Interest Select Plan is an interest only lifetime mortgage. Clients can borrow a tax free lump sum against the value of their property. Interest can be repaid in full every month, and the principle amount of the loan is repaid when the property is sold. In fact, Stonehaven equity release will allow you to set up a partial repayment facility, if the full amount of interest is out of your budget range. Therefore, rather than all the interest being repaid, a contribution towards this amount is paid.

 

Therefore, rather than the balance remaining level for the duration of the lifetime interest only mortgage, there will be an element of roll-up interest, albeit significantly lower than if no repayments were made at all. This scenario is ideal for candidates who are risk averse and wish to control the future balance of these pensioner mortgages for their children’s inheritance.

 

Being a lifetime mortgage, there is no fixed term and the loan will continue indefinitely, which will be until sale of the property, which is usually on death or moving into long term care.

 

Self Cert 2013 Lending Criteria

The lending criteria for this loan are based on the age of the youngest applicant and the value of the property. Plans start at age 55 with a minimum property valuation to qualify of £70,000. The property can now be situated in England, Wales & mainland Scotland.

 

As long as applicants can make the minimum monthly repayment of £25, there is no question of requesting income. Stonehaven’s Interest Select plan can therefore be safely categorised as a self cert mortgage. Once the mortgage is set up however, the premiums cannot be amended, other than to stop interest payments completely and convert to a roll-up lifetime mortgage plan. This feature can be used as a safety net in case the mortgage becomes unaffordable in the future & effectively prevents a situation whereby normally repossession would ensue. Repossession for none payment of premiums cannot therefore occur with the Stonehaven Interest Select Plan.

 

Another feature that appeals in today’s economic climate is that of adverse credit or poor credit rating. These lifetime interest only mortgages have leniency towards this. They will permit arrears and defaults. Additionally, they will accept CCJ’s (County Court Judgements) upto a certain level as long as they are repaid from the proceeds and were for understandable reasons.

 

Like most equity release schemes, Stonehaven base the lending on a loan-to-value principle. Stonehaven have four tiers of loan-to-values and each comes with its own interest rate. In essence the more you borrow against the value of your house the higher the interest rate becomes. Conversely, the older you are the greater the amount that can be borrowed, hence it is important you receive independent equity release advice to assess which tiered rate of interest applies and is best for you.

 

For instance a male aged 65 with a property value of £250,000 could release the following with Stonehaven: –

 

 Product Name

Maximum Borrowing

Interest Rate

Loan-to-Value

 Interest Select Lite

£52,500

5.99%

21%

 Interest Select

£60,000

6.08%

24%

 Interest Select Plus

£67,500

6.17%

27%

 Interest Select Max

£72,500

6.81%

29%

 

Who else provides self cert lifetime mortgages on an interest only basis?

Other pensioner mortgages are becoming increasingly available such as the more2Life Interest Choice Plan. This is another self-certification mortgages whereby no income checks are made by the lender. The mortgage is only repaid once the property is sold, which is when the client dies or moves into permanent care, or decides to make an early sale for any other reason.

 

Self-certification mortgages are not very common in the regular residential mortgage sector as lenders are reluctant and wary of lending without formal income checks under FCA (Financial Conduct Authority) regulations. Interest rates are often higher and the loan to value ratio may be lower than traditional mortgages. However, they have been designed with security in mind, something which interest only mortgages of the past haven’t been.

 

Many pensioner mortgages which rely on the property sale for repayment are essentially self-certification mortgages as they don’t carry out income checks for approval. For these mortgages the main relevant criteria are the age of the applicant which helps determine the expected term of the loan and the property valuation which helps determine the loan to value ratio.

 

For a full assessment of eligibility criteria with the range of interest only lifetime mortgages that Equity Release Supermarket have available, please call Freephone 0800 678 5159 or email mark@equityreleasesupermarket.co.uk.

 

Further information on the range of self cert interest only lifetime mortgages can be found on our Compare Equity Release Deals page.

Equity Release Schemes Available In Scotland

Thursday, March 28th, 2013

It’s been a long time coming, as the song goes but Scotland is at last catching up with the rest of the UK when it comes to the uptake of equity release schemes.

 

The reason the Scottish equity release market has not grown as quickly in the past as the rest of the UK is that a lot of Scottish homeowners have very close family ties and traditions and want to leave their property and estate as inheritance for their families and have been happy in the past to either down size or make do.

 

One of the common objections to equity release in Scotland was the loss of inheritance for the family. However, with the new range of equity release mortgages this loss of potential inheritance can be resigned to the past.

 

In the last year alone, many changes have taken place within the equity release market. All equity release schemes Equity Release Supermarket recommend still have the ‘SHIP’ standard – a ‘no-negative equity guarantee’ built into them. SHIP has now come under the auspices of the Equity Release Council in maintaining this important protection feature.

 

Latest equity release schemes

In addition to the no negative equity guarantee, new innovative plans have been introduced with options such as the Inheritance Protection Guarantee, where a percentage of the property value can be ring fenced to protect the family inheritance. This provides peace of mind in protecting a fixed final amount of the property value to be left as an inheritance for the family at the end of the day.

 

Hodge Lifetime have recently brought out a roll-up lifetime mortgage plan where they will allow up to 10% of the capital borrowed to be repaid each year by cheque, again a way to protect the loan from the effects of the roll up of interest. Not only can the interest be repaid, but additionally a proportion of the capital by paying the maximum 10%pa in repayments. Effectively this renders the Hodge Lifetime scheme a capital & repayment equity release mortgage!

 

Stonehaven have also moved into Scotland with an interest only lifetime mortgage. The Stonehaven Interest Select plans operate on an interest only basis with a balance that remains constant throughout the mortgage term. This continues so as long as the monthly payments are made, resulting in a loan that will never be more than the initial amount at the start of the plan.

 

These Stonehaven equity release schemes in Scotland are eventually repaid from the sale of the property. The interest rates are currently the lowest we have seen from Stonehaven since they started over 6 years ago at just 5.99%.

 

Scottish interest only mortgage enquiries

From the number of interest only lifetime mortgage enquiries Equity Release Supermarket now receive in Scotland, many people have also noticed this, and taken advantage of these low interest rates which are then fixed for life. Providing security, not only for inheritance purposes, but also in fixed lifetime monthly payments is something that the over 55’s in Scotland are looking for.

 

Equity release plans are not only weathering the economic downturn, they are offering a much needed lifeline to homeowners in this time of austerity. It may not be the best option for everyone in Scotland and by seeking independent financial advice it is important you also consider any alternatives beforehand.

 

Nevertheless, if you are sitting with a lot of equity in your home and you are over 55 years of age why deny yourself a good lifestyle in retirement, when unlocking some of the equity in the home could help make life a lot more comfortable for you, or your loved ones.

 

In this growing equity release market with new providers and new plans coming along it is more important than ever to get the correct advice from a specialist dealing in equity release such as the Equity Release Supermarket.

 

If you wish to find out more about any of the plans mentioned then do not hesitate in making contact with the author of this article – Nigel Hall who would be more than happy to help.

 

To request a free initial consultation on the range of equity release schemes available in Scotland call Nigel Hall on 07553 408010 or email nigel@equityreleasesupermarket.co.uk

 

How Does Equity Release Work?

Wednesday, March 27th, 2013

Equity release schemes have risen in the popularity stakes over the past 12 months. With regular articles in the tabloids, and increasing government awareness, lifetime mortgages have certainly raised the bar. But how does equity release actually work in the whole scheme of things, and why has it become such topical subject matter for those looking for a comfortable lifestyle in retirement?

 

Equity release workings

Primarily equity release is available to home owners where the youngest person on the deeds is at least aged 55. Equity release works by allowing eligible people to raise tax free cash from the equity tied up in their home. The amount that can be released is based on an age-related ascending percentage of the value of the home. In other words, the older you are, the more you can raise!

 

For example a single person in good health, aged 65, with a property value of £250,000 could raise a maximum of 30% of the property value. This would mean a maximum equity release of upto £75,000 with Aviva.

Even better, is the fact there are now impaired life schemes that offer ‘enhanced’ rates to people who are not as fit and healthy as they used to be and these schemes increase the percentage that can be drawn.

Therefore, if the same person was a smoker with high blood pressure, having diabetes & a history of heart attacks could now release upto £115,500 on the Partnership enhanced lifetime mortgage scheme.

 

Popular uses for equity release

The money raised from any equity release scheme can be used for any legal purpose from clearing credit card balances and existing mortgages, to helping children or grandchildren with deposits to climb onto the property ladder. However, many would be treating themselves to some lifestyle indulgences such as a new car, world cruise or home improvements.

 

Today’s equity release schemes

The modern format of Equity Release started in the mid 1990s with Hodge Lifetime (part of Julian Hodge Bank), Norwich Union (now Aviva) & Northern Rock (now Papilio UK) with a simple roll up lifetime mortgage.

 

Today there are three basic equity release schemes:-

 

1)      Roll up Lifetime Mortgage

This type of scheme has a few variations but basically the borrower takes an initial tax free lump sum, makes no monthly payments and the accrued interest is added to the loan and compounds annually.

 

The main variation to this is the “drawdown lifetime mortgage“ scheme. This is where only the immediately required amount is drawn down and a reserve cash facility is then offered with the remainder. No interest is accrued on this drawdown facility until it is taken in the future. The advantage here by taking it in smaller amounts is that interest is compounded at a much slower rate, than if it had be taken all at once.

 

Another variation of a roll up plan is offered through Hodge Lifetime on a roll-up basis. Hodge’s flexible repayment plan has an option to repay up to 10% of the original amount borrowed annually without any early repayment charges. Hodge also offer a unique ‘downsizing protection’ option whereby after five years, if the property is then sold and the owner moves & downsizes house, then no early repayment charges apply.  A great solution for many who cannot sell now, but may do so in the future.

 

 

2)      Interest Only Lifetime Mortgage Plans

There are two lenders currently offering this type of interest only scheme – Stonehaven and more2Life. Both schemes are fairly simple whereby a lump sum is withdrawn and the monthly interest is paid in order to maintain the balance outstanding level throughout the term.

 

This method has proved appealing to parents who are keen to minimise any inheritance reduction for their children. In recent times, since the withdrawal of the Halifax Retirement Home Plan lifetime interest only mortgages have become increasingly popular. Both these Equity Release Interest Only schemes have the added safety feature that should the monthly payments become too much (one applicant dying and their pension income reducing) then it can revert to a roll up equity release plan, where no payments are required thereafter.

 

3)      The Home Reversion Plan

This is now the least popular type of equity release mortgage. Nevertheless, it can prove to be the best advice in certain scenarios. The workings are that the homeowner(s) must have a minimum age of 65. They have the option of selling part, or all of their property to the reversion provider and then lives in that property, usually rent free, for the rest of their life. In truth, this is usually only appropriate when there are no beneficiaries to the estate, or they wish to leave a guaranteed percentage of the final value of the house to their children.

 

Home reversion schemes only account for less than 5% of the market these days. The market has seen a few withdrawals from the market by lenders such as Aviva and Retirement Plus. The three remaining home reversion providers are Hodge Lifetime, New Life & Bridgewater.

 

About the author

The author of this article is Barry Adnams, who is a senior equity release adviser at Equity Release Supermarket.

Barry is aware of what a monumental decision taking equity release can be. He is a traditional adviser that would always advocate a home meeting with family involvement. Barry offers an initial cost free ‘face to face’ appointment and likes to include as many family members as possible to be present to discuss whether taking equity release is the right option, or not.

 

If you want to benefit from the experience Barry has to offer and understand how equity release works further, then please contact Barry Adnams at Equity Release Supermarket, on 07989 281108 for a free initial consultation. Alternatively please email barry@equityreleasesupermarket.co.uk.

Which Equity Release Companies Accept Payments of Interest &/or Capital?

Monday, January 14th, 2013

Following on from the last article entitled – ‘Will Equity Release Providers Accept Repayments of Interest and/or Capital?‘ we now look at the three companies concerned & their equity release plans in greater detail by covering the features these schemes have brought to the marketplace.

 

Hodge Lifetime

Hodge Lifetime returned to the equity release market in 2012 with a truly innovative lifetime mortgage product which has since been improved again to include a new drawdown facility.

This lump sum lifetime mortgage is unique in that it includes a 10% flexible repayment option with absolutely no early repayment charges under certain circumstances upon downsizing.

 

Hodge Lifetime Allow 10% Overpayments

The Hodge Lifetime Lump Sum Lifetime Mortgage is basically a traditional roll-up lifetime mortgage scheme in that it allows you to borrow a lump sum with a fixed interest rate for life. The flexible repayment option allows you to make a repayment of up to 10% of the original amount borrowed, without incurring any penalties or charges. Since there are no monthly commitments, repayment is flexible and you are free to pay as and when you choose, once the first 12 months has elapsed.

 

These payments are permitted on an irregular basis with a maximum of two repayments per annum. This would ideally suit people who want to control the balance of the plan in the future and in particular want to keep a level balance, or even repay some of the capital by taking advantage of the maximum 10% overpayment rule.

 

The effect of making these 10% overpayments

The Hodge Lifetime Flexible Repayment Option Calculator (accessible via their website) shows the effect making the maximum 10%pa repayments has on borrowing £20,000 at their current rate of 5.83% monthly (6.2% APR).

Over a 10 year period, by repaying £2,000pa back to Hodge Lifetime (10% of capital amount borrowed), it would reduce the balance by almost half to £11,340. Compare this to if NO repayments were made at all and the balance would have risen to £35,778; a significant difference of £24,438!

 

Hodge also have NO early repayment charges…

A second feature that is proving extremely popular with Equity Release Supermarket customers is the favourable early repayment charges that Hodge Lifetime offer.

The plan is geared towards those clients who maybe considering downsizing in the future. Again this has always been a stumbling block for many who see equity release schemes as a solution, however have been put off by the potential size of some of the lenders early repayment charges if repaid early. With some lenders such as Aviva, these penalties can be upto a maximum of 25% of the amount borrowed.

 

Hodge Lifetime make downsizing a more attainable option by applying a sliding scale of early repayment charges (ERC’s) over the first 5 years. These ERCs descend from 5, 4, 3, 2, 1 over the first five years of downsizing. There are no early repayment charges if you downsize after 5 years.

The starting age for the Flexible Repayment Lump Sum Lifetime Mortgage is 60, and the minimum property value is £100,000 with a minimum initial borrowing of £20,000. Hodge Lifetime is a member of the Equity Release Council and all their plans follow SHIP Guidelines. Click here to request a Hodge Lifetime quote.

 

Stonehaven

Stonehaven launched their Interest Select Plans over 7 years ago and were the first of the current crop of equity release companies to offer an interest only lifetime mortgage option.

Stonehaven have been important addition to the equity release range of companies as they created the original concept of this type of interest only lifetime product, which now is starting to make in-roads into the over 55’s mortgage market.  With features unseen before in this sector of the equity release market, Stonehaven’s Interest Select range of products have been launched with the changing needs of the customer in mind.

 

Stonehaven help protect your inheritance

Like the other two flexible repayment plans, this plan is designed to suit those who wish to have more control over repayment and to protect their inheritance.

The Stonehaven Interest Select plans include the Interest Select Lite, Interest Select Plus, Interest Select and the Interest Select Max. Each plan has its own lending limits, or loan-to-value. The greater the borrowings, the higher the interest rate becomes.

 

You can select your monthly payment

All these plans offer a disciplined monthly repayment plan that maintains a level balance throughout the term of the contract. The minimum amount that needs to be repaid monthly is only £25. The client can actually elect how much of the total interest charged they wish to repay. It can be anywhere between the total amount of interest charged each month, down to this £25pm level. The interest rate charged depends on which interest select option you choose.

 

If only partial repayment is made then the Interest Select loans have two parts – the interest payment part, and the interest roll up part. The part of the loan on which you make interest repayments is the interest payment part. If you are not paying all of the interest, then the roll up part is included and this element will accrue over time depending on how much of the total payment is being made.

 

Stonehaven give you the option from the outset to choose how long you wish to make these monthly payments for. Most people will select over their lifetime. However, if there is to be a significant event arising in the future, then you can elect to fix a term for the payments. The interest rate is fixed for the term you will be making interest payments, but cannot extend it later.

 

Protection against repossession

Stonehaven also include a protection feature that is unique to the equity release market. In the future, should you ever fall upon difficult times, then the monthly payments can always be stopped and the plan is automatically converted into a roll-up lifetime mortgage. No further repayments are then requested. There are no actual penalties for this, however if this has been done without prior notification then Stonehaven will increase the future interest rate by just 0.2%

 

What are the Stonehaven Interest Rates?

The monthly rates of interest for the Lite, Select, Plus and Max options vary, and are currently as follows –

 

Interest Select Lite – 5.99%

Interest Select – 6.08%

Interest Select Plus – 6.17%

Interest Select Max – 6.81%

 

The selection of each product is determined by the loan-to-value of the application. The lower the loan-to-value the better the interest rate offered by Stonehaven is.

An example of borrowing £20,000 on their interest select lite plan would result in monthly payments of £103.08 (6.4% APR).

 

Stonehaven are also a member of the Equity Release Council and all their plans follow SHIP Guidelines. Their plans start at a lower age of 55 with a minimum property valuation of £70,000 and a minimum initial release of just £10,000. Click this link to request a Stonehaven Interest Select quote.

 

more2life

more2life which is part owned by Key Retirement Solutions, has recently launched their Interest Choice Plan with a fixed lifetime interest rate.

 

This is a flexible drawdown interest only lifetime equity release plan, and allows applicants the option to repay between upto 100% of the monthly interest. The minimum amount that needs to be repaid is £25. The drawdown facility however, is provided only on a roll-up basis, not an interest only basis.

 

Plans start at age 60, with a minimum property value of £70,000 in England & Wales and with a minimum initial release of just £10,000.

If you wish to request a quote from more2life follow this link.

 

For additional information on any of these interest only lifetime mortgage schemes call freephone 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

 
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