Archive for the ‘Stonehaven Equity Release’ Category
Friday, May 29th, 2015
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mortgage balance outlived the more conventional mortgage products such as the Halifax Retirement Home Plan which was withdrawn in August 2011.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 firstname.lastname@example.org to discuss this further.
Monday, March 16th, 2015
When 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!
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 email@example.com.
Sunday, December 7th, 2014
Each 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.
- 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.
- 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.
- 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.
- 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.
- 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!
- 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.
- 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.
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 – firstname.lastname@example.org
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 email@example.com
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 firstname.lastname@example.org
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 email@example.com.
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 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 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 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 firstname.lastname@example.org