Archive for the ‘Equity Release’ Category
Wednesday, June 22nd, 2011
The amount of equity you own is the term used to describe the value of a home less any mortgage or secured pending on it. Equity release allows you to free up this money tied up within your home.
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The equity release process will allow you to receive a tax free, lump sum of capital allowing you to spend it in whatever way that you choose.
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An obvious disadvantage is that you will not be able to hand down all of your property to your offspring. Nevertheless, you do get to live out the remainder of your life in your home, rent free or till you move into elderly care.
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If you are considering an equity release scheme, the best way to get started would be to approach an expert. Some organisations which provide equity release schemes also provide a free consultation, so remember to take advantage of their services. Some research of the advisor would be of benefit as they must be regulated by the FSA (Financial Services Authority) & have an individual registration number with them. The equity release adviser should therefore be found on the FSA website register.
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Ensure they are independent, which means they are free to deal with ANY equity release provider in the market. So ask. Some companies purport to be whole of market, however upon closer analysis they only deal with a handful of companies. You may therefore be missing out on a beneficial feature of an equity release scheme that they do not have available. This could save you £1000′s in the long run & could prove costly if the wrong equity release plan was chosen.
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Your advisor will let you in on all the vital details regarding the procedure. This will be after the equity release adviser has collated all the necessary facts regarding one’s current situation. Guarded with this information, & any soft facts provided such as ‘how important is that you leave part or all of your property to your beneficiaries?’ will be asked. Also income & whether you are in receipt of means tested benefits is important as this will reflect on which equity release schemes are advised upon. The equity release consultant can then document & record this stage of the lifetime mortgage process.
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Once an accurate financial picture has been ascertained & observed the clients objectives, the equity release adviser can then discuss the mortgage options available. These would include an explanation of the various schemes available to suit. Included in this would be roll-up equity release schemes, home reversion plans & interest only lifetime mortgages such as the Halifax Retirement Home Plan or the Stonehaven Interest Select.
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You do not have to give them an instant decision; after all, going for an equity release scheme is a big decision and something which should not be rushed into.
Upon presentation of the equity release advisers recommendations a Key Facts Illustration must be offered to you. This would include a summary of the scheme in principle, costs & charges, future balance & the commission payable by the lifetime mortgage providers. This is quite a comprehensive overview of the scheme & covers the finer details, as well as the main features, such as the no negative equity guarantee & early repayment charges etc.
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Once you have made your decision, all you have to do is simply call your advisor and give them the go ahead. They will have all your paperwork taken care of, contact your solicitor and keep you updated about everything, right to the time that you get your money released.
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A professional & courteous adviser will confirm the funds have been released & offer any after care service in the future; for example when additional funds are required such as on a drawdown equity release scheme.
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As a company Equity Release Supermarket keep contact with its clients to advise on new products & interest rates in the future as it is important to keep abreast of the market as & when more competitive products become available.
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Independent & award winning equity release specialist Equity Release Supermarket offer all the above benefits & quality of service that the testimonials at the bottom of the home page illustrate.
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To discuss your options in the release of equity from your property call freephone 0800 678 5159 today or alternatively complete our contact form & one of our advisers will be in touch
Tags: drawdown equity release, equity release, Equity Release Adviser, equity release schemes, equity release solicitor, home reversion, independent, Independent equity release advice, interest only mortgage, lifetime mortgages, No negative equity guarantee
Posted in Advice, Equity Release, Halifax Retirement Home Plan | No Comments »
Friday, June 17th, 2011
Equity release is used as a term for schemes that help a homeowner to secure a good amount of money from their main residence. These schemes provide homeowners with an option to use their property to release money. It becomes hard for people who retire after a certain age and do not have funds to support their needs. Equity release schemes provide an option for people who live on pensions and are unable to support themselves or maybe wish to increase their lifestyle options with a new car or holidays. It therefore helps provide an extra flow of money to fulfil their needs & retirement enjoyment.
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Equity release has become very popular among citizens who are over the age of 55. There are an increasing number of retirees opting for these equity release solutions. Equity release UK schemes offer retirees an opportunity to generate money from their property, either a lump sum amount, timely earnings, or in some cases, both. Retirees can remain living on their property unless they decide to move out at which point the equity release plan becomes repayable. The equity release providers will usually require repayment of the balance within 12-18 months by the beneficiaries. This gives the executors of the estate plenty of time to achieve the best sale price on the property to cover the debt & maximise the inheritance for the beneficiaries.
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The value of your property and your age are the key factors in the data used in equity release calculator formula. There is no age limit as far as equity release is concerned. The older you are, the more you can generate out of your property. This scheme is accessible for people who are over fifty five years and own their property which usually should be of standard construction & freehold, or leasehold with more than 75 years left remaining on the lease.
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Halifax Retirement Home Plan is one such scheme which helps people to extract money out their property. It is a type of interest only equity release lifetime mortgage plan where the borrower pays a sum of money to the lender on a monthly basis. It is a useful and easy plan which suits the needs of all perfectly. As mortgages for pensioners seem to be difficult to come by, the Halifax equity release scheme has become a breath of fresh air to many people in retirement. They can be safe in the knowledge that the balance will not increase as long as the payments of monthly interest are maintained.
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This is an interest only lifetime mortgage which means there is no set term & these equity release schemes will run for the rest of their lives. As long as too much equity is not taken from inception on the Halifax Retirement Home Plan then if there comes apoint in the future that the monthly payment should cease, then repayment by a roll-up equity release plan could always take effect.
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There are many options today that assist pensioners to take equity release from their property, however to ensure which scheme is the correct one for your circumstances contact a professional & qualifies advisory service.
Award winning Equity Release Supermarket have advisors local to you who can provide quality & friendly service to guide you through the equity release decision making process.
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Call the equity release team today on 0800 678 5159 for your free initial consultation.
Tags: equity release, Equity Release Adviser, Equity release calculator, equity release schemes, Equity Release Supermarket, halifax equity release, Halifax Retirement Home Plan, lifetime mortgage schemes, lifetime mortgages, pensioner mortgage, Roll up lifetime mortgage
Posted in Equity Release, Halifax Retirement Home Plan | No Comments »
Tuesday, June 14th, 2011
Retired homeowners can now safely make plans for their future with the help of an equity release scheme.
There are a number of equity release schemes available today in the market. Some of these are:
- Interest only mortgages
- Lifetime mortgages
- Home income plans
- Home reversion
Amongst these schemes, the interest only mortgage is very popular. It can either have a fixed or tracker rate of interest which is to be paid at the end of every month. Interest only mortgage schemes have gained popularity in recent times.
This scheme is highly suited to people who are retired and it can help them in their old age. Those retirees who are opposed to the roll-up effect of conventional equity release schemes, can find solice in these interest only lifetime mortgage schemes. The reason being is that the balance will always remain the same & never increase, thus protecting any beneficiaries inheritance.
The interest only mortgage scheme is considered as the safest option by many people. It promises a fixed capital lump sum to spend on anything they wish in retirement.
In other plans such as home reversion, one sells all or part of the property & can thereafter live rent free in the home for the rest of their lives. These schemes do not start until age 65 & now only account for 3% of all equity release plans taken out.
It should be noted that none of the interest only schemes put the retired person at a risk to lose their right to live in their property. However, monthly payments must be maintained in order to not default on their mortgage. Obviously, these interest only mortgages always come with the health warning – Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Should you have any questions on lifetime mortgages, home reversion schemes & interest only mortgages please contact the Equity Release Supermarket advisory team on 0800 678 5159 or alternatively email mark@equityreleasesupermarket.co.uk
Tags: equity release, equity release schemes, Equity Release Supermarket, Halifax Retirement Home Plan, home reversion, home reversion plans, home reversion schemes, interest only mortgage, lifetime mortgage schemes, lifetime mortgages
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Tuesday, June 7th, 2011
Equity release schemes have become extremely popular amongst retired individuals due to their myriad of benefits. The most notable benefit of these form of lifetime mortgage is that you do not have to move out of your home to get equity from your property & you have no monthly mortgage payments to make. Similar to any other financial scheme, it is important to consider your needs and requirements before you arrive at a decision.
Mentioned below are some important factors that you need to understand before selecting an equity release scheme.
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No negative equity guarantee
Most equity release schemes have a no negative equity guarantee provided free of charge & automatically incorporated into any SHIP equity release plan. A no negative equity guarantee will ensure that your outstanding debt will never exceed the overall value of your property. At the same time, any outstanding debt will not be transferred to your family after you pass away. Therefore, your beneficiaries can be safe in the knowledage that by you taking equity now, will not make you pay for it later.
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Moving to a new property
It should be noted that moving to a new property is permitted by the equity release provider you choose to go with. However, as long as the property you are moving to is of standard construction & if leasehold has a lease still in excess of 75 years then it should still be possible to transfer your scheme. Because of this reason, it is recommended to look for a reutable equity release scheme that caters to your specific needs.Again, all equity release schemes that are members of SHIP (Safe Home Income Plans) must have this facility to transfer the mortgage built within the terms.
If you are looking to downsize, then a repayment maybe required to bring the amount riased in line with the equity release providers loan to value. This amount would usually come from the equity that has been raised by downsizing so there would be no need for alarm. Additionally, as you are making some form of repayment, then NO early repayment charge would be applied by the lifetime mortgage provider.
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Criteria
It should be noted that you will need to meet the equity release companies criteria to become eligible for equity release schemes. For starters, you need to be at least 55 years of age & own your own home. At the same time, the market value of your home should be at least £60,000, although some equity lenders do impose higher valuations so check beforehand. Ensuring you meet these criterion’s will help if you are planning to opt for one of best equity release plans.
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However, help is always on hand. Therefore to establish whether equity release is the correct path for you to follow then speak to the specialists at Equity Release Supermarket. Call freephone 0800 678 5159 or email mark@equityreleasesupermarket.co.uk
Tags: equity release, equity release schemes, lifetime mortgage schemes, lifetime mortgages, No negative equity guarantee, SHIP
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Tuesday, April 19th, 2011
Upon researching whether equity release is a suitable option, you may be finding most of the information available in the press or on the internet focuses on the main types of plans available which are Roll-Up Lifetime Mortgages.
There is in fact another type of plan which is less commonly understood and these are called Home Reversion plans.
I think it’s important to consider these plans in more depth. Increasingly home reversions are become more appropriate for those considering taking an equity release plan, particularly if those looking for a simple plan giving a high degree of certainty.
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A home reversion plan involves transferring ownership of all or part of your property to the provider in exchange for a tax free cash lump sum (or you can choose regular payments). Your property is independently valued and from this the provider will work out how much they will pay you for the percentage of the property being sold.
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The amount you’re paid wont be as much as the market value of the property. This is simply because you will be living there rent free for the rest of your life (or until moving out permanently into long term care). As a “rule of thumb” the older you are the more the home reversion provider will pay you for the share sold, that’s because your life expectancy is less. You are still responsible for paying all your bills, insurance and maintaining the property. At the end of the plan the property is sold and if you’ve retained part of it, your share of the proceeds will be paid to your estate.
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When considering a home reversion company, it’s important to choose a provider who is a member of the trade body Safe Home Income Plans. SHIP members offer a guarantee to their customers, the main benefits of this are that you’re allowed to remain in your property for life (provided the property remains your main residence) and you have the right to move plan to another suitable property without any financial penalty. Plus of course you have the safeguard of independent legal advice.
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Home reversions are also regulated by the Financial Services Authority (FSA) which oversees how providers and advisers must deal with you. And finally, because home reversions involve the sale of property a third level of extra consumer protection is given by UK property law, which governs the relationship with the provider and their obligations towards you.
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So what type of people are home reversion schemes most suitable for?
Well it really boils down to your thoughts and concerns. As a guide a reversion might be more appropriate for someone who falls into some or all of the following categories:
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- Customers who want to specifically avoid debt – a home reversion plan is not a mortgage & cannot therefore be repossessed
- Those concerned house prices won’t keep going up – the risk of falling house prices is passed to the provider
- People in good heath and confident that they may live for many more years to come (for example there may be a history of longevity in the family) – generally the longer you live the better value a reversion becomes
- Anyone wanting to the peace of mind of knowing that if they need to in the future, they can access the maximum cash from their remaining equity – some providers will guarantee to always release further funds until 100% of the property is sold
- Clients wanting to guarantee an inheritance for their estate – for example if only 25% of the property is sold, the estate will inherit 75% of its value after costs
- Those wanting to release more cash from their property than they can by using a lifetime mortgage
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Naturally home reversion plans are not for everyone. Generally you will only be eligible to take a reversion plan if you are 65 or older. Ideally, to get the better rates you would need to be over age 70.
As reversions are a long term commitment they should not be considered if you intend to repay the money released at some stage in the future (for example if you’re expecting an inheritance).
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If you are in poor health or expect to have below average life expectancy then you may not get full value from a reversion either. However, we do have access to products now that do offer an impaired life (poor health) facility & therefore can provide an extra lump sum for this reason.
For those unfamiliar with how a reversion works there is understandably a little concern about giving up all or part ownership of your property.
The reality is that the terms and conditions of a reversion (ie the “small print”) are similar to that of equity release and your right to privacy and freedom to live in your own home are not affected.
Usually with a home reversion you are granted a lease for life to live in the property for as long as you wish to. And this important legal arrangement is recorded by HM Land Registry much the same as a leasehold flat or house is. So although you may have sold all or part of the property to the provider it still very much remains your home.
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The decision to release equity from your home using a home reversion plan or a lifetime mortgage is an important one and you will need specialist advice from a Financial Adviser in order to do so. They can talk to you about whether equity release is right for you and if it is what sort of product best suits your particular needs.
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To obtain further information on Home Reversion schemes, please contact an Equity Release Supermarket adviser on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk
Tags: equity release, Equity Release Adviser, FSA, home reversion, home reversion plans, home reversion schemes, impaired life, inheritance protection, lifetime lease, lifetime mortgages, lifetime tenancy, SHIP
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Tuesday, March 8th, 2011
On Thursday 3rd March 2011, the equity release market saw another welcome lender return with Stonehaven relaunching their Lump Sum & Interest Select plans.
Having been absent for over a year whilst new funders were sourced, Stonehaven have now streamlined & simplified their product range.
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One product in particular will answer a common question –
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“Can I have an interest only equity release plan where I can repay the interest?”
Well the answer is now categorically – ‘YES’
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Before discussing the Stonehaven Interest Select option in greater detail, let’s have a look at the two products launched.
Stonehaven now have two propositions available to customers: -
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1. Lump Sum Only Option
2. Interest Only Equity Release
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The lump sum option does as it says on the tin; namely two lump sum options which offer different loan to values. Stonehaven are not launching at the maximum release end of the market, but aiming competitively with lower interest rates.
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Lump Sum Lite has the lowest interest rate at market leading 6.13%.
Plans start at 55 & this product will release 11% of the property value at this age.
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The Lump Sum plan has a higher interest rate of 6.24%, with a higher release of 14% at age 55.
Both plans have no drawdown facility, but a simplified single lump sum option from the outset.
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Next we come to the Interest Select products.
These innovative plans allow you to choose how much of the interest charged you would like to repay each month, and also how long you wish to pay this for. You could pay off the whole interest, or if you have a specific budget just pay off part of the interest with the remainder rolling up onto the original capital borrowed.
In effect it can be classed as an interest only lifetime mortgage for pensioners.
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Traditional equity release may not be suitable for everyone, especially due to roll-up of interest & the reduction this will make to potential beneficiaries.
Therefore, particularly suitable for people with good disposable incomes & used to servicing & managing debt throughout their working lives, these people can now control how much inheritance they leave behind by these new equity release schemes.
Primarily, it can be regarded as a half way house between a conventional mortgages and roll-up equity release. The scheme is an interest only eqity release & has all SHIP safeguards and protection offered by the FSA.
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However, a major feature of the Interest Select plan is the ability to be converted over to a full roll up scheme at a later date. This could be when one party to the mortgage dies or financial circumstances dictate that no more monthly payments wish to be made.
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Simplification on the new Interest Select means that when conversion arises, the new rate on the equity release plan will only be 0.2% higher than on the previous Interest Select. However, better still, should the roll-over date be previously set, then roll-over will be at the SAME interest rate as the original interest only element.
With interest rates starting at 6.13% which are currently the lowest in the market, a particularly attractive proposition can be found here for those interest rate tarts!
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TIP – Should one be able to afford the minimum monthly contribution of £25pm for the minimum roll-over period of 12 months, then one can easily achieve a roll-up equity release plan with a 6.13% monthly interest rate thereafter!
Surely, a tip not to be passed by?
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There have been four Interest Select plans launched which surely indicates which way Stonehaven feels the market potential lies.
These range from the Interest Select Lite at just 6.13% & releasing 11% at age 55, upto Interest Select Max with an interest rate of 7.57%, but releasing a higher 19% at age 55.
An example of borrowing £40,000 on the Stonehaven Interest Select Lite at 6.13% would result in monthly payments of £205pm.
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Qualification Criteria for Both Schemes
All Stonehaven equity release products are available to people aged 55 and over, living in a main residence in England and Wales & must have a minimum property valuation of £70,000. The minimum release has been reduced to £10,000.
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Additional Features
No Negative Equity guarantee
There is the guarantee that when the property is sold on death or long term care, the proceeds payable to Stonehaven can never be greater than the property value itself. This guarantees there can be no excess debt passed to the beneficiaries.
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Protected Equity
A valuable inheritance protection feature applicable to the lump sum plans. There is the facility to choose to protect a percentage of the final sale value of the property. Point to note is that the no negative equity guarantee and the amount that Stonehaven will lend are based on the value of the unprotected portion of the property.
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Thus, another chapter unfolds in the equity release storyline; providing greater diversity in the whole of market lifetime mortgage product range. A welcome read & a promising sign of further things to come for the industry.
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If you have any questions, or wish to obtain advice on the Stonehaven range of products please contact the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk
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Tags: equity release, Equity Release Adviser, equity release schemes, Halifax Retirement Home Plan, inheritance protection, interest only mortgage, lifetime mortgage schemes, lifetime mortgages, SHIP, Stonehaven, Stonehaven interest select
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Friday, March 4th, 2011
Equity release is a type of mortgage which is secured on your property and helps you to access money attached to it. The value of your property minus any secured loans placed upon it is termed as equity. You are able to withdraw this amount to assist you financially in later years.
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What is equity release all about?
A clichéd reason given for releasing equity is mainly ‘debt consolidation’. During 2011, debt consolidation is proving to be the most popular reason for releasing equity from one’s property.
Debt consolidation involves settling mortgages, loans, credit cards & any other unsecured finance which the individual is finding difficult to maintain. Once these debts are repaid, your monthly expenditure is reduced thus giving you extra income to enjoy. Other reasons for releasing equity could be to buy a new car, holidays or generally making your lifestyle more satisfactory during retirement.
The equity release plans do not have a fixed term therefore they run for the rest of your own or your partner’s life. If there is any money left, it is passed onto your nominees as suggested in your will. This scheme is only meant for people who have retired and are over 55 years of age.
There are two types of equity release scheme. The lifetime mortgage scheme is recommended for people who are retired. A loan is given to the borrowers on their house. Interest is then added annually to the loan, which is then repaid by selling the property when the borrower dies or when they move out into long term care.
The second option is a home reversion scheme & refers to selling the whole or part of your property to the reversion provider. This means that it the property itself is actually shared or even fully belongs to someone else. The borrowers can continue to live in their house for as long as they wish & not have to worry about any rental payments.
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To ascertain which equity release scheme is suitable for yourself, contact the Equity Release Supermarket team on 0800 783 9652 or visit our market leading website at EquityReleaseSupermarket.co.uk
Tags: equity release, equity release schemes, home reversion, home reversion schemes
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Wednesday, March 2nd, 2011
With the main concern over equity release schemes being the inheritance passed down to beneficiaries, here we discuss the pro’s & con’s of these lifetime roll-up mortgages.
Firstly, we look at the effect on beneficiaries & the sources of these areas of concern. This then leads us onto the equity release calculator with facts & figures showing how these schemes fair for the beneficiaries at the end of the day.
Ok, we’ve have all heard the saying; bad news travels faster than good news & this is synonymous with term ‘equity release’.
Although equity release plans originate back to 1965, the damaging news about them generally dates back to the late 1980′s when ‘home income plans‘ were initially launched.
Linked to an annuity or investment bond & an interest only mortgage, these plans were destined to fail, relying heavily on investment performance in a period of falling property values & rapidly rising interest rates.
The mid 90′s then introduced the much derided shared appreciation mortgages (SAM’s), the focus of most causes for campaigns against equity release including the Trevor MacDonald Tonight programme.
Is it any wonder reputation was soured?
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So what has the equity release industry done about it?
At the time of the SAM’s debacle, SHIP (Safe Home Income Plans) was launched.
Formed from its originators – Ecclesiastical Life, Hodge, Home & Capital Trust and GE Life all members agreed to abide by a strict code of conduct, which still exists to this day.
Soon, new lenders entered the market with household names such as Norwich Union & Northern Rock introducing the first roll-up schemes & bringing a significant boost & trust to the industry.
Although the volume of applications began to blossom around 2003 with 25,000 loans completed, a lack of regulation still overshadowed the equity release sector. The market was still somewhat blighted by its previous misdemeanours.
Thankfully, partial regulation was soon imposed on the industry with lifetime mortgages coming under the auspices of the Financial Services Authority on 31st October 2004. Home reversions joined lifetime mortgage schemes soon after & by 2007 full regulation & confidence was brought back to the sector.
Therefore, the market has evolved & strived to restore pride; a far cry from the negative perceptions of decades previous.
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So what does this all mean for today’s beneficiaries?
The main ‘clean up act’ came with the introduction of SHIP & its rules imposed on the members. The ‘no negative equity guarantee‘ affords the greatest level of protection this industry can offer.
Safe in the knowledge that any amount borrowed by their parents can never escalate to more than the eventual sale price of the property, beneficiaries are at least guaranteed no debt can ever be passed onto themselves.
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A crumb of comfort maybe, but peace of mind for the parents.
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An equity release adviser should always encourage involvement of the heirs to the estate. With their input & assurance, feelings can then be vented either for or against equity release being taken as for many elderly people this is a major financial proposition.
Again qualified advisers should play an important role in explaining the pro’s & cons of lifetime mortgages & convey these issues to all parties concerned.
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What else does the equity release sector afford by way of protection?
Interest rates for home equity release schemes, albeit not the lowest ever, are still historically low. One positive feature of these schemes is the lifetime fixed rate on all loans now.
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So what is the benefit of this?
If you borrowed an amount of capital, with a fixed interest rate for life it enables you to calculate the exact future balance.
This is building further reassurance for potential mortgage applicants.
A client will always be made aware that the equity release balance escalates over the lifetime of the scheme; this is the nature of these plans & should never be entered into unless this has been clearly explained. The effect of the interest compounding annually, approximately doubles the balance every 10-11 years, depending on interest rate charged by the equity release companies.
Sounds daunting? Well, let’s now look at the sums as promised:
One of the lowest interest rates around at present would be the Aviva Lifetime Lump Sum plan, which at the time of writing this article has a fixed lifetime interest rate of 6.65% (6.9% APR) annual.
A male, aged 65 borrowing a lump sum of £25,000 on the Aviva Lifestyle lump sum at a fixed interest rate of 6.65% would know exactly what the future balance will be, even before taking out the equity release scheme. The Key Facts Illustration provided by the equity release adviser will confirm these figures & also the costs & additional features involved.
For instance, given the aforementioned figures at the end of 10 years the mortgage balance would be £47,594 & after 20 years it would be £90,606.
This may seem expensive given only £25,000 was borrowed initially; however there are two factors that could still rule in favour of the a lifetime mortgage scheme.
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One common issue overlooked is the potential for property values to increase. If so, & with 100% ownership of the house still being retained, then the homeowner will fully benefit from any escalation in the house price. This will then offset some of the compounding effect of the interest & mitigate its effect on the estate somewhat. Again, we are looking here at the longer term & no guarantee can be given they will go up; nevertheless historical records show they have indeed.
Consequently, a rule of thumb is never to borrow anymore than required beyond the initial 12 months. Plans are now flexible enough & with drawdown equity release schemes introduced & now being the most popular roll up lifetime mortgage, then the funds can be drip fed over time as & when required.
Additionally, by taking a lower initial amount, results in less interest being charged, thus meaning more inheritance passed onto the beneficiaries.
The second factor affecting the balance accruing & is also the primary cause of roll-up & that is purely down to the fact that NO monthly payments are required. This helps retirees to have access to the some of the equity tied up in their property & at the same time having NO effect on their budget.
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Finally, equity release schemes do have an ever increasing part to play in the retirement planning for the over 55′s. Care must always be taken & should never rushed into without discussion & involvement of third parties. Advice should always be provided by an industry qualified equity release adviser.
Hopefully lessons have now been learned from the past & the industry can move forward, innovate & develop further over time. If so, & in the right circumstances equity release can provide for many, a comfortable & enjoyable retirement.
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If you require furthjer advice on equity release schemes, please call freephone 0800 783 9652 or email mark@equityreleasesupermarket.co.uk
Tags: drawdown equity release, equity release, Equity Release Adviser, Equity release calculator, home income plan, lifetime mortgage schemes, lifetime mortgages, SHIP
Posted in Advice, Equity Release | No Comments »
Wednesday, February 16th, 2011
The main concern of equity release schemes is the reduced inheritance which is passed down to beneficiaries. Here we discuss the pro’s & con’s of roll-up equity release plans.
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First, let’s look at the effect on the beneficiaries & the source of the causes for concern. This then leads us to the equity release calculator with facts & figures showing how these schemes fair for the beneficiaries on final redemption of the plan.
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Ok, we’ve have all heard the saying; bad news travels faster than good news & this is synonymous with terminology ‘equity release’.
Although equity release plans were initiated in 1965, the news damaging these schemes generally dates back to the late 1980’s when the first home income plans were launched.
Linked to an annuities or regular income investment bonds & an interest only mortgage, plans such as these were destined to fail, relying heavily on investment performance in a period of falling property values & rapidly rising interest rates.
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The mid 90’s then introduced the much derided & chastened Shared Appreciation Mortgages (SAM’s), the focus of most causes for campaigns against equity release including Trevor MacDonald’s Tonight TV programme.
Therefore, its no wonder the industries reputation was soured.
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So what has the equity release industry done about repairing this negative sentiment?
At the time of the SAM’s debacle, SHIP (Safe Home Income Plans) was launched. Formed from its originators – Ecclesiastical Life, Hodge Equity Release, Home & Capital Trust & GE Life all members agreed to abide by a strict code of conduct, which still exists today.
Soon new lenders entered the equity release market, with household names such as Norwich Union & Northern Rock with their newly developed roll-up equity release schemes bringing a significant boost & trust to the industry.
Although equity release schemes began to blossom around 2003 with approximately 25,000 equity release loans completed, a lack of regulation still overshadowed the equity release sector. The market was still somewhat bighted by the previous misdemeanours.
Thankfully, partial regulation was soon imposed on the equity release industry with lifetime mortgages coming under the auspices of the Financial Services Authority on 31st October 2004. Home reversions soon joined lifetime mortgage schemes & by 2007 full regulation & confidence was brought back to the equity release marketplace.
Therefore, the market has evolved & strived to restore pride; a far cry from the negative perceptions of decades ago.
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So what does this all mean for today’s beneficiaries?
The main ‘clean up act’ came with the introduction of SHIP & its rules imposed on the members. The ‘no negative equity guarantee’ affords the greatest level of protection the industry has to offer.
Safe in the knowledge that any amount borrowed by their parents can never escalate to more than the eventual sale price of the property, they are at least guaranteed no debt can be passed onto themselves.
A crumb of comfort maybe, but certainly peace of mind for parents.
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As an equity release adviser, encouragement must always be shown to involve the heirs to the estate. With their input & assurance, feelings can then be vented either for or against equity release being taken as for many this is a major financial proposition.
Again qualified advisers should play an important role in explaining the pro’s & con’s of equity release mortgages & convey these issues to all parties concerned.
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What else does the equity release sector afford by way of protection?
Interest rates for home equity release schemes, albeit not the lowest ever, are still historically low. One positive feature of these schemes is the lifetime fixed rate on all equity release loans now.
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So what is the benefit of this?
If you borrowed an amount of capital, with a fixed interest rate for life it enables you to calculate the exact future balance.
This is building further reassurance for potential equity release applicants.
We know the equity release balance escalates over the lifetime of the scheme; this is the nature of plans & should never be entered into unless this has been clearly explained. The effect of the interest compounding annually, approximately doubles the balance every 10-11 years, depending on interest rate charged by the equity release companies.
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Sounds daunting? Well, let’s now look at the sums as promised earlier:
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One of the lowest interest rates around at present would be the Aviva Lifetime Lump Sum scheme, which currently has a fixed interest rate of 6.65% (6.9% APR) annual.
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A male, aged 65 borrowing a lump sum of £25,000 on the 6.65% Aviva Lifestyle lump sum would know exactly what the future balance will be, even before taking out the equity release scheme. The Key Facts Illustration provided by the equity release adviser will confirm these figures & also the costs & additional features involved.
For instance, based on a release of £25,000 in this scenario would lead to a balance in 10 years of £47,594 & after 20 years would be £90,606.
This may seem expensive given only £25,000 was borrowed initially; however there are two factors that could still rule in the equity releases favour.
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One common issue overlooked is the potential for property prices to increase. If so, & with 100% ownership of the house still retained the homeowner will fully benefit from any future escalation in the house price. This will then offset some of the compounding effect of the interest & mitigate its effect on the overall estate. Again, we are looking longer term & no guarantee can be given prices will go up; nevertheless historical data confirms they still have.
As a consequence, a rule of thumb is never to borrow anymore than required beyond the initial 12 months. Plans are now flexible enough with drawdown schemes being available that funds can even be drip fed over time as & when required.
hence, by taking a lower initial amount would result in less interest being charged, meaning more inheritance passed to the beneficiaries.
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The second factor affecting the balance accruing & is the main cause of equity release roll-up is purely down the fact that NO monthly payments are required. This helps retirees to have access to the equity tied up in their property & at the same time leave their budget unaffected.
Nevertheless, equity release schemes do have an increasing role in retirement planning for the over 55’s. Care must always be taken & never rushed into without discussion & involvement of third parties.
Advice should always be provided by an industry qualified equity release consultant. If so, & in the right circumstances equity release can provide a comfortable & enjoyable retirement.
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Finally, hopefully lessons have been learned from the past & the industry can move forward, innovate & develop further over time.
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To discuss any of these issues & with no obligation whatsoever, please contact the Equity Release Supermarket team on 0800 783 9652 or email mark@equityrelease supermarket.co.uk
Tags: drawdown equity release, equity release, Equity Release Adviser, equity release awards, Equity release calculator, equity release schemes, lifetime mortgages, No negative equity guarantee
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Friday, February 11th, 2011
The resurgence of the equity release market gathers momentum in 2011 with the news that New Life Mortgages are set to re-introduce their landlord & second home equity release schemes on 11th February 2011.
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Following the additions of more2life & New Life Mortgages to the equity release market late in 2010, the latest launch from the innovative lifetime mortgage lender signals a degree of diversity to their portfolio.
New Life Mortgages temporarily withdrew from equity release market in 2009. They obviously haven’t been sat idle, but instead waited for their opportunity to re-enter at the right time & with the right products.
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Following on from my previous article on New Life Mortgages rejoining the equity release market in November 2010, here we discuss the features & benefits to landlords of this unique equity release plan.
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How does the scheme work?
The New Life Mortgages Landlord Loan provides a tax free cash lump sum based on a percentage of the value of the residential investment property & the age of the applicant. Plans start at age 55 & any landlord with a portfolio of upto 5 rental properties can potentially release some of the equity tied up within them.
This buy to let equity release has no set repayment date & no monthly repayments to make. The loan is eventually repayable on the sale of the property when the last surviving borrower has died or gone into care.
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How do I qualify?
- Minimum age of 55 (for joint applicants minimum age 55 of the youngest)
- Investment property must be in England & Wales
- Landlord loan minimum property valuation of £100,000 & a maximum of £1million
- Minimum release is £25,000 & maximum is £500,000
- The property should be standard construction with flats over 5 storeys excluded
- If leasehold property, then 80 years must be remaining on the lease
- Any existing mortgage must be repaid on commencement of the Landlord scheme
How Much Can I Borrow?
This is determined by the age of the youngest applicant & the value of the investment properties:-
- Age 55 – 16%
- Age 60 – 21%
- Age 65 - 26%
- Age 70 - 31%
- Age 75 – 36%
- Age 80 – 41%
- Age 85+ – 45%
Therefore, as an example a 65 year old landlord with a single investment property of £200,000 could potentially release a capital lump sum of £52,000.
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How does it compare to a normal equity release scheme?
The scheme in principle works exactly the same. You borrow the money, the interest accrues on a monthly basis & it is repaid when the property is finally sold.
The differences lie in the rental side; an assured shorthold tenancy agreement must be in place to qualify & cannot be let to family members.
Also, there are maximum borrowing criteria, similar to a buy to let mortgage. This states that the monthly interest charged cannot be more than the rental income received.
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What are the costs involved?
- Valuation fee dependent upon the value of the investment property
- Application fee which can be added to the loan
- Solicitors legal fees
- Lifetime fixed monthly interest rates of 6.39% (age 55-80) & 6.55% (age 81+)
- Early repayment charges only 5% for the first 5 years. No charges thereafter.
- Any advice fee charged by your equity release specialist
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Practical uses of the New Life Landlord buy to let mortgage?
The equity release funds can be utilised in many ways.
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With market opportunities growing in the rental market as house prices fall & yields increase, bargains are there to be had. Should any residential landlord wish to expand their portfolio & have concerns over the expense of buy to let mortgages they can consider schemes such as this.
Should a potential landlord spot a new investment opportunity, but has limited capital for deposit, then landlord equity release schemes could assist. The borrower could review all properties under his portfolio & by using an equity release calculator; assess how much could be released individually to meet the shortfall required.
Additionally, with the age group eligible for this buy to let mortgage there could be tax implications. Therefore, should some of these assets need to be disposed of, rather than selling the property & incurring capital gains tax, then equity release can be undertaken instead.
Finally & the most common purpose for this could be for debt consolidation purposes. Should financial difficulties arise on a buy to let mortgage or other personal finances, then subject to the amount that can be released, these debts can be repaid.
Perhaps one has just had enough repaying a buy to let mortgage & would rather receive the gross rental income to support their retirement?
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The uses of the New Life Landlord scheme can be many; so to discuss how the features of this unique buy to let lifetime mortgage can benefit you contact the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk.
Tags: buy to let, buy to let mortgage, equity release, Equity release calculator, equity release schemes, landlord equity release, landlord mortgages, New Life Mortgages
Posted in Equity Release, News | No Comments »
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