Stonehaven, the innovative equity release lender that sourced its funding from Santander is the latest provider to withdraw from the lifetime mortgage market.

Stonehaven have now become one of many finance houses to pull back from the sector & whom say the move is hopefully only temporary & may return to the market when funding improves.

After the shock withdrawal of Prudential at the end of 2009, Stonehaven was one of only a number of remaining providers including Just Retirement, Aviva & LV= who expressed commitment to the sector.

Georgina Smith, sales and marketing director at Stonehaven, said it has been forced to suspend lending after banking giant Santander, decided it no longer wanted to fund the equity release mortgages.

Georgina stated “We are in discussion with a number of potential lenders and we do hope to start lending again in the near future. We believe in equity release as a product,”

Stonehaven’s existing lifetime mortgage customers will not be affected with continued good servicing & they have pledged to meet all the existing terms and conditions

Stonehaven have placed deadlines on existing business applications based on KFIs generated before 10^th March 2010.

New applications, supported by relevant Key Facts Illustration must be received by close of business on Wednesday 7th April 2010. Applications must include a cheque to cover the valuation fee.

Thereafter, offers made by Stonehaven are normally valid for a period 3 months; however they are extending this deadline to 6 months from the valuation date

We look forward to their return.

Mark Gregory CeMap CeRER

0800 783 9652

mark@equityreleasesupermarket.co.uk

Post from: Equity Release Latest News

Equity release can be a final solution for borrowing in retirement once all other potential avenues of capital raising have been explored, however equity release can be expensive & sold all too quickly without looking at the alternatives.

It is a common misrepresentation that just because people are near to, or in retirement, that they cannot raise funds via a conventional mortgage.

This is grossly incorrect.

As part of any capital raising initiative, all options must be considered & eliminated as necessary upon discussion between client & adviser. By ascertaining disposable income & the clients future intentions with regards to their property, occupation & selected retirement date the adviser can provide recommendations accordingly.

There are two ways that lenders will look at potential mortgage cases: - pre retirement & post retirement income: -

Should one still be working, most lenders will consider employment income only up to a maximum age of 65. The amount that could be borrowed would be based on a multiple of income which varies from lender to lender. It can also be based on affordability, taking into account gross incomes & making deductions for any loans, credit cards or other outstanding debt.

However, how does this affect people considering working beyond normal retirement age of 65?

Not to worry, as there are still a few lenders that would permit this & this is where specialist independent mortgage advice should be sought.

For example Leeds Building Society will take into account current employment income into retirement should they be aged under 60, regardless of the normal state pension age.

Leeds will actually permit the mortgage term to extend into retirement upto a maximum age of 85.

It must be stressed to the client however that  payments must be maintained & this could be difficult should employment cease prior to the end of the selected mortgage term.

However, for some this could certainly be an option should their future pension income still be substantial.

For many lenders though, should the mortgage term extend beyond age 65, then only post retirement income will be considered.

This could be income such as a state pension, company & private pensions, investment income etc not reliant on employment.

However, due to the lower levels of income at retirement age, this would result in reduced borrowing power into retirement & consequently smaller mortgages.

Dependent upon age, the mortgage term would be determined by the maximum age at expiry of the mortgage. Again, many lenders cautiously use 75 as the maximum expiry age. Should the lender only permit a capital & repayment mortgage, due to the short term this could be expensive.

Therefore, an interest only mortgage could be an alternative if the loan to value is below 75%.

Again, access to specialist advice can result in finding lenders that can potential lend beyond age 75 & also on an interest only mortgage basis.

Should adequate pension provision have been made, then lenders acknowledging this are available & will lend beyond age 75.

Leeds Building Society, Godiva & Halifax’s Retirement Home Plan will fit the bill here.

All three will lend to a minimum age of 85 & in the case of Halifax they will extend to a term of 40 years; more than sufficient for most!

Therefore, before rushing into borrowing in retirement, bear in mind that yes, equity release is an option, howoever is it the best option for everyone?

Probably not & as surprisingly advised to some of my retired clients, (pleasing most as a result) they could be too YOUNG for an equity release!

Therefore,  consider the affordability of a mortgage first, as it could be a lot less costly for your beneficiaries than an equity release plan.

For further details on mortgages in retirement & to check eligibility please contact Mark on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

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However, a further function of this increasing popular over 55’s mortgage is its ability to assist with a house purchase.

In essence, an equity release scheme is a mortgage secured on ones property; however unlike a conventional mortgage there are no monthly payments. Instead, the interest charged by the lender is added to the loan & compounded over the term.

Therefore, similarities between equity release & a household mortgage co-exist.

Furthermore this similarity extends to the house buying process.

When funds need to be raised to assist with a house purchase, a conventional mortgage is normally utilised to bridge the shortfall between the purchase price & any deposit already held.

Equity release can also assist a house purchase by using exactly the same principles as a mortgage.

Experience has shown that as people move through their retirement years their health may deteriorate & disability may result. As a consequence, their existing property may become less accessible if stairs or even property location is an unsuitable feature.
Aspirational requirements may dictate that a move to a more ‘up market’ is required.

Many reasons for a move in retirement exist.

Upon review therefore, it may be necessary to look for an alternative property which meets the new objectives of accessibility, which could either be buying a bungalow or even moving nearer to children, who can take more care.
As the purchase price of a bungalow or new house could be more expensive, there may be a cash shortfall to fulfill the transaction.

Equity release can therefore be applied for on the new property to bridge the difference between the equity available from the sale of the existing house & the purchase price of the new house.

At this point, it would be advisable to approach an experienced independent equity release adviser such as Equity Release Supermarket, who can source the most suitable equity release scheme available for house purchases.

The adviser will need to make calculations to ascertain exactly how much capital will be required, as not only is there the equity shortfall, but also whether any additional costs including solicitors fees, stamp duty, removal costs even home improvements may be required to be included in the equity release application?

A recommendation can then be made as to which equity release scheme would offer the best terms for the purchase; be it lowest interest rate, flexibility via drawdown or early repayment charges & taking advantage of any special lender offers that are currently available.

Other factors which need to be considered are whether any existing mortgage needs to be deducted from the sale proceeds, as this will reduce the equity that can be used as a deposit.

Once these calculations & recommendations are made, the application can be submitted to the prospective equity release company.

The application process is exactly the same as a mortgage: -

• Valuation carried out by a independent surveyor appointed by the lender
• Solicitor instructed to commence legal work & enquiries made on behalf of the applicant
• Upon satisfactory valuation, an offer is then made by the lender
• Upon receipt of the offer, the paperwork is drawn up by the solicitor which is signed by the client in due course
• Exchange takes place & completion date set.
• On the day of completion, the solicitor requests funds from the equity release provider & along with the client’s deposit, transfers the proceeds to the vendor’s solicitor to complete the legal process & purchase.
In summary, an equity release plan can be used to actually move up market to a more expensive or suitable property to meet future retirement needs.

This could be for disability reasons, live in close proximity of the children or even aspire to a house of your dreams!

Post from: Equity Release Latest News

This news arrives in conjunction with the departure of Prudential from the equity release market at the end of 2009 & is a bold move readdressing the negative moves on interest rates at the back end of last year

The interest rate reduction applies across all age ranges & as a consequence Just Retirement now becomes one of the lowest drawdown equity release schemes in the market.

In addition to this rate reduction, Equity Release Supermarket can also obtain a generous £450 cashback for the client on completion of the plan.
This certainly assists in reducing the overall set up costs of the plan.

For further information or quotation on the Just Retirement Roll-Up Lifetime Mortgage, please contact Mark Gregory on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

Post from: Equity Release Latest News

It will also have an immediate impact on the APR (annual percentage rate) of the equity release scheme in that the lower the set up costs, the lower the APR.

Traditionally, there are four main associated costs involved: -

1. Valuation Fee
2. Lenders Application Fee
3. Solicitors Fees
4. Adviser Fee

These will be discussed in turn & assistance given on where to look for potential savings.

• Valuation Fee - paid upon application & can vary significantly from lender-to-lender.

The fee as with any mortgage is directly related to the property value & can vary from a percentage of the property value to a banding system.

One area of savings here would be in the banding system. First establish what the bands are from the potential equity release lender & ensure that you have not placed your property value into a higher band than required. Dropping to the one level below can save at least £30 - £100.

However, bear in mind the valuation of the property will affect the maximum release so don’t jeopardise this figure if you are looking for as much as possible.

The biggest savings you can make is with a free or subsidised valuation which some independent brokerages like Equity Release Supermarket can obtain. Certain lenders will make these special offers from time to time & would result in NO upfront costs being incurred.

• Lenders Application Fee - these are usually fixed no matter the size of the release or value of the property.

Some home reversion companies have no fee, as this is accounted for in the full or partial transfer of ownership.

Lifetime mortgages application fees however can vary from £500 up to £695. Again, special offers can be made by lenders or even cash-backs can be obtained to reduce the net costs overall.

• Solicitors Fees - due to the fact the solicitor can be selected, considerable savings can be made here.

Local or family solicitors can be contacted & a quote for equity release conveyancing requested. Borne within the quote would be the solicitors flat fee & any disbursements including VAT.

Consider obtaining several quotes from solicitors or take the recommendation of your independent adviser as they may have special fixed cost arrangements with solicitors from ERSA (Equity Release Solicitors’ Alliance).

*Equity Release Supermarket has a fixed fee arrangement of £295 + VAT & disbursements with a leading equity release legal firm.

• Advice Fee - dependent upon which brokerage advice is being sourced will determine how much the adviser is charging.

Care should be taken here. Fees of £1495 can be levied for taking out the same equity release plan as another brokerage charging only £595!

Some companies will also charge an upfront fee, some will offer an initial consultation free of charge. Establish with the adviser how they are remunerated & shop around if you feel a better deal can be found elsewhere.

In summary, considerable savings can be made by conducting in depth research & dealing with a specialist independent firm of equity release advisers such as Equity Release Supermarket.

If you have any queries regarding equity release fees & costs, please contact Mark Gregory on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

Post from: Equity Release Latest News

With this in mind we briefly look at their unique scheme features & what effect this loss will have on the equity release market as a whole.

Prudential have two equity release schemes; lump sum & increasing cash reserve plan. Within these plans the features are found: -

1. An increasing cash reserve facility which provides a reserve that increases yearly by 1% of the original property value, upto age 84.
2. An equity guarantee that guarantees a certain percentage of your property’s value at the start of your plan, will still pass on to your beneficiaries.
3. Unlikelihood of ANY early repayment charges being applied if the plan is taken out with the current Bank of England base rate at 0.5%

Although, certain remaining equity release schemes can provide an equity guarantee, none of them can offer the remaining two.

Therefore, if you have a future requirement whereby you wish for a drawdown plan that offers a larger long term cash facility then the Prudential Increasing cash reserve plan could be an option.

Additionally, if you have a shorter term borrowing requirement, (possibly unsuccessful sale of property in the current climate) the Prudential equity release plan, with its unlikely NO early repayment charge scenario also could be an option.

So, if these features are of interest & you are considering releasing equity from your property, what are the deadlines for last minute applications?  

1. Last date for quote requests is 31st December 2009
2. Last date for applications which must be supported by a quote is 15th January 2009
3. All applications must be completed by 31st March 2009

For last minute queries & illustrations please ring immediately on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

Post from: Equity Release Latest News

It is in the generic mortgage market that some unique & flexible mortgage products can be sourced that offer an alternative to the traditional roll-up lifetime mortgage; it is one of these that I write about.

Upon gathering client details & ascertaining a generous disposable income, sometimes it can be evidenced that monthly payments can be afforded into retirement.

However, there is a common misconception that someone in retirement cannot have a mortgage.

This is incorrect.

Providing income multiples can justify the borrowing requirements, then research can be sought that would provide recommendations of suitable mortgage products.

However, providers that can lend into retirement have varying criteria with regards to age & the term permitted & here advice & a knowledge of the market comes into the domain of an experienced independent financial adviser.

The options available would be dependent on budget, but also on attitudes as to how much inheritance is to be left at the end of the day.

Should it be imperitive that the maximum inheritance remain, then a capital & repayment mortgage should be advised.

Conversely, if this is not a major issue then an interest only mortgage can be recommended which will maintain the balance at the same level throughout the term of the mortgage.

Some of the major lenders such as Abbey & Alliance & Leicester do have a maximum age of 75, by which time the mortgage must be repaid. A few will lend to age 85 such as Leeds Building Society which does give more time for the mortgage to run, however, this may only be suitable for capital & repayment mortgages, not interest only mortgages.

Therefore, should you be looking for equity release in retirement, have surplus monthly disposable income, wish to ensure an inheritance for your beneficiaries & want the mortgage on an open-ended basis then look no further than the Halifax.

It may come as a surprise that such a product may be available with a mainstream lender, however it has become more evident how this product can fulfill in-retirement needs.

The Halifax Retirement Home Plan can release cash over a maximum 40 year term, which for someone already near to, or actually in retirement, should be sufficient!

They will only permit this product upto 75% of the property value, however this is not usually not an issue due to the amount of equity in retirees properties. Finally, dependent on whether a mortgage currently exists, we can also obtain for you a free valuation & free legal fees.

They will also allow the product to use the mainstream Halifax interest rates such as their 2 year base rate tracker at 2.79%, which for a £50,000 interest only mortgage would equate to a payment of only £116 per month.

Obviously, consideration must be given to future potential changes that may affect the mortgage, such as the death a mortgagor which would reduce the household income & in turn affordability of the mortgage. However, this can be catered for with a life insurance policy which would repay the mortgage should either party die.

Alternatively, it should be borne in mind that if the level of borrowing is kept to within current equity release lending limits, then if one party did die, the surviving party could repay the mortgage with an equity release plan. This would resolve any affordability issues, as no monthly payments would be required thereafter.

Having completed several of these products recently, I can vouch for the speed of transacting this deal - 4 weeks, which compared to an equity release application is quicker too.

Therefore, rather than just assuming equity release is the only solution, ensure you receive advice from an independent financial adviser - which Equity Release Supermarket can provide.

For further information & eligibility for the Halifax Retirement Plan please contact Mark Gregory on 0800 783 9652 or alternatively email mark@equityreleasesupermarket.co.uk

Post from: Equity Release Latest News

The insurer will however continue to maintain the current service standards to its existing 14,000 customers.

As reported in earlier newsletters on this site, this follows a trent set in 2009 of other equity release providers pulling its equity release schemes - notably Coventry Building Society (Godiva), Saffron Building Society, Retirement Plus & Northern Rock.

However, the Prudential’s announcement is the first major casualty in the specialist equity release market & may come as a concern.

Launched in 2004, Prudential had innovative products & backed by its strong household brand name. Their market share had been 23% in 2008 & 12% of the equity release market in 2009, with total lending amounting to around £1bn.

They have stated that the mortgage book always was planned to be securitised, however with current market conditions this course of action was stemmed. Barry O’Dwyer who is Managing director of retail life and pensions stated that he does not feel this securitisation market to return potentially for another five years.

Other factors Prudential have sited are the up-front costs of equity release provision being too high against the payback period for the capital. Prudential now feel this cash is better deployed to other product areas of the business.

Remaining companies in the market will surely address their positions in light of this. The major providers now left being Aviva, Just Retirement, LV=, Hodge Lifetime, Stonehaven & the home reversion companies of Bridgewater & Home & Capital. 

Therefore, anyone considering the Prudential equity release plan must act soon!

For a summary of their products and rates please click on the following link…Prudential Equity Release Plans

Equity Release Supermarket still have a special offer with the Prudential which includes a free valuation & £300 cashback on completion.

Click here to register your interest…Prudential Offers

If you have any queries or an existing customer please contact Mark Gregory on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

Post from: Equity Release Latest News

More commonly, people enquiring about equity release have an existing mortgage or loan still secured on their home.

However, for an equity release scheme to be accepted by the lender, the mortgage or secured loan balance must be fully repaid.

In order to ascertain whether the mortgage can be repaid by an equity release we need to know the valuation of the property & the age of the youngest property owner (minimum age is 55).
Once established, as long as the figure calculated is at least the size of the current mortgage, then the equity release can be applied for.

Even in situations where the full mortgage balance cannot be effectively be reached by releasing equity, if the difference can be found by way of additional funds such as existing savings/investments, then the application can still proceed.

The major benefit of being in a position to pay off the mortgage is that no more monthly payments will be required in the future.
This will alleviate any financial pressures of maintaining the mortgage payments maybe at a time of redundancy, retirement through ill-health or severe debt issues.

Potentially, this course of action would avoid the issues of repossession & even incurring an adverse credit record.

Nevertheless, it must be bourne in mind the consequences of this course of action.

Yes there are no more monthly payments, however the interest that would normally have been repaid is instead added to the mortgage balance. This has the effect of an ever increasing debt that effectively doubles every 10-11 years, dependent on the interest rate obtained.

There may be concern that this equation would, & can, have the effect of eroding the value of ones estate, especially given the fall in property prices recently.
However, the optimists amongst us would assume that over the longer term property values will recover & escalate over time.

Effectively this would counter the roll-up effect of the increasing equity release balance.
Unfortunately, we would not know the full extent of this & hence the reason for the inclusion of the no negative equity guarantees built into these SHIP regulated schemes.
This ensures that any beneficiaries cannot be saddled with any personal debt, with the worse case scenario effectively being that the lender takes the value of the property; no more.

For these reasons from a lifetime mortgage lenders point of view, they do not permit any second charge as there maybe no security left for the subsequent lender in case of default.
Why a second charge would want to be placed given there maybe no future equity remaining anyway would be a questionable issue.

Therefore in summary, anyone looking at taking out equity release must be able to redeem any existing mortgage with the new lifetime mortgage being the only secured loan on the property.

Please contact mark@equityreleasesupermarket.co.uk

http://www.equityreleasesupermarket.co.uk

Post from: Equity Release Latest News

This follows their success in 2008 where they won the award of Best Financial Advisers - less than 10 employees.

Director - Mark Gregory commented, “Im extremely pleased with the recognition the company has achieved yet again, given the current market conditions & so proud of the effort his advisers have made over the past 12 months”

Equity Release Supermarket are independent specialists advisers the over 55’s lifetime market.

mark@equityreleasesupermarket.co.uk

Post from: Equity Release Latest News