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Posts Tagged ‘Aviva Equity Release’

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

Monday, March 16th, 2015

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

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

 

Background to Equity Release Early Repayment Charges

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

 

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

 

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

 

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

 

Stonehaven’s Move to Fixed Equity Release Early Repayment Charges

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

 

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

 

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

 

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

 

Further Information

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

How Low Can Equity Release Interest Rates Go?

Sunday, January 25th, 2015

Aviva's lowest ever equity release interest rateHaving been advising on Equity Release since the halcyon days of Norwich Union, I have seen a continual, albeit gradual decrease in the level of equity release interest rates. The latest news has it that Aviva will be aggressively reducing their interest rates today –  Monday 26th January 2015 to an unprecedented lowest rate ever, starting from just 5.13%!

 

So what are the factors behind this interest rate drop, given the rest of the equity release companies trail so far behind Aviva in competitiveness?

 

History of Equity Release Interest Rates

Equity release interest rates historically don’t tend to move that regularly, or by very much. It tends to be market forces that dictate how competitively they wish to be & where they wish to be positioned in the market. Going back the early days of equity release schemes, particularly plans from Northern Rock (now Papilio) and Norwich Union (now Aviva), their early interest rates were in excess of 8%. However, comparatively mainstream mortgage rates were also higher at that time and therefore equity release plans were not considered as expensive as they look today.

 

Time to Consider Interest Rate Diversification?

However, the difference between mainstream mortgage rates and equity release interest rates is the fact that equity release schemes historically have a fixed interest rate for life. Residential mortgages don’t & therefore can be re-appraised frequently which enables the best interest rate to be achieved each time.

 

Perhaps it’s time that equity release providers took time to consider this fixed lifetime interest rate offering? Afterall, the reason that traditional equity release schemes have a fixed rate is to act as a safety net due to the compounding effect of interest as no payments are normally necessary, or permitted. This also aides the protection of their insurance policy, which is the ‘no negative equity guarantee’.

 

How Can Equity Release Lenders Reduce Interest Rates Further?

New Voluntary Repayment Plans from the likes of Aviva, Stonehaven & Hodge Lifetime accept repayments of upto 10%pa with NO penalty and therefore if managed correctly cancel out the potential compounding effect of interest. Therefore, would it not make sense for these lifetime mortgage lenders to offer a reviewable interest rate every so many years? A reviewable interest rate could have a bearing on the nature of early repayment charges where so many equity release companies use the unpredictable nature of government gilts as their barometer. Retirees are looking for greater flexibility these days and a change in structure could certainly assist.

 

Catering to the New Silver Surfer Generation

More retirees are becoming financially savvy, particularly those arriving at retirement still owning interest only mortgages. This crop of mortgagors have experienced the variances in interest rates & the different types of rates available during their mortgage years. For instance, is it not time for a standard variable equity release interest rate, or a tracker equity release interest rate? Why not, if the interest or upto 10% of the original capital is to be repaid each year, then why is it necessary to have a lifetime fixed interest rate?

 

If the equity release market is set to expand it needs further innovation & development of its equity release schemes. Therefore, should the forecast for future interest rates be historically low, then it would make sense to consider the options of tracker, discounted or variable interest rates. Perhaps the future of the no negative equity guarantee can be questionable given this has an effect of increasing the interest rate by upto 0.5%?

Why not have the option of choosing whether to include the no negative equity guarantee, or not. With that would come the choice of two representative interest rates; one including the guarantee & a lower interest rate without it. These options could all help to reduce the future interest rates of equity release plans & help the market move forward & expand.

 

A strong case in question for the optional inclusion of the no negative equity guarantee would be where retirees are committed to making repayments & managing the future balance of their lifetime mortgage scheme. Clearly advice of the consequences of not including this guarantee should always be provided, but we shouldn’t be treating the majority of equity release consumers with kid gloves. Equity releasers can themselves make informed decisions based on the facts & advice provided. As long as the adviser is giving quality impartial equity release advice then why can’t the industry open up & start becoming more diverse in its thought process & product innovation!

 

New Aviva Flexible Lifetime Mortgage Interest Rate

As stated earlier Aviva are to significantly reduce their minimum interest rate on their Flexible Lifetime Mortgage Plan. Equity Release Supermarket is able to obtain a lower interest rate than mainstream equity release advisers. This is set to continue from 26th January 2015 with the reduction in the minimum interest rate as calculated by the Aviva flex tool calculation. The lowest equity release interest rate with Aviva is determined by personal criteria, such as age, property value & also health.

 

Consider the following equity release scenario: –

Mr & Mrs Chambers are aged 67 & 64 respectively & own a property valued at £250,000 which is unencumbered. Unfortunately, Mrs Chambers had cancer last year and they now realised how important it is for them to enjoy their retirement. They wish to go on a cruise, carry out home improvements and release approximately £30,000 with access to a future cash reserve facility.

 

After conducting research with Equity Release Supermarket they were recommended the Aviva Flexi Plan with an interest rate of just 5.13%pa (5.33% representative APR). This recommendation was borrowing £30,000 & having a further cash reserve facility of £33,000 for possible future use.

 

Aviva’s Lowest Ever Equity Release Interest Rate To-Date

This 5.13% enhanced lifetime mortgage rate is the lowest ever equity release interest rate that any home equity release company has made available in the history of equity release & presents many opportunities for retirees to consider their future finances: –

 

  1. Those people with interest only mortgages – where lenders are demanding repayment as the end term has been reached & they are not prepared to extend can benefit from these interest rate reductions. By switching onto the Aviva Flexi Lifetime Mortgage Plan they could consolidate onto a mortgage for life, at a low fixed interest rate, thus enabling them to budget accordingly knowing the interest to be charged in the future.
  1. Existing equity release customers – who are on interest rates that are over 6%pa should consider whether to remain with their existing lender or switch equity release plans. By taking a lower interest rate would mean less interest charged & hence either a lower future balance, or less interest payments to maintain control over the balance. There are factors to consider such as potential early repayment charges & set up costs, however this is a calculation your Equity Release Supermarket adviser can arrange & analyse for you.
  1. Anyone over the age of 55 – who has been contemplating taking a release of equity, but maybe waiting for the optimum interest rate or occasion to apply for it. With the various lifetime mortgage schemes available now including interest only, drawdown & voluntary repayment schemes, the equity release market has never been so competitive.

 

So why have Aviva aggressively reduced their interest rates?

Word has it there are new lenders set to enter the equity release marketplace. With new names entering the market such as L&G and Santander, plus More2life have new funding available, Aviva are sure to find new competitors in their space. Perhaps they are trying to gather as much momentum & market share as possible now before they come under pressure?

 

We have already seen unprecedented movements in equity release interest rates so early in 2015. More2life’s Enhanced Lifetime Mortgage & Interest Choice plans have seen rate reductions, followed by Stonehaven’s Interest Select range in response to keep their market position above More2life. Whatever equity release 2015 has to hold its going to be exciting time and one for any future lifetime mortgage customer can benefit from with the lowest equity release interest rates ever seen.

 

Should you wish to request an Aviva Flexible Lifetime Mortgage quote & find out how low your equity release interest rate could go, please contact Mark Gregory on Freephone 0800 783 9652 or email me at mark@equityreleasesupermarket.co.uk

 

Further information on equity release –

 

Compare Equity Release Deals | Equity Release Calculator | Ask Mark A Question

How Your Medical History Can Enhance the Maximum Equity Release

Saturday, November 15th, 2014

Enhanced lifetime mortgage lifestyle questionnaire

While equity release schemes have been available for many years, the concept of the enhanced equity release seems to have been a more recent addition. However, the history of the impaired equity release has been around for almost a decade.

 

Companies back then such as Partnership & Hodge did offer enhanced or impaired life home reversion schemes. In fact Hodge themselves did have an enhanced lifetime mortgage that was withdrawn only pre credit crunch era. These plans were not sold a great deal and their impact was minimal.

 

More recently enhanced lifetime mortgages have seen a resurgence in popularity as they have been redesigned & improvements made to the underwriting process. Enhancement to an equity release mortgage means that the amount of equity available to you can be increased based on your current or pre-existing health conditions. It works similar to the impaired rates offered from annuity providers whereby based on a medical questionnaire, the lenders underwriters will assess the maximum equity release available.

 

Equity Release providers who currently offer Enhanced Lifetime Mortgage rates are:

  • Aviva
  • More2Life
  • Just Retirement
  • Partnership

Aviva equity release offer 2 plans; the Aviva Lump Sum Max offers a higher loan amount if you qualify for impaired terms. Alternatively, you could benefit from being charged a lower interest rate on the Aviva Lifestyle Flexible Option, with rates starting as low as 5.63% (5.7% representative APR).

 

More2life & Partnership offer a lower qualification threshold than Aviva for qualification on their enhanced lifetime mortgage schemes. Where Aviva offer one enhanced lifetime loan-to-value ratio, More2life & Partnership provide different levels of maximum release based on how serious the impairment is.

 

Just Retirement being specialists in the enhanced annuity market take a more scientific approach & will consider more illnesses including COPD. Their actuaries will individually assess each Lump Sum Plus case to determine the maximum equity release available.

 

What illnesses qualify for an enhanced lifetime mortgage?

 

Most of the impaired health conditions, which can qualify for enhanced terms, are similar with all of the above lenders and include-

  • Height and weight
  • Smoking details
  • High blood pressure
  • Heart attack
  • Diabetes
  • Stroke
  • Angina
  • Cancer
  • Parkinson’s Disease
  • MS
  • Early retirement due to ill health
  • Even whether prescription medication is being taken

The amount of extra money that you can release depends on three factors; age of the youngest applicant, the value of the property & which conditions you have & the level of severity of each impairment.

 

You may simply qualify for an enhanced lifetime mortgage based on your height and weight which is represented by your BMI (Body Mass Index). Typically, the greater the number of conditions you have, the higher the maximum equity release loan amount that is available.

 

What are the qualifying criteria for an enhanced equity release?

 

The minimum age is 55, which out of the four equity release companies only Aviva will accept and additionally there is no maximum age. Joint life customers can also apply although it’s usually the health of the younger person which affects any enhanced rate. The minimum property value can be as low as £60,000 from More2life while properties must be located in England, Scotland & Wales with Aviva also lending in Northern Ireland. The lowest enhanced equity release available is £10,000 with no upper limit from the likes of Aviva.

 

How much more tax free cash does enhancement provide?

 

A recent client of mine, age 69 had a property valued at £250,000. Based on standard terms he was able to release a maximum equity release loan of £86,250. However, he suffers with high blood pressure and diabetes. Based on his ill-health & completion of a health & lifestyle questionnaire, the loan amount was increased to £104,500 by More2Life, so he was able to release an extra £18,250.

 

He set the More2life enhanced lifetime mortgage plan on a drawdown basis. This enabled them to release an initial £30,000 and still leave a reserve facility of £74,500 with More2life which he can access in the future without incurring further fees. This meant he has the flexibility of a drawdown lifetime mortgage but with the benefit of an enhanced drawdown facility.

 

Will I need to have a medical?

 

The good news is that you won’t have to attend a medical to qualify for enhanced terms. Lenders ask you to complete a health & lifestyle questionnaire and sign to confirm that your medical details are correct. Following submission of the equity release application, each lender may simply write to your doctor to confirm that your conditions are accurate, so that you qualify for the best terms possible.

 

If you are a smoker, they may ask you to undergo a simple non-invasive test and require you to confirm your consumption and the extent of your smoking habit. The test, which they arrange and pay for, is carried out by a qualified nurse in the comfort of your own home.

 

How do I find out if I qualify for enhanced terms?

 

You should always to seek advice from an independent equity release specialist. As part of the process of checking whether equity release is suitable for you or not, we will always ask clients for details of their medical history to ensure that we can tailor any advice to their fit their circumstances. At the end of our initial meeting we would then conduct research from the whole of the equity release market to find the most suitable plan. If you do qualify for an enhanced rate, we can then produce an equity release key facts illustration to explain how the lifetime mortgage works.

 

Where can I get more information?

We have information on all the enhanced products in the compare equity release deals section of our website along with the useful enhanced equity release calculator.

 

If you wish to speak directly with me, please feel free to contact me direct on 07415 275669 or email simon@equityreleasesupermarket.co.uk for further information. There’s no obligation and any information you provide is confidential.

Aviva introduce two new flexible mortgage options for its equity release schemes in 2014

Sunday, June 1st, 2014

Aviva Flexible Lifetime Mortgage options

We have recently discussed the merits of the new 10% repayment option which are part of Aviva’s new range of flexible mortgage options that have been incorporated into the Aviva Lifestyle Flexi Plan & Lump Sum Max – Now Aviva Accept Voluntary Repayments – Does this Change the Future of Equity Release?

 

These new flexible repayment features provide customers with the ability to manage the future balance of their equity release schemes. However, further additions have been made which are a credit to the forward thinking of Aviva’s hierarchy.

 

The two further equity release options now included into both plans are the enhanced lifetime mortgage option and an early repayment exemption charge.

Let’s look at each option individually and understand why & how each new feature could potentially benefit future Aviva equity release plan holders.

  1. Enhanced Lifetime Mortgage Option

Previously, only the Aviva Lump Sum Max plan had the enhanced (also known as impaired lifetime mortgage) equity release facility. This means that anyone who has a history, or has medical records indicating they meet a list of qualifying illnesses could benefit from uplift in the maximum equity release lump sum they could receive.

 

However, Aviva has now put a reverse spin on how this equity release enhancement can work. Rather than the enhancement working to increase the maximum lump sum, they have reversed this by applying a twist on how the enhancement can operate. Therefore, on the revised Aviva Lifestyle Flexi plan now, should illness permit qualification for enhanced terms, then the interest rate will be REDUCED. Consequently, retirees looking for a release of equity & qualify for enhanced terms will receive a lower interest rate than the normal equity release rate.

 

No enhanced mortgage company has considered this approach previously, so why does Aviva now & how does this work?

Qualification rules for the enhanced lifestyle flexi plan

Firstly, Aviva will request a Health & Lifestyle Questionnaire be completed which will ask questions to ascertain eligibility for enhanced terms. Such health questions include:

 

  • Height & weight including Body Mass Index
  • Do you smoke more than 10 cigarettes a day?
  • Have high blood pressure?
  • Suffer from diabetes & take medication?
  • Had angina or suffered a stroke?
  • Had cancer in the last 5 years requiring chemotherapy
  • Suffer from Parkinsons disease or dementia
  • Kidney, heart, lung, liver problems
  • Retirement from work early due to medical reasons

 

Should any of these, or combination of these establish qualification for enhanced rates then a Key Facts Illustration can be generated by your equity release adviser. If terms are then acceptable & an application follows, then as part of the enhanced lifetime mortgage application process Aviva will clarify with your doctor whether your stated health issues are on your medical records. No medical examination will be required.

 

Whereas previously the minimum rate for the Aviva Lifestyle Flexi was 5.68%, if enhanced terms are available due to ill-health, then the rate can be reduced by a further 0.05% to just 5.63% (rate @1.6.14). Not a significant reduction it may seem, however considering roll-up of the interest and the compounding nature of the future balance this could save your beneficiaries a considerable sum of money in their future inheritance.

 

Therefore, in summary a lower equity release interest rate can be achieved by qualifying for enhanced terms due to poor health on the Aviva Lifestyle Flexi plan which also comes with the drawdown option. Possibly the best equity release plan in the current marketplace due to the extra low interest rate, cashback of £1000, free valuation, drawdown facility & the strength of the Aviva brand.

 

*A point to note here is that not all companies offer the same enhanced rates. Check you can at least obtain rates that are independent & NOT from Aviva direct as they will not be lower than companies such as Equity Release Supermarkets.

 

  1. Early repayment charge exemption

Since I originally advised on Aviva’s equity release plans almost 15 years ago, there has always been a stigma attached to their calculation of early repayment charges which can be upto a maximum of 25% of the original amount borrowed. The link with government gilt rates can be also confusing to many customers when calculating how they work in practice. Nevertheless a qualified equity release adviser should be able to assist with such calculations.

 

News stories have also highlighted cause for concern with potential early repayment charges. These charges have always been shown on their Key Facts documents, however occasionally situations can arise whereby even the flexible nature of these schemes cannot compensate for some unfortunate scenarios.

 

One notable example of this was the news story where someone needed to move into long term care with their partner following in order to provide their care in the home. This left them with an empty home and little option other than needing to sell up as they cannot rent out or leave the property unattended. With this being forced on them, they could incur a hefty penalty for repaying the equity release loan early based on the ruling that the partner did not need to move into care aswell.

 

Welcome changes to Aviva’s early repayment charges

Following examples of unfortunate events as previous which hit the tabloids, Aviva have since changed their plans to account for such scenarios and this is welcomed.

 

On plans now, the rules have changed should clients with a joint Aviva lifetime mortgage need to repay the loan due to death or moving into a long-term care facility. If such an event occurs Aviva will now allow repayment of the lifetime mortgage free of any early repayment charge. However, the condition is that this is actioned within THREE years of one of the client’s death or the date Aviva is advised that one of the mortgagors requires long-term care.

 

Therefore, in the above scenario their plight would have be accounted for and NO early repayment charge would be applicable. This will apply to many other people where at such a stressful time, the last thing they wish for is for another penalty to be applied in their lives. A simple concept which can have such alleviating consequences and has therefore to be commended.

 

If you have any questions regards the points raised  in this article please ring Freephone 0800 678 5159 or email me at mark@equityreleasesupermarket.co.uk .

 

Now Aviva Accept Voluntary Repayments – Does this Change the Future of Equity Release?

Tuesday, May 27th, 2014

Aviva equity release voluntary partial repaymentsAviva equity release plans have proved the most popular form of lifetime mortgage scheme over the past 15 years.

The reason for their popularity has been down to a combination of brand name, simplicity and the fact that Aviva have regularly provided the lowest equity release interest rates.

 

However, during that time there has been a cloud hanging over their lifestyle flexi mortgage range and that is the issue over the maximum early repayment charge & the lack of a partial repayment facility. It’s always been a case of all, or nothing with regards to paying off Aviva’s equity release schemes – now we have a choice.

 

Aviva – time for change

In the past few weeks Aviva have bravely taken steps to alleviate these issues with some bold amendments to their lifetime mortgage range. In fact the impact these changes could make, will dramatically alter the way equity release schemes will be used & managed in the future. Other equity release companies will undoubtedly take note of these new features & it can only signal the start of further innovation in lifetime mortgage industry.

 

Aviva have introduced three new approaches to equity release: –

  • new voluntary repayment features can be used to actually clear the equity release loan over a set number of years
  • Aviva apply a different approach to enhanced equity release rates by actually reducing the interest rate on offer (see later article)
  • An early repayment charge exemption can be applied on first death for any new joint equity release lifetime mortgage (see later article)

 

Why Aviva needed to up the ante

Monday 28th April heralded the start of swinging changes to the Aviva Lifestyle Mortgage range. All Aviva’s new equity release applications from this date forth would have the ability for partial repayments to be made back to Aviva.

 

However, from our company perspective during 2013, Equity Release Supermarket had seen its share of applications move significantly towards the Hodge Flexible Lifetime mortgage range. This has been due to Hodge Lifetime’s two pronged attack on becoming the most popular & flexible lifetime mortgage product. Their innovative move towards being able to repay upto 10% of the original capital borrowed & the ability to downsize after 5 years & repay the loan with NO penalty has captured a large market share.

 

Aviva has now responded to the popularity of the Hodge Flexible Lifetime Mortgage plan by matching the 10% repayment option & additionally providing more beneficial features!

A new dawn for the equity release market has started.

 

How does the Aviva Voluntary partial repayment option work in practice?

From inception of the new Aviva equity release plan there is the inherent ability to make repayments of an ad-hoc nature back to Aviva. Aviva do have a cap of 10% of the original capital borrowed that can be repaid in any one year. Additionally, the earliest date that the first repayment can be made is 12 months from the commencement date of the plan. So some forward planning needs to be made & this ideally would have been made with the involvement of your equity release adviser at recommendation stage.

 

Consideration needs to be borne in mind that interest will be added to the plan in the meantime for calculation purposes. For example, if a sum of £40,000 equity was initially released at an interest rate of 5.68%, the balance before any repayment could be made would be £42,272.

 

This is where the first decisions on how much to pay back need to be made, and there are three options available:-

  1. If only a fixed budget is available, then a contribution towards the interest accruing could be made. Should this be less than the annual amount of interest charged, then the balance will still increase, albeit at a lower rate than would otherwise have been should nothing have been repaid.
  2. Should a level future balance be the choice moving forward, the sum of £2,272 could be annually sent back to Aviva, thus reverting the balance back to its original starting point of £40,000. This process could theoretically continue infinitum until the plan ends, which would be upon death of the last borrower or them moving into long term care. The balance would always flicker between these two figures, dependent at what point the repayments of £2,272 were made.
  3. If total repayment of the £40,000 is required, then a repayment strategy could be put in situ which would see this whole amount repaid over a set number of years. Dependent upon how much is initially borrowed & assuming maximum repayments of 10%pa can be maintained for the duration, Equity Release Supermarket can calculate at what point the plan can be fully repaid with NO penalty!

 

As an example Equity Release Supermarket have calculated someone borrowing £40,000, on the popular Aviva interest rate of 5.68%pa, & repaying the maximum £4,000pa could repay their Aviva lifetime mortgage shortly after the end of the 16th year.

Could this be classed as the first capital & interest equity release mortgage?

 

Please contact us on 0800 678 5159 for your personalised Aviva repayment calculation or click this link.

 

How do I physically make voluntary repayments back to Aviva?

A reminder to make repayments will begin with the receipt of your first annual Aviva equity release mortgage statement. This will evidence the amount of interest that has been added to your plan. It is at that point that the first repayment can be made back to Aviva. The question is how much to pay & this will be down to an individual’s personal preferences.

 

Aviva have cleverly side stepped the issue of MMR (Mortgage Market Review) here. Whereas companies such as Stonehaven & more2life have had to adapt their interest only lifetime mortgage process to the new MMR regime, Aviva due to their ad-hoc approach to repayments have avoided the MMR obstacle. Regular payments cannot be set up to repay the Aviva equity release schemes. Although Aviva do permit upto 4 payments each year, subject to a minimum amount of £500, the repayment process has to still be managed through their head office.

 

This repayment process would initially involve a phone call to the Aviva offices advising them of the fact a repayment is due to be sent to them. In reply they will provide a verbal form of quote which acts as confirmation. This can be confirmed in writing to you & optionally your adviser aswell so they are aware of your intentions.

 

The next step would be to send the money which can be in the form of a cheque, credit or debit card or a bank transfer for which Aviva will provide their details & reference number to track. They will not accept payments without this process having been accomplished, or contact being made beforehand. In fact they could return the funds should this process was not followed.

 

Important repayment points to note

As previously stated, repayments can only commence after 12 months from inception of the loan. However, Aviva have imposed further 12 month conditions on when repayments can be made following certain events: –

 

  1. Following withdrawal of cash funds from the drawdown facility of the flexible lifetime mortgage
  2. Should any additional borrowing be taken in the future

 

In both situations, no repayments can therefore be made for 12 months following these two events also.

 

Additionally, the same applies in reverse;

Should a customer have made repayments and has an available cash reserve under their drawdown plan, they cannot gain access to the reserve or additional borrowing until 12 months following their last repayment has been made.

Aviva may consider requests for a further release of equity in exceptional circumstances outside of that rule.

 

These rules are effectively to prevent to the to-ing & fro-ing of cash funds within the plan which would undoubtedly have made the Aviva equity release plans unmanageable and unprofitable.

 

Functional planning ideas for managing voluntary repayments & retaining a cash reserve

Although it’s still early days in the life of the new flexible repayment options, some ideas on managing the Aviva voluntary repayments have already sprung to mind.

 

Unlike Hodge Lifetime, Aviva do not impose a £10,000 lower capital threshold by which no further repayments can be made without penalty. In fact Aviva will allow the continued repayment of interest & capital with NO minimum amount down to zero, or even almost zero.

 

This could be beneficial for those who want to see the equity release balance to be reduced to a minimum level (e.g. £100 or less), yet still maintain the option of keeping their drawdown lifetime mortgage cash facility for the future. Bear in mind the small outstanding balance will accrue interest (albeit minimal), yet for many the comfort of retaining a cash reserve may have massive benefits should cash be required still in the future.

 

Summary

Aviva have responded well to the changing needs of the baby boomer generation as equity release moves into the next stage of its development. Retiree’s financial needs are becoming more complex with almost 75% of pensioners owning their own property, even carrying debt into retirement & living much longer than previous.

 

Aviva’s latest changes will therefore appeal to both advisers and consumers alike who are looking for more flexible loan terms on the long road ahead.

 

To request an Aviva Flexible Lifetime mortgage quote with voluntary repayments please click here.

Click the following link for your FREE Aviva capital repayment calculation.

 

To discuss any of the points raised in this article please contact Mark on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

 

Switch Equity Release from Papilio UK – Time is running out

Sunday, May 25th, 2014

Switch equity release from PapilioIn my last article on this subject in February 2013 I drew attention to the ease with which borrowers could escape the higher equity release  interest rates charged by Papilio UK, the successor to Northern Rock. I also reminded Papilio equity release borrowers that the option to take further loans from Papilio UK, an option Northern Rock originally considered, was no longer available.

 

Since my original Papilio article, Equity Release Supermarket have been inundated with enquiries leading to many satisfied clients switching to cheaper lifetime mortgages. And with many lifetime mortgage lenders currently offering free valuations and cashbacks, the costs of such transfers rarely exceed £1,500 – a sum that could soon be recovered through cheaper borrowing or funded by increasing the new mortgage.

 

Indeed, with fixed interest rates as low as 5.63% (5.83% representative APR) we have achieved savings for our clients of over 1.3% on their loans. With such low equity release interest rates, now is an excellent time to consider a remortgage from Papilio UK to a new provider.

 

Reasons to switch equity release plans

This could be for one of two reasons;

  1. To borrow additional funds & consolidate all old & new borrowings under one roof with a much lower interest rate.
  2. To simply swap equity release schemes on a like-for-like basis, but obtaining a much lower interest rate for the long term.

 

As an example in real terms, assuming that you remortgage a lifetime mortgage of £50,000 onto a fixed rate of 5.68% from a Papilio UK equity release mortgages rate of 6.99%, then after just 10 years the saving in interest charges would be in excess of £15,000. This would be not only beneficial for you if you require further borrow in the future, but also your beneficiaries who would now receive a larger inheritance.

 

Obviously, the larger the loan is, the greater the potential savings. This in turn would make large savings for your ultimate beneficiaries. Think of switching equity release schemes like any residential remortgage; you want to obtain the best rate for your outstanding debt, so as not to pay any more interest than necessary to the mortgage lender. The equity release switch principle works in exactly the same way.

 

New equity release schemes have greater benefits

In addition to the cheaper cost of borrowing, many lenders with whom you can swap equity release schemes to have now developed much more flexible lifetime mortgage plans.

 

For example, you could select a new lender with various penalty free options. The most recent innovations in the lifetime mortgage market are:

  1. Lifetime mortgage plans with Hodge Lifetime & Aviva where voluntary repayments of upto 10% per annum can be made each year. These ad-hoc repayments enable you to ‘control’ the future balance of the loan. This could be to maintain a level balance or even use it as a capital & interest mortgage by repaying the whole balance over a set number of years.
  2. Downsizing protection option from Hodge Lifetime which allows full repayment of the plan after 5 years by “trading down” your home. Therefore, if you move house & downsize you have the option to clear the whole mortgage debt & end up equity release ‘free’.
  3. Depending on the value of your property, you could remortgage to a new drawdown lifetime mortgage where a cash reserve facility could be established for ready access to further loans in case of future need ( a great way of protecting a surviving spouse on a reduced income)
  4. The option to protect a percentage of the eventual sale proceeds of your home with a guaranteed inheritance protection option for your children and beneficiaries.

 

So why consider switching from Papilio UK now?

The present economic conditions will not last for ever. Long term interest rates have started to creep up and the recent increase in property values in certain parts of the country might not be sustained. The Governor of the Bank of England warned over the weekend about the danger of the property “bubble” bursting, and this could remove from those with larger loans the opportunity to escape the higher interest rates charged by Papilio.

 

In our opinion, the time to act to escape Papilio UK equity release mortgages is NOW before interest rates increase and property values fall. And if you intend to take action then swapping equity release scheme from Papilio could be your recommended ‘escape route’

 

For further information, or to receive a FREE initial consultation, please contact me, Mike Vicary, on 07795 195302 or if you prefer email mike@equityreleasesupermarket.co.uk where I would be more than happy to discuss your options.

 

The Papilio UK remortgage process

In the meantime it would be advisable to write to Papilio UK to obtain an up to date redemption statement to include all fees and the ongoing daily accrual of interest. Their address is:-

PO Box 1003, Ipswich, Suffolk, IP1 9UZ (Tel: 0844 8464716).

 

Armed with this information, I can then discuss with you your financial position and future plans and make a formal recommendation, if appropriate. You would receive clear details of the benefits to you of the Papilio UK remortgage and a full breakdown of costs.

 

Assuming you accept my recommendations, then we would complete the application paperwork at a mutually convenient home visit (preferably with family members present) or by post.

 

Following that Equity Release Supermarket would then oversee the valuation of your home by the new lender and we would instruct your solicitor on your behalf.

(We would strongly suggest appointing a specialist solicitor from our recommended panel to ensure that the transaction is completed as quickly and efficiently as possible.)

 

Our new business administration department would then manage your equity release application through to a successful completion by liaising with your new provider, solicitors & yourself. Once arranged, the Papilio UK equity release mortgage would have been repaid & the outstanding balance transferred to your new lifetime mortgage company & taking full advantage of the new lower rate &/or additional borrowing.

 

The time to take action is now.

 

Please do contact me for a free consultation on 07795 195302 or email mike@equityreleasesupermarket.co.uk

How to Get the Best Aviva Equity Release Deal

Monday, March 24th, 2014

Best Aviva equity release interest ratesWhile you might think that going direct to the biggest brand name in the equity release market would be your cheapest option when looking to unlock the equity in your home, you’d be wrong.

 

The leading name in the equity release market is Aviva. Through Aviva Direct they had provided the services of their own dedicated field based sales force to both advise you on clients options and sell you their products. But the direct sales team needed paying for, and those costs were to be met in sales. This sales force needed wages, pensions, company cars, holidays, benefits, a mobile phone. All of this costs and Aviva needs to find that money from somewhere. Their only real option is for all of that to be costed into the direct product.

 

Saving through independent equity release services

In contrast to the Aviva tied-in sales model, an independent equity release brokerage such as Equity Release Supermarket costs the company much less. They don’t have to pay any of those costs or expenses, and those savings can be passed onto you, the consumer. Aviva also want to encourage those independent advisers to send them more business. This is how independent companies can offer more competitive deals and rates. They have no obligations to the lenders.

 

For instance, Equity Release Supermarket can obtain rates on the Aviva Flexible Lifetime Mortgage Plan, starting at 5.68% (5.88% APR). If you get the same deal directly by making the enquiry at Aviva now, even though it won’t be Aviva whom you deal, the rate would be much higher. Beware.

 

This is the reason that Aviva closed down their direct equity release offering as of 1st July 2013. Today over 80% of all equity release deals are coming in through independent firms. Customers have discovered that the best deals could only be found this way. Aviva was the last big company to still provide the direct service, but now they have realised that they can offer the best service to their customers through independent companies.

 

How Do Aviva deal with their enquiries now?

Since Aviva Direct was disbanded, enquiries still filter through from the general public. Not only that, Aviva have still continued with their direct marketing as can be evidenced on their paid listing on Google. But why would they continue marketing when they have no advisers to deal with their Aviva equity release enquiries?

 

Aviva made the unusual decision to use independent equity release brokers to handle the new business & any Aviva additional borrowing enquiries. However, even more unusual is the fact that these independent brokers are unable to deal with these enquiries on an independent basis. They must handle these Aviva potential consumer enquiries by only recommending Aviva’s own lifetime mortgage products. Not only that but this doesn’t come with the independent & best Aviva equity release UK interest rates. Yes, a premium would be paid.

 

So where do you find the best Aviva equity release interest rates?

As with any purchase to be made, the safest option is to always shop around. Therefore, if an Aviva referral to an outsourced company has been made ascertain their independence and whether this constitutes the best equity release deal. Once the quote & recommendation has been made, it then time to research the whole of the equity release market & compare deals. Using comparison tables such as prepared by CompareEquityRelease.com, you can see where the lowest rates relating to drawdown lifetime mortgages, lumps sum plans or even interest only lifetime mortgage scan be found.

 

The message is to understand your needs first. Don’t just plump for the first recommendation, especially if the company providing the advice can only recommend an Aviva plan. Aviva do have a very competitive offering, but this must come from an independent source, not a tied representative arrangement. This tool they use to get the best Aviva interest rate is called the Aviva Flex Tool.

 

What is the Aviva Flex Tool?

Independent equity release brokers have access to a unique quotation tool called the Aviva Flex tool. This is the pre-quotation tool that helps design the customer’s rate & product, whether it be an enhanced lifetime mortgage or maximum lump sum or the Aviva flexible drawdown plan. Based on criteria surrounding the clients ages, property value, health & loan-to-value will determine the lifetime mortgage rate offered. The higher the loan-to-value, the higher the interest rate usually becomes. Additionally, for drawdown lifetime mortgages, the greater the reserve facility required, the higher the interest rate becomes. There, is also the option of choosing certain offers, such as free valuation or a £500 or £1000 cashback.

 

Therefore, by using a combination of tactics with the size of the cash lump sum, the reserve facility and the cashback/valuation offers can manipulate the interest rate in the clients favour. This is something that only a specialist equity release adviser with access to the Aviva Flex Tool can provide & by contacting EquityReleaseSupermarket.co.uk, this access can be made available.

 

 

Work these extras into your Aviva plan

You can build these cash extras to the Aviva plan through Equity Release Supermarket. You might wish to include a free valuation of your property before deciding, or add £500 or £1000 cash back. These are deals that you can only obtain by using one of the top equity release firms in the UK. And the best price on those deals can only be found when using independent advice through companies such as Equity Release Supermarket rather than going through the equity release firm directly.

 

For a free initial Aviva quotation, call the team on 0800 678 5159 or alternatively complete this Aviva quote request form.

What Leasehold Property Criteria is Acceptable to Equity Release Companies

Friday, October 18th, 2013

Equity release on leasehold propertiesWhen meeting new clients who are interested in releasing equity from their home, I’m often asked whether equity release companies will accept leasehold properties. The answer is more often than not…yes, however with certain caveats.

 

Around 2 million properties are currently owned on a leasehold basis in the UK. These leases are often originally set to 99 years or 999 years from the date the lease was set up. Older properties in the UK tend to have leases arranged to expire in 999 years, whilst new builds or retirement developments are usually shorter and can be typically around 99 years+. Typically flats tend to be leasehold, as freehold flats do incur issues with ownership, particularly when there is more than one floor.

 

Equity release providers usually require a minimum of 75 unexpired lease years in order to qualify for an equity release scheme. Just Retirement and more2life insist on a minimum of 75 years. Likewise LV= and Aviva equity release like to see 80 years left on a lease while Hodge prefer 90 years of unexpired lease years.

 

For properties built with a 999 years lease, these don’t usually cause any problems at all as they are unlikely to expire within one’s lifetime! However, for properties arranged on a 99 year lease, it may mean that the lease has reduced below 75 years depending on when the property was built. For equity release purposes this is where problems can arise as if the remaining leasehold term is below the lenders minimum then action needs to be taken.

 

In this instance, there are two possibilities: –

  1. It may be possible for you to buy the freehold. Further good news is that the cost of acquiring the freehold can be paid for from the proceeds of the equity release application.
  2. Extend the lease for a term of 90 years on top of the unexpired term of the existing lease.

 

Both the aforementioned solutions will not only enable meeting the criteria for the equity release companies, but also will invariably add value to your property. Basically, as the term of a lease reduces, it can have an impact on the property value and can be especially significant with expensive leaseholds in London.

 

The legal paperwork necessary to either extend or buy the lease is relatively straightforward and is done by the same solicitor who is acting on behalf of the equity release client. Ashford’s solicitors specialise in leasehold extensions and freehold purchase. They are one of the former members of ERSA (Equity Release Solicitors Alliance).

 

Peter Barton, a partner at Ashfords said “I have seen over recent years an increase in the number of clients using equity release to extend their lease. Whilst the process may appear daunting we at Ashfords can take you through the process at the same time as dealing with the equity release, and it can be timed to complete at the same time.”

 

Additionally Peter Barton of Ashfords advises the following –

 

“We would always recommend speaking with your Landlord/Managing Agent to ascertain their costs in extending the lease. If those costs seem excessive it is always worthwhile speaking with any neighbours who may have extended their lease to see if they were charged the same, alternatively there are websites that contain calculators to give you an estimate of Landlord costs for extending the lease. We have found those very useful and have saved clients many thousands of pounds by enabling clients to negotiate with their Landlords.”

 

Leasehold properties can present a challenge with regards to applying for an equity release mortgage, however upon inspection of the deeds including the lease document can unravel the exact lease criteria. Additionally, by checking the lease can also clarify any unusual rules in relation to retirement properties or sheltered accommodation. These could include such clauses such as a sinking fund, where the freeholder can make provision for improvements or repairs, or even age restrictions on who can live there.

 

Other issues that leaseholders are obliged to pay for, & can be too prohibitive to some equity release companies, are the service charges.  These are often paid for via maintenance charges and are usually determined by the freeholder or their agent who can decide the work that needs to be done, who will does it and the ultimate cost. All these issues should be investigated beforehand, so that if issues do exist they can be resolved as part of the equity release process.

 

For any questions about leasehold properties or to check your eligibility for equity release, please contact Mark Rumney at Equity Release Supermarket on 07957 974826. Mark can also be emailed directly at markrumney@equityreleasesupermarket.co.uk

Why Now Might Prove to Be a Good Time to Take Out an Equity Release Plan: Given the Competitiveness of the Market

Monday, March 12th, 2012

Equity release schemes and equity release remortgage deals allow you to extract the equity tied up within the bricks & mortar of your home. The tax free cash is withdrawn usually by a lump sum or in the form of monthly income. This is a type of loan is for property owners over the age of 55 and is one of the best ways for such people & property owners to borrow money. Equity release plans typically do not need to be paid back until the sale of the home, or the borrower has died or gone into long term care.

 

Why have equity release schemes become so popular?

Homeowners opt for equity release plans for many reasons & their uses have extended beyond their original concept. Gone is the original ideology that equity release schemes would pay for pensioners essential living demands. Instead the flexibility & uses of equity release schemes have diversified into areas such as inheritance tax planning, moving home & many more besides.

They may have grandchildren entering university, and education tuition fees to pay; they may want to travel the world to meet distant relatives or loved ones; purchase a new car that maybe more economically friendly & cost saving; they may have a child that is soon to wed & needs a deposit for that first step on the property ladder; or they may want to consolidate their debts such as mortgage, loan & credit cards in order to free up & release some disposable income. These are all wonderful & purposeful reasons to choose an equity release mortgage. At the end of the day you just want to retire and relax  throughout the longest holiday of your life.

 

How to Compare Equity Release Deals

There are various providers and independent specialists and a variety of equity release remortgage deals available on the market. In the tough economic times, there are few property owners that would not benefit from an equity release deal; however many homeowners are unaware that they have a solution to their problems with an equity release loan. It is important for the retirees to understand how these UK equity release plans work and how to shop around and compare all lifetime mortgages & home reversion schemes to find the best deal available on the market.

The most convenient means to compare equity release deals is on the World Wide Web or more commonly termed – the Internet. There are many equity release providers and schemes that operate home equity loans. These include schemes such as roll-up lifetime mortgages that allow you to extract an initial lump sum with the interest being charged, & compounded onto the previous year’s balance. The flexible & now more popular scheme is the drawdown lifetime mortgage that allows you to take a smaller initial lump sum that is agreed upon at commencement of the loan and then further amounts as you wish. There are advantages and disadvantages to each.

When you compare equity release, you should work with a company that offers advice and guidance and one that has the contacts in the industry to present you with the best deals available on the market. Equity Release Supermarket has a comparison table that identifies the best interest rates, cashback deals & free valuations for you. Click here to visit the compare deals table.

 

All Equity Release Supermarket financial advisers are independent & FSA trained and accredited and it is essential that the deal that you opt for meets the FSA standards and SHIP regulations. This will ensure that you have a deal that is safe and fair.

 

Why Now Might Prove to Be a Good Time to Take Out an Equity Release Policy

A combination of the current crop of exclusives has provided a cheaper route to market for many new equity release applications. However, this is not the only reason for the equity release industry being more confident these days.

A recent spate of rate reductions for the 3 major equity release companies has resulted in some of the lowest interest rates for the past 5 years. Aviva’s recent reduction on its Lifetime Flexible drawdown plan has scuppered plans for Just Retirement to be the market leader. In fact Just Retirement has now thrown in the towel in its quest to become the cheapest lifetime drawdown scheme currently available & is now targeting other areas for domination.

 

 

The current exclusive Aviva equity release offered by Equity Release Supermarket is as follows: –

Product              –        Aviva Lifestyle Flexi Plan

Interest rate      –        5.92% fixed for life

Offers                 –        Free Valuation  PLUS £500 cashback on completion

 

If you wish to take advantage of this Aviva deal then request a quote  or contact the Equity Release Supermarket team on 0800 678 5159 where one of our advisers will be happy to assist.

 

Equity Release Supermarket – New Exclusive Cashback & Low Interest Rate Deal from Aviva

Friday, November 11th, 2011

Equity Release Supermarket is pleased to announce its new equity release deal from Aviva.

 

Commenting on the exciting new deal from Aviva equity release which offers clients a FREE valuation* plus a £500 cashback & specially reduced interest rate of 6.32%, director Mark Gregory states…

 

‘the offer from Aviva is testament to the work & progress Equity Release Supermarket is making in the equity release market. Buoyed by the growing consumer confidence in equity release schemes, I feel that we are now positioned to increase our market share. Excellent deals from the likes of major equity release companies such as Aviva will help my team of advisers promote such competitive equity release plans.’

 

Equity Release Supermarket are now recognised as one of the major independent equity release brokers in the UK. Their market leading website offers all the current equity release interest rates & exclusive offers currently available.

Experience the Equity Release Supermarket website or to speak to one of their experienced equity release advisers call freephone 0800 678 5159.

 

*Free valuation applies to property valuations upto £250,000

 

 
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