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Posts Tagged ‘Buy to Let Mortgage’

Different Lifetime Mortgage Options Available With Equity Release

Thursday, April 28th, 2011

Are you looking to secure your life post retirement?

Do you want to lead a life free from tension and financial worries?

 

If the answer is yes, opting for an equity release scheme could be the right decision.

As different people have different financial requirements, recent equity release schemes have been designed and developed to cater to your needs. These schemes include home reversion schemes and lifetime mortgages. Roll-up lifetime mortgages are much preferred by many people these days as they enable you to retain 100% of the property value & are more flexible in the long run.

 

Features of lifetime mortgages

Lifetime mortgages are especially relevant for those homeowners who are entering retirement. With such a plan, retired homeowners can release equity from their property in the form of a secured loan on their property. The repayment of a loan under this plan takes place after the homeowner has moved into long-term care or after the last applicant has passed away.

 

Once either event has occured then the beneficiaries usually have 12 months in which to repay the debt to the equity release lender. This is most likely from the sale of the property. However, this can be repaid by the children taking ownership of the house & raising their own finance in which to repay the equity release company. For instance if the property was used for rental purposes than a buy-to-let mortgage could be applied for to cover the equity release debt.

 

After opting for a lifetime mortgage, homeowners can continue to live in their residence for the rest of their lives. This is also applicable even when the equity release balance exceeds the value of the property. This is where the no negative equity guarantee applies & provides protection for the heirs. Therefore, inheritants are given assurance that the no debt is incurred by them from the decision made by their parents.

As the equity released is completely tax free, applicants can use the money for any purpose they want. Due to all these benefits, more and more retired homeowners opt for equity release to secure their future.

 

Call 0800 678 5159 for further information or an equity release quote

 

New Equity Release Scheme Launches To Help Landlords in the Buy to Let Mortgage Market

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.

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.

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.

 

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.

 

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.

 

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.

 

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

 

Practical uses of the New Life Landlord buy to let mortgage?

The equity release funds can be utilised in many ways.

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?

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

 

Breathing ‘New Life’ to Buy to Let Mortgages – The Equity Release Way

Tuesday, September 15th, 2009

Could equity release assist the resurgence in the buy to let market & reclaim it from the doldrums?

 

With the equity release market becoming more & more competitive, we focus on a particular product that has found itself a niche in this market.

 

You can’t have failed to notice in the past 6 months that ‘mortgages’ have become synonymous with terms such as ‘credit crunch’ & ‘falling property values’ & anything involving difficulty in obtaining credit.

 

The mortgage market is showing preliminary signs of improvement, but not before time & there is still a long way to go before its back on its feet.

 

One particular area in the financial services sector that has been associated with this slump is the buy to let mortgage. With blame being apportioned to these products having acted as part-catalyst to the advent of the credit crunch, lenders have had their fingers burnt & even withdrawn from lending on these products. It’s therefore difficult to see how they will recover in time & ahead of the general mortgage market.

However, all is not lost. You’ve heard the saying ‘being in the right place at the right time’ – well this could be one of those moments!

 

There has been a Landlord Equity Release scheme available for a number of years which has been drifting along without much prominence. This equity release scheme from New Life Mortgages enables landlords over the age of 55 to be able to assist them financially by releasing capital from their buy to let portfolios.

 

Buy to let landlords generally build their portfolio’s by relying on property values to increase. Once additional equity is built up via property value escalation, the landlord can then apply for a buy to let remortgage to raise additional capital. These new funds can then be used as a deposit towards to next purchase…& the momentum continues.

 

The problem now is that property values have fallen, hence this portfolio creation technique has been somewhat dismantled.

 

With the buy to let market having experienced massive growth over the past decade, thousands of mortgagees are now relying on the equity in their buy to lets and holiday homes for retirement purposes.

So how can equity release help?

 

Well, landlords over the age of 55 can now raise equity without having to sell their properties or even pay any monthly mortgage payments in the process. Instead, the interest is “rolled up” and the loan is repaid only on death, go into long-term care or the house is sold.

 

This equity release scheme has proved to be attractive to landlords who want to release equity in their portfolios in order to supplement their pensions. With the current depressed property market, landlords may be reluctant to sell & thereby delay the eventual sale in order for their families to benefit from future growth.

 

The New Life equity release scheme could be taken out on an unencumbered property in which the capital raised could be used in assisting with retirement plans or even the purchase of another buy to let property.

 

Alternatively, the plan could be used to repay an existing mortgage. Thus, by not having to make any further monthly mortgage payments & with the landlord still in receipt of rental income, this has the overall effect of increasing their retirement income.

 

Another benefit of this scheme is from a taxation viewpoint.

 

By taking out equity release, landlord’s could potentially avoid a capital gains tax (CGT) bill they would pay if they sold up — although they would be still be passing on a reduced tax liability to their heirs. This can also apply to inheritance tax.

 

New Life’s equity release scheme takes advantage of the Inland Revenue rule that profits are revalued when someone dies. When people die and leave their belongings to their family, or indeed anyone else, there is no CGT to pay at the time. When the property is eventually sold, CGT is based on the difference between the proceeds of the sale and the market value at the time of death.

 

Another perk for landlords is that the interest charged on the equity release can be offset against the tax on the rental income, even though the interest is rolled up.

 

The scheme is also available on holiday cottages and second homes, thus extending the markets potential.

 

Other benefits in brief are that the New Life equity release plan has no impact on the landlord’s main residence. This will leave it free from any potential legal charges on the property.

 

Finally, the landlord can raise commercial finance at a residential rate which is currently 7.25% compounded monthly.

 

Main features of the buy to let scheme are: –

·       Minimum age of the youngest must be 55

·       LTV’s start at 15%

·       Minimum loan £26,000

·       Minimum property value of £100,000

·       Rental Income must exceed the interest being charged

·       Never owe more than the value of the property

·       Early repayment charges are over 5 years

 

It is niche equity release products like this from New Life Mortgages that will instill further confidence in the current subdued property market & we look forward to further innovations in this sector.

 

 
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