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Posts Tagged ‘Capital Lump Sum’

Why an Interest Only Lifetime Mortgage Calculator is The Starting Point for Your Research

Thursday, February 26th, 2015

Are you sure an interest only lifetime mortgage is the best product for you? Are you even sure any lifetime mortgage is correct for you? Entering retirement can be a daunting prospect when you are cash poor, but asset rich. You want to know you have a place to live, plenty of money to live on, and can enjoy the retirement you worked so hard for. Equity releases like lifetime mortgages can help you enjoy that life if it is the right product for your situation. However, there is no ‘one product fits all’ scheme out there. There are choices like interest only lifetime equity releases, enhanced equity release schemes & new voluntary repayment plans. Each comes with their own set of USP’s and these are what you need to ascertain in order to discover which the best equity release scheme is for you.

 

The Interest Only Lifetime Mortgage Advantage
An interest only lifetime mortgage provides you with retirement funds, where you borrow a capital lump sum and in return pay a monthly interest-only amount. This amount can be the full interest that accrued, or in some cases only £25 per month. It depends on your budget and what you can afford. If you pay the entire interest that accrues per month then the principle balance remains the same for the life of the mortgage. At death or moving to an assisted living facility, you would repay the principle balance at that point. Any equity left in the home would be inheritance for your family. The advantage is keeping a little inheritance for your family versus spending it all on your retirement and the repayment of the loan.

 

Starting with the Interest Only Lifetime Mortgage Calculator
Now that you understand what an interest only lifetime mortgage offers, you need to find out if it is an affordable option for you. There is no point in speaking with any lender of these mortgages if you cannot afford it, or afford the £25 per month minimum interest payment. An interest only lifetime mortgage calculator can help you determine if you can afford the mortgage. For some you may not be ready to speak with a qualified specialist.

 

Others have spoken with a qualified specialist and received a value that seems like they should accept it. In fact there are many who accept the first offer they receive from one of the big providers of the loans because they believe it is the best option. Yet, they never once use an interest only calculator to see the potentials from other companies. This is where professional equity release advice is needed to compare the whole lifetime mortgage & home reversion marketplace.

 

Big companies have done well to establish their equity release brand. They have great marketing skills and the advertising budget to keep in the limelight. However, it does not mean they offer the best products for everyone including on their interest only lifetime mortgages. The only way to find out who has the best is by using a calculator to determine what other companies are able to offer you. There are all-in-one calculators from the likes of Equity Release Supermarket that look at all equity release plans and then provide a table of different mortgage lenders. In this way you can access all the estimate data you need to make an informed decision.

 

What Inputs are Required for the Calculation?
Now that you understand the reason for starting with a calculator to determine the estimate and potential equity release options, you need to understand what the calculator will ask for and why. You will be asked for your full name, phone number, email address, age, health, and property value from some of the best calculators. Some may only ask for your personal data and then say the information is in the email—this is data mining and of no help to you. You want a calculator that gives you instant results and at least asks for your age, health, and property value. This is all a calculator needs to offer accurate results.

 

Your age determines your life expectancy. Your health if good or poor determines if you will live longer or shorter than the average healthy person. There is also the assumption that males live shorter lives than females, so some calculators even want to know this distinction or if you are a couple in which case the age of the youngest homeowner has to be used in the calculator.

 

The age and the property value determine the loan to value percentage or estimate of funds you can unlock in equity. The loan to value is only an estimate based on the information you supply to the calculator. If you do not have an accurate property value, then you will have an inaccurate estimate. Zoopla and other websites can help you find as close an estimate to accurate property value as possible.

 

An important factor is making sure you use an interest only calculator or all-in-one when you want to find out about interest only loans. The calculator has to determine the estimate based on the amount of interest you will pay back each month versus property value. In this way the calculator can tell you if you can take more or less based on the estimated interest payment. It also leads to the decision of whether the loan is the right equity release for you.

 

The Next Steps in your Interest Only Lifetime Mortgage Calculation
After you determine that a lifetime interest only mortgage is right for you, you need to take the next step in looking at comparison tables and finding the best equity release company for you. You have a potential value that is as accurate as possible given the data you had to input into the calculator.

 

Now you know if you can afford the loan and if the interest payments are possible. When you speak with a company about interest only lifetime mortgages and calculator results, you can ask questions about their differences in calculations as well as some of their qualification criteria. You can also find this online and use comparison websites to see the typical estimate for your age, health and property value.

 

Make certain that you have an informed decision so that you can speak with a qualified equity release representative to obtain the best possible interest only lifetime mortgage for you. You may also need to wait till you are slightly older to get better results, at least with a calculator you will know. But as long as you have reached the age of 55, then a lifetime interest only calculator & mortgage is available to you.

 

Home Reversion Can Still Play a Part in the Whole Equity Release Scheme of Things

Saturday, April 7th, 2012

Home reversion schemes have literally had their nose pushed out of the equity release market upon entering the year 2012. There has been a significant rise in the popularity of lifetime mortgage plans; including drawdown equity release schemes, enhanced equity release schemes & interest only lifetime mortgages.

Figures produced by SHIP (Safe Home Income Plans) show that home reversion plans now only account for 2% of the whole equity release sales. Drawdown lifetime mortgages popularity has captured 62% of applications & conventional lump sum equity release sales amount to 36%.

It is clearly evident to see the sincere lack of home reversion applications. Here we look at the mis-conceptions surrounding home reversion schemes & why they must still be considered in the overall equity release scheme of things!

 

First let’s look at the home reversion plan basics..

The home reversion scheme requires the property owner to sell part or all of their property in return for a tax free lump sum. The lump sum offered by the reversion company will always be at a discount to the percentage sold. The reason for this is that the applicants can remain living in the property for the rest of their lives, rent free. Significantly, it could be some time before the home reversion lender receives their money.

No interest element is attached to home reversion schemes. Unlike lifetime mortgages, home reversion offers guarantees as to the percentage of the property that will pass to the beneficiaries at the end of the day. This stems from the initial decision made as to how much of the property’s title is transferred to the lender. For example, if 55% of the property is sold in exchange for a lump sum, then this will still guarantee 45% of the eventual sale proceeds will pass to the beneficiaries. This is a major advantage of home reversion schemes over lifetime mortgages & provides peace of mind.

 

So why the lethargy surrounding home reversion plans?

Perhaps one of the major stigmas attached is the fact that you will not own your property 100%. The reversion provider will co-own the property with you, thus having a greater say in its maintenance & future planning of the home. They will have the right to inspect the house at regular intervals to ensure it is maintained adequately, thus protecting their security. Any major home improvements will also need their permissions in case you were thinking of extensions or knocking down walls!

Another consideration would be upon moving home or wanting to sell. At this point an equity release calculation would need to be undertaken to establish how much equity you own based on current value upon transfer across to the new abode. Therefore independent valuations would need to be conducted to ascertain current market value. This could prove difficult in today’s market with a lack of sales & depressed housing market.

The one danger of home reversion plans is upon early death. Home reversion would prove expensive should you die or move into care in the earlier years of inception. Effectively, you have given up a large portion of your home based on average life expectancy. If you fail to reach this date, then home reversion could prove a poor decision. On the flip side, if longevity is in your family genes, then home reversion could be a great decision. Oh the virtues of a crystal ball!

Nevertheless, this aspect of the housing doldrums could actually have a positive accent as to why a home reversion plan could be more advantageous than a lifetime mortgage scheme.  By taking out a home reversion scheme in anticipation that property values will remain static could prove beneficial. Afterall you are guaranteed that at the end of the day some equity will remain as you have a percentage of the property value guaranteed.

Compare this to lifetime mortgage schemes where the roll-up of interest compounds yearly & will continue escalating until the plan expires. In this situation, should property values remain static, then with a continuously rising mortgage balance & static house prices, will lead to the eventual erosion of the equity. This could be so much so, that NO equity remains at the end of the day with a lifetime mortgage.

 

So why should you consider a home reversion scheme?

As you can see the home reversion plan offers a sense of assurance which is not possible with many other equity release schemes. With the progress in medical science, the human body is capable of living much longer. Age therefore plays a major role in this equity release plan with a minimum starting age of 65. Indeed, the older one gets before taking out a home reversion scheme the better the terms that will be offered by the lender. The resultant effect of this is the older the homeowner, the more is paid as a capital lump sum.

 

Some of the negative issues surrounding home reversion schemes have been addressed by the providers – Bridgewater, New Life Mortgages & Hodge Lifetime. Particularly Bridgewater have considered many of these issues & allayed such fears by building in a series of plan options. Similar to drawdown lifetime mortgages, Bridgewater offer a flexible equity release plan which allows you to sell less than 100% of the home & still provide the guarantee of future withdrawals in the future.

 

Another home reversion plan flexible feature could be a ‘secured escalating release’ option which allows you to release a lump sum of cash now, together with a future income over a number of years. This is achieved with the use of annuities.

Finally, some home reversion plans could also offer protection on early death, so always make the necessary enquiries before entering into a long term financial commitment.

 

Home reversion redemption

The home reversion company will eventually receive their money by selling the property when the occupier has died or moved into long term care. Additionally, this type of home equity scheme offers the property owner the ability to change properties. This is a requirement of SHIP (Safe Home Income Plan).

Always take the assistance of an independent financial advisor so that they can help estimate the value of your property and help you decide on the scheme best suited to your requirements. Equity release is very beneficial for retired individuals who do not have a steady flow of income or require a capital lump sum for lifestyle improvements. One of the products that could succeed with these bequests could be the home reversion scheme as it offers stability, guarantees for your children and allows you to enjoy a worry free, rent free retirement.

 

For home reversion advice contact the specialists at Equity Release Supermarket on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

No Early Repayment Charge Equity Release Plan Launched by Hodge Lifetime

Monday, April 2nd, 2012

Following in the steps of the Stonehaven Interest Select plan, Hodge Lifetime are launching a new equity release plan with repayment options that include NO early repayment charges.

Previously, only Stonehaven equity release had created a niche in the lifetime mortgage market by offering an interest only lifetime mortgage. Stonehaven allow you the facility to repay the interest charged monthly, thus maintaining a level balance.

However, Hodge Lifetime has now created their own niche product, by offering a roll-up equity release plan with a spin. The unique feature of the plan is the facility of allowing partial repayments of upto 10% per annum with no penalty. This is a first in this previously inflexible early repayment charge equity release UK market.

 

The Mechanics

The option to repay without penalty applies after the plan has been running for at least 12 months. You then have the possibility of repaying all of the interest & an even an element of capital, if you wish. The minimum repayment is £500.

The major advantage of this lifetime mortgage is that no penalty would apply to this repayment as long as no more than 10% of the initial capital borrowed is repaid.

An example of this would be someone borrowing £25,000 initially. After, 12 months of the plan running they can then repay upto £2,500 each year thereafter. With a launch interest rate of just 6.31% annual equivalent, by paying the full 10% allowance would allow you to repay not only the interest but also the capital. The Hodge Lifetime Plan could then effectively be even used as a form of flexible lifetime repayment mortgage!

 

Background to Hodge Lifetime

Hodge Lifetime introduced the very first equity release plans in 1965 and have continued to earn a reputation for reliability ever since. Hodge Lifetime is a subsidiary of Julian Hodge Bank and is a founder member of SHIP (Safe Home Income Plans).

 

Plan Facts

The Hodge Lifetime Lump Sum Lifetime Mortgage allows you to take a single cash lump sum with a fixed interest rate for life. Plans start at age 60 & there is a minimum property value of £100,000 with a £20,000 minimum initial withdrawal limit. The plan is available in England, Wales & mainland Scotland.

Hodge Lifetime’s standard early repayment charges only apply for the first 5 years on a 5,4,3,2,1 basis. There is also an additional potential variable repayment charge dependent upon the movement in 25 year interest rate swap rates.

However, this variable penalty will be waived after 5 years. This ‘Downsizing Protection’ feature allows you to repay the Hodge Equity Release Plan with NO penalty if you move home after 5 years.

However, the main focus surely on the Hodge Lifetime Lump Sum equity release plan will be possibility of repayment the interest with a choice of when & how much.

No other equity release schemes provider will permit this at present with so much flexibility. Hodge will allow two payments per annum subject to the 10% maximum repayment & no penalty.

 

Who Would the Repayment Facility Benefit?

People who maybe wish to inhibit the traditional roll-up effect of their equity release plan would find the Hodge Lifetime plan of benefit.

Those unable to commit to a fixed monthly repayment as their preferred choice would be to make ad-hoc repayments once a cash sum has been saved.
People who may receive an unexpected windfall in the future
Parents who may wish to gift to their children for financial reasons (e.g. house purchase) knowing they will be repaid over a future term
Those at Pre-state pension age, need a capital lump sum now, but may wish to repay chunks back in the future from their extra income
The list could go on…

 

What to do next…

If you have been dissuaded by equity release early repayment charges in the past, then take a close look at this exciting new plan from Hodge Lifetime. The ability to repay 10% off the balance each year with NO penalty is unique.

With an opening offer of a reduced valuation fee of £99 for property values upto £350,000, this certainly looks likely to follow hot on the heels of Stonehaven’s Interest Select Plan.

 

For further information or to request a quote please visit Equity Release Supermarket’s dedicated Hodge Lifetime Lump Sum equity release page. Alternatively call the team on 0800 678 5159.

 

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

 

Explore Retired Life Viably With An Equity Release Scheme

Tuesday, September 28th, 2010

People who eventually retire from their work look forward to spending the rest of their lives comfortably. For these retired individuals, retirement should be a period of less worry & no work. In effect they will have more free time and can therefore concentrate on the happiness of seeing their family grow up.

 

However, unless there has been many years of retiremnent planning, these dreams of a relaxing & an enjoyable retirement can suddenly turn sour.

With more time to spend money, retirement is also known as the ‘longest holiday of your life‘. You will be aware that holiday periods are probably the most expensive periods of life & are usually planned for a year in advance. Therefore, consider the holiday you will be entering, once you retire & the lengthy duration thereof.

The average person will retire between 60-65. Life expectancies are now reaching into the late 80’s; therefore planning for this period should be all relative.

So, considering most people are not as disciplined at planning for their retirement as they are with their annual holidays, how can one rectify this issue once retirement is reached & they have insufficient provision to live on?

 

Well one of the solutions to this could be via equity release schemes which can provide a way to gain cash benefits without having to sell off the property.

 

Making use of the increase in realty prices
Real estate prices have increased significantly over the past few decades. By optimising these increases & climbing onto the property ladder, can pay dividends in the long run for your retirement

In the forthcoming years, house prices should begin to rise again. In such a scenario, the home owner can further capitalise on the equity locked inside the house without having to sell the property. Having a constant income flow can ensure that the retired population can lead a high quality of life, even when their regular income has fallen sharply.

 

How can equity release help?

By continuing to maintain a rung on the property ladder, once retirement age is attained then it can be time to cash in on the equity built in the property during one’s period of employment. There are several ways of achieving this if a top-up to the state pesnion is required. Whether you are in need of income or a capital lump sum, equity release schemes can assist assuming certain criteria is met; a property value over £70,000 & a minimum age of 55. Therefore, even if early retirement has been taken for health or unemployment reasons there can still be financial help available with equity release.

 

Distinguishing features of equity release schemes
One of the main features of an equity release scheme is that the homeowner can retain 100% ownership of the home and at the same time can continue taking income or capital from the higher value of their home. The money which is released can be paid back to the equity release company at anytime in the future (subject to possible early repayment charges).

However, this is usually on the death of the property owner or them moving into long term care. Equity release is particularly beneficial to those who do not have family members to look after and do not need to pass on their property to the next generation.

The benefits of equity release schemes are many. Firstly the cash amount that is received by the owner of the house is exempt from income tax. Thus, the retired individual can continue taking equity from the property in order to supplement their lifestyle & thus make it the best holiday of their lives!

 

For further information on equity release & the current equity release schemes in the market, contact the equity release team on 0800 678 5159.

 

 
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