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Posts Tagged ‘Debt Consolidation’

A Brief Insight Into Equity Release

Friday, March 4th, 2011

Equity release is a type of mortgage which is secured on your property and helps you to access money attached to it. The value of your property minus any secured loans placed upon it is termed as equity. You are able to withdraw this amount to assist you financially in later years.


What is equity release all about?

A clichéd reason given for releasing equity is mainly ‘debt consolidation’. During 2011, debt consolidation is proving to be the most popular reason for releasing equity from one’s property.

Debt consolidation involves settling mortgages, loans, credit cards & any other unsecured finance which the individual is finding difficult to maintain. Once these debts are repaid, your monthly expenditure is reduced thus giving you extra income to enjoy. Other reasons for releasing equity could be to buy a new car, holidays or generally making your lifestyle more satisfactory during retirement.


The equity release plans do not have a fixed term therefore they run for the rest of your own or your partner’s life. If there is any money left, it is passed onto your nominees as suggested in your will. This scheme is only meant for people who have retired and are over 55 years of age.


There are two types of equity release scheme. The lifetime mortgage scheme is recommended for people who are retired. A loan is given to the borrowers on their house. Interest is then added annually to the loan, which is then repaid by selling the property when the borrower dies or when they move out into long term care.

The second option is a home reversion scheme & refers to selling the whole or part of your property to the reversion provider. This means that it the property itself is actually shared or even fully belongs to someone else. The borrowers can continue to live in their house for as long as they wish & not have to worry about any rental payments.


To ascertain which equity release scheme is suitable for yourself, contact the Equity Release Supermarket team on 0800 678 5159 or visit our market leading website at EquityReleaseSupermarket.co.uk


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


Two Reasons Why You Should Consider Purchasing Equity Release Schemes

Monday, February 7th, 2011

Not many people are aware of the benefits of purchasing an equity release scheme. An equity release scheme is a type of loan scheme which allows you to receive a sum of money without having to make monthly repayments. This amount of money can be ascertained by the use of an equity release calculator.


Here are some reasons why you should consider a home equity release scheme:

Back-up for your retirement

Everyone plans to relax and enjoy their retirement years. After all it is the longest holiday of your life!

However, this is possible only when you have a steady flow of income and many pension schemes have been unreliable in both performance & trust.

On the other hand, an equity release mortgage allows you to release money according to both your age & the value of your home. This amount can then be used for your retirement period to assist with any expenditures that are incurred in retirement; whether it is a new car, holiday, home improvements or debt consolidation.

You can also receive money on a monthly basis with equity release schemes. Equally, you could opt for the more popular lump sum.


Debt Consolidation

Equity release schemes can allow you to take a percentage of the total value of your home in order to repay credit card, mortgage or any other form of debt. An equity release mortgage will enable you to clear the debts which in turn will alleviate your finances & provide surplus monthly income with which retirement can be made all that much easier financially.


Consider these options and take advantage of an equity release scheme to take care of your retirement worries.

A free initial consultation is available with any of Equity Release Supermarket’s experienced & friendly advisers.


Call today on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk


The Halifax Retirement Home Plan – The Quest To Find Mortgages For Pensioners?

Tuesday, October 26th, 2010

Planning for your retirement in essence should start in your earlier years; however as we know life unfortunately doesn’t always go to plan!

Here we discuss the merits of the niche interest only mortgage product; the Halifax Retirement Home Plan which is becoming an increasingly popular way of providing mortgages for pensioners.

Since writing my original article on the Halifax Equity Release plan (click here to view), interest has certainly been escalating. The main reason being that people in retirement are unaware of their mortgage options once they finish work. But life must go on.


What is the history of the scheme?

Established in 1984, the Halifax Retirement Home Plan was initially available through the Halifax branch network and was developed to provide low cost mortgage finance for the retired & elderly.

However, under the Financial Services Authority review of the lifetime mortgage market in 2006, Halifax withdrew the branch license to offer lifetime mortgage advice.

Therefore, the responsibility for providing advice on the Halifax Retirement Home Plan was left completely with lifetime mortgage qualified advisers including independent specialists Equity Release Supermarket.


So what is the Halifax Retirement Home Plan?

In simple terms the scheme is an interest only mortgage for people who are retired & facilitates the release of equity tied up in the property. The release of funds can be for almost any purpose including:-

  • Debt consolidation including paying off credit cards/loans or mortgages
  • Holidays including cruises or just day trips
  • Replacement car or caravan
  • Home improvements
  • Gifts to the children providing a deposit for house purchase
  • Supporting your lifestyle through retirement.

Qualification for the Halifax equity release scheme is based on income. Halifax will only accept non-earned income & this must be in the form of: –

  • Occupational pensions
  • Private pensions such as personal pensions or retirement annuities
  • State pensions
  • State benefits including pension credits & disability benefits

The stated minimum age for the Halifax Retirement Home Plan is 65. However, as long as there is no earned income & justification for the size of the mortgage can be based solely on the above income, then ages lower than 65 can be achieved.


How much can be released?

The minimum release on the Halifax Retirement Home Plan is only £15,000. However, to establish the maximum release possible would require the use of an affordability calculator.

Halifax does not base the size of release on a multiple of income, but whether the interest only mortgage can be afforded through retirement.

The data Halifax requires for this calculation includes income, credit status, number of applicants & credit commitments outstanding after the new mortgage commences.

This procedure can be carried out by qualified adviser such as Equity Release Supermarket & is an accurate assessment of the potential borrowings on this scheme.

The overall maximum release available can never be more than 75% of the valuation of the property. Therefore, should the affordability calculator show a figure greater than this, it will still be capped at 75% of the property value.


Does Halifax require a repayment vehicle?

The answer to this is NO.

As the Halifax Retirement Home Plan is an interest only mortgage for pensioners, no form of repayment is required.

In contrast, the mainstream mortgage market is actually tightening its grip on new interest only mortgages, whereas this Halifax equity release scheme will still accept repayment by virtue of the eventual sale of the property. This would be on death of the surviving partner, moving into long term care or earlier property sale.

The term allocated to the Halifax home retirement plan is 40 years which should provide ample time for it to run for the rest of one’s life! This removes any concern about having to find the funds to pay off the Halifax scheme during your lifetime.

Most mortgage providers will only accept a mortgage term upto age 70-75 or in rare instances age 85. However, this only buys time as eventual repayment would be required. However, this scenario may still be suitable should one be downsizing at a predetermined date in the future.

The Halifax Retirement Home Plan therefore removes any element of capital repayment risk.


So what interest rates & products are available?

Dependent upon whether you are a new or existing Halifax customer will determine the interest rates & products applicable.


Currently, the better deals are offered to new customers as they have access to the whole mainstream Halifax product range. This is a great advantage, as there is full access to current low rate tracker & fixed rate products. Click here for the latest interest only mortgage rates…

These include deals such as the current 2 year tracker rate at just 2.59%. Based on borrowing £50,000 this currently would only cost £107.92pm (3.6% APR).


Additionally, if remortgaging from another lender then there is the benefit of a free valuation & free standard legal fees, which reduces the set up costs significantly. I have experienced clients who have just £800 outstanding on a mortgage or even documents kept in deed store that qualified for this free remortgage package!


What if I already have a Halifax mortgage?

The good news is you can still apply for the Halifax Retirement Home Plan. However, the situation here requires completely different advice & procedure. Should you wish to merely transfer onto the Retirement Home Plan then you can port over your existing rate which can be good news if on a standard variable rate. However, if you wish for additional borrowing then the process becomes a little more complicated.

The product range for existing Halifax customers is rather sparse & with the best deals starting currently at 4.99% fixed, hence there is a distinct advantage for new customers.


Such applications will be paper based & therefore processed manually which involves more human input. Experience has shown this results in a different underwriting approach to the process undertaken on new applications.


Can I pay off the Halifax Retirement mortgage early?

The simple answer to this is YES.

Unlike equity release plans where penalties can potentially apply for the rest of your life, the Halifax interest only mortgage will only have early repayment charges for the initial product term. Therefore, should you have opted for the 2.59% 2 year tracker product discussed previously, the penalties would only apply for the first 2 years. After, this 2 year period the mortgage would then revert to the Halifax standard variable rate, currently 3.5%.

However, before the initial rate expires you will have the option to take out a new product from the Halifax mortgage range available at that time.


So what is the advantage of the Halifax Retirement Home Plan over an equity release scheme?

The obvious answer to this is the fact that the Halifax mortgage is interest only & therefore requires a monthly payment of interest. The balance will always remain the same throughout the term of the plan. E.g. borrowing £50,000 today, will result in £50,000 requiring repayment once the house is sold.

In contrast, equity release schemes do not require any monthly repayment & therefore the balance will increase over time. Roughly speaking the balance of equity release schemes will double every 10/11 years.

From a beneficiary’s point of view, the Halifax interest only mortgage will guarantee an inheritance, as the final balance of the mortgage will always be known. This would be favourable for people who want to ensure the children definitely receive an entitlement to their parent’s inheritance.


With all this information & options available it is more important than ever to receive specialist advice to obtain the best deal for your personal circumstances.

Equity Release Supermarket can provide independent advice on both equity release schemes & interest only mortgages for pensioners.

For further information or to request a quotation, please ring Mark on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk


AVIVA Equity Release – Latest Changes To Interest Rates & Lending Limits

Sunday, June 6th, 2010

This article provides information on the latest interest rates & changes that Aviva are making to their product range.


With the current shortage of equity release lenders, additional pressures are mounting on the remaining companies providing equity release schemes.

These lenders are now experiencing larger than normal business volumes as the number of providers has dwindled over the past 12 months. As a consequence some servicing issues are of concern, of which the biggest provider is now addressing.


Of these equity release companies; Aviva  are the first to change their lending criteria & this post provides details of this in advance.


Come the 14th June, Aviva will be increasing their interest rates & lowering their loan-to-values (LTV) & details of these changes are detailed later in this article.

This is a negative step for the market given that Aviva’s Maximum Cash Release plan offers the highest cash release in the lifetime mortgage market at present.

Therefore, clients looking for financial relief by releasing the maximum possible after this date now have a reduced cash sum available. Couple this with Aviva’s recent reduction in loan-to-values on flats & maisonette’s & there is a definite swing away from higher loan values.


Aviva will now only lend on 75% of property values on flats & maisonette’s, which is a dramatic move away from lending on these abodes. Couple this with the reductions in loan-to-values which are being announced on the 14th June, means a significant shift in their lending criteria.

This will affect in particular clients looking at debt consolidation or potential other requirements that demand the maximum possible.


Equity Release Supermarket  as independent financial advisers have witnessed firsthand the demand for larger advances this year alone. Predominantly, this has been for debt consolidation purposes whereby clients in retirement are now experiencing income shortfall issues as their investment returns have fallen significantly.

This has resulted in financial pressures meeting these monthly liabilities including mortgage payments, personal loans or more commonly, credit card debts.


Nevertheless, there are fresh signs within the market indicating that external forces are construing to develop new plans & ideas to drive this stagnant market forward.

We heard last week that More2 Life is introducing an impaired life roll-up equity release scheme. This is welcoming news for the market & hopefully the sign of things to come.

In the meantime the current crop of lenders can dictate in a market having little competition from other providers.


Part of the result of this is Aviva’s impending equity release scheme changes.


Aviva have announced an increase of 0.1% to the interest rates for new business on the Lifestyle Flexible Option, Lifestyle Lump Sum and Lifestyle Lump Sum Max.

Equity Release Supermarket receive an exclusive interest rate lower than that offered directly by Aviva themselves.


The new Aviva interest rates wef 14th June are therefore 6.70%, 6.55% & 7.40% respectively. On paper this doesn’t represent a large percentage increase; however given the roll-up nature of these products, this will result in £1000’s difference in the future balance.


Additionally, Aviva equity release are reducing the loan-to-values on the Lifestyle Lump Sum Max by 2% for customers aged 60 or below, and by 1% for those over 60.

Even with this decrease, they currently still offer the best LTV scale in the market on all properties (apart from flats & maisonettes).


The LTV rates for the Lifestyle Flexible Option and Lifestyle Lump Sum will stay the same.


Example LTV’s on the Lifestyle Lump Sum Max (single borrower) are now: –

Age 55        –           20.5%

Age 60        –           25.5%

Age 6          –           30%

Age 70        –           36%

Age 75        –           41%

Finally, there are transitional arrangements in place which anyone considering the Aviva equity release schemes should be aware of;


Applications on the Lifestyle Flexible Option, Lifestyle Lump Sum and Lifestyle Lump Sum Max dated prior to 14th June and received by the 18th June will receive the old interest rates. Also, any Lifestyle Lump Sum Max applications will be on the old LTV scale.


Applications on the Lifestyle Flexible Option, Lifestyle Lump Sum and Lifestyle Lump Sum Max dated before 14th June and received after 18th June will receive the new interest rate. Lifestyle Lump Sum Max applications will be on the new LTV scale.


Applications dated after 14th June will receive the new interest rates. Lifestyle Lump Sum Max applications will be based on the new LTV scale.


To request an Aviva illustration or further advice on any of the issues discussed above, please contact Mark Gregory on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk


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