Posts Tagged ‘drawdown equity release’
Wednesday, June 22nd, 2011
The amount of equity you own is the term used to describe the value of a home less any mortgage or secured pending on it. Equity release allows you to free up this money tied up within your home.
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The equity release process will allow you to receive a tax free, lump sum of capital allowing you to spend it in whatever way that you choose.
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An obvious disadvantage is that you will not be able to hand down all of your property to your offspring. Nevertheless, you do get to live out the remainder of your life in your home, rent free or till you move into elderly care.
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If you are considering an equity release scheme, the best way to get started would be to approach an expert. Some organisations which provide equity release schemes also provide a free consultation, so remember to take advantage of their services. Some research of the advisor would be of benefit as they must be regulated by the FSA (Financial Services Authority) & have an individual registration number with them. The equity release adviser should therefore be found on the FSA website register.
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Ensure they are independent, which means they are free to deal with ANY equity release provider in the market. So ask. Some companies purport to be whole of market, however upon closer analysis they only deal with a handful of companies. You may therefore be missing out on a beneficial feature of an equity release scheme that they do not have available. This could save you £1000′s in the long run & could prove costly if the wrong equity release plan was chosen.
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Your advisor will let you in on all the vital details regarding the procedure. This will be after the equity release adviser has collated all the necessary facts regarding one’s current situation. Guarded with this information, & any soft facts provided such as ‘how important is that you leave part or all of your property to your beneficiaries?’ will be asked. Also income & whether you are in receipt of means tested benefits is important as this will reflect on which equity release schemes are advised upon. The equity release consultant can then document & record this stage of the lifetime mortgage process.
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Once an accurate financial picture has been ascertained & observed the clients objectives, the equity release adviser can then discuss the mortgage options available. These would include an explanation of the various schemes available to suit. Included in this would be roll-up equity release schemes, home reversion plans & interest only lifetime mortgages such as the Halifax Retirement Home Plan or the Stonehaven Interest Select.
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You do not have to give them an instant decision; after all, going for an equity release scheme is a big decision and something which should not be rushed into.
Upon presentation of the equity release advisers recommendations a Key Facts Illustration must be offered to you. This would include a summary of the scheme in principle, costs & charges, future balance & the commission payable by the lifetime mortgage providers. This is quite a comprehensive overview of the scheme & covers the finer details, as well as the main features, such as the no negative equity guarantee & early repayment charges etc.
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Once you have made your decision, all you have to do is simply call your advisor and give them the go ahead. They will have all your paperwork taken care of, contact your solicitor and keep you updated about everything, right to the time that you get your money released.
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A professional & courteous adviser will confirm the funds have been released & offer any after care service in the future; for example when additional funds are required such as on a drawdown equity release scheme.
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As a company Equity Release Supermarket keep contact with its clients to advise on new products & interest rates in the future as it is important to keep abreast of the market as & when more competitive products become available.
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Independent & award winning equity release specialist Equity Release Supermarket offer all the above benefits & quality of service that the testimonials at the bottom of the home page illustrate.
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To discuss your options in the release of equity from your property call freephone 0800 678 5159 today or alternatively complete our contact form & one of our advisers will be in touch
Tags: drawdown equity release, equity release, Equity Release Adviser, equity release schemes, equity release solicitor, home reversion, independent, Independent equity release advice, interest only mortgage, lifetime mortgages, No negative equity guarantee
Posted in Advice, Equity Release, Halifax Retirement Home Plan | No Comments »
Wednesday, March 2nd, 2011
With the main concern over equity release schemes being the inheritance passed down to beneficiaries, here we discuss the pro’s & con’s of these lifetime roll-up mortgages.
Firstly, we look at the effect on beneficiaries & the sources of these areas of concern. This then leads us onto the equity release calculator with facts & figures showing how these schemes fair for the beneficiaries at the end of the day.
Ok, we’ve have all heard the saying; bad news travels faster than good news & this is synonymous with term ‘equity release’.
Although equity release plans originate back to 1965, the damaging news about them generally dates back to the late 1980′s when ‘home income plans‘ were initially launched.
Linked to an annuity or investment bond & an interest only mortgage, these plans were destined to fail, relying heavily on investment performance in a period of falling property values & rapidly rising interest rates.
The mid 90′s then introduced the much derided shared appreciation mortgages (SAM’s), the focus of most causes for campaigns against equity release including the Trevor MacDonald Tonight programme.
Is it any wonder reputation was soured?
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So what has the equity release industry done about it?
At the time of the SAM’s debacle, SHIP (Safe Home Income Plans) was launched.
Formed from its originators – Ecclesiastical Life, Hodge, Home & Capital Trust and GE Life all members agreed to abide by a strict code of conduct, which still exists to this day.
Soon, new lenders entered the market with household names such as Norwich Union & Northern Rock introducing the first roll-up schemes & bringing a significant boost & trust to the industry.
Although the volume of applications began to blossom around 2003 with 25,000 loans completed, a lack of regulation still overshadowed the equity release sector. The market was still somewhat blighted by its previous misdemeanours.
Thankfully, partial regulation was soon imposed on the industry with lifetime mortgages coming under the auspices of the Financial Services Authority on 31st October 2004. Home reversions joined lifetime mortgage schemes soon after & by 2007 full regulation & confidence was brought back to the sector.
Therefore, the market has evolved & strived to restore pride; a far cry from the negative perceptions of decades previous.
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So what does this all mean for today’s beneficiaries?
The main ‘clean up act’ came with the introduction of SHIP & its rules imposed on the members. The ‘no negative equity guarantee‘ affords the greatest level of protection this industry can offer.
Safe in the knowledge that any amount borrowed by their parents can never escalate to more than the eventual sale price of the property, beneficiaries are at least guaranteed no debt can ever be passed onto themselves.
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A crumb of comfort maybe, but peace of mind for the parents.
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An equity release adviser should always encourage involvement of the heirs to the estate. With their input & assurance, feelings can then be vented either for or against equity release being taken as for many elderly people this is a major financial proposition.
Again qualified advisers should play an important role in explaining the pro’s & cons of lifetime mortgages & convey these issues to all parties concerned.
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What else does the equity release sector afford by way of protection?
Interest rates for home equity release schemes, albeit not the lowest ever, are still historically low. One positive feature of these schemes is the lifetime fixed rate on all loans now.
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So what is the benefit of this?
If you borrowed an amount of capital, with a fixed interest rate for life it enables you to calculate the exact future balance.
This is building further reassurance for potential mortgage applicants.
A client will always be made aware that the equity release balance escalates over the lifetime of the scheme; this is the nature of these plans & should never be entered into unless this has been clearly explained. The effect of the interest compounding annually, approximately doubles the balance every 10-11 years, depending on interest rate charged by the equity release companies.
Sounds daunting? Well, let’s now look at the sums as promised:
One of the lowest interest rates around at present would be the Aviva Lifetime Lump Sum plan, which at the time of writing this article has a fixed lifetime interest rate of 6.65% (6.9% APR) annual.
A male, aged 65 borrowing a lump sum of £25,000 on the Aviva Lifestyle lump sum at a fixed interest rate of 6.65% would know exactly what the future balance will be, even before taking out the equity release scheme. The Key Facts Illustration provided by the equity release adviser will confirm these figures & also the costs & additional features involved.
For instance, given the aforementioned figures at the end of 10 years the mortgage balance would be £47,594 & after 20 years it would be £90,606.
This may seem expensive given only £25,000 was borrowed initially; however there are two factors that could still rule in favour of the a lifetime mortgage scheme.
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One common issue overlooked is the potential for property values to increase. If so, & with 100% ownership of the house still being retained, then the homeowner will fully benefit from any escalation in the house price. This will then offset some of the compounding effect of the interest & mitigate its effect on the estate somewhat. Again, we are looking here at the longer term & no guarantee can be given they will go up; nevertheless historical records show they have indeed.
Consequently, a rule of thumb is never to borrow anymore than required beyond the initial 12 months. Plans are now flexible enough & with drawdown equity release schemes introduced & now being the most popular roll up lifetime mortgage, then the funds can be drip fed over time as & when required.
Additionally, by taking a lower initial amount, results in less interest being charged, thus meaning more inheritance passed onto the beneficiaries.
The second factor affecting the balance accruing & is also the primary cause of roll-up & that is purely down to the fact that NO monthly payments are required. This helps retirees to have access to the some of the equity tied up in their property & at the same time having NO effect on their budget.
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Finally, equity release schemes do have an ever increasing part to play in the retirement planning for the over 55′s. Care must always be taken & should never rushed into without discussion & involvement of third parties. Advice should always be provided by an industry qualified equity release adviser.
Hopefully lessons have now been learned from the past & the industry can move forward, innovate & develop further over time. If so, & in the right circumstances equity release can provide for many, a comfortable & enjoyable retirement.
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If you require furthjer advice on equity release schemes, please call freephone 0800 783 9652 or email mark@equityreleasesupermarket.co.uk
Tags: drawdown equity release, equity release, Equity Release Adviser, Equity release calculator, home income plan, lifetime mortgage schemes, lifetime mortgages, SHIP
Posted in Advice, Equity Release | No Comments »
Wednesday, February 16th, 2011
The main concern of equity release schemes is the reduced inheritance which is passed down to beneficiaries. Here we discuss the pro’s & con’s of roll-up equity release plans.
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First, let’s look at the effect on the beneficiaries & the source of the causes for concern. This then leads us to the equity release calculator with facts & figures showing how these schemes fair for the beneficiaries on final redemption of the plan.
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Ok, we’ve have all heard the saying; bad news travels faster than good news & this is synonymous with terminology ‘equity release’.
Although equity release plans were initiated in 1965, the news damaging these schemes generally dates back to the late 1980’s when the first home income plans were launched.
Linked to an annuities or regular income investment bonds & an interest only mortgage, plans such as these were destined to fail, relying heavily on investment performance in a period of falling property values & rapidly rising interest rates.
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The mid 90’s then introduced the much derided & chastened Shared Appreciation Mortgages (SAM’s), the focus of most causes for campaigns against equity release including Trevor MacDonald’s Tonight TV programme.
Therefore, its no wonder the industries reputation was soured.
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So what has the equity release industry done about repairing this negative sentiment?
At the time of the SAM’s debacle, SHIP (Safe Home Income Plans) was launched. Formed from its originators – Ecclesiastical Life, Hodge Equity Release, Home & Capital Trust & GE Life all members agreed to abide by a strict code of conduct, which still exists today.
Soon new lenders entered the equity release market, with household names such as Norwich Union & Northern Rock with their newly developed roll-up equity release schemes bringing a significant boost & trust to the industry.
Although equity release schemes began to blossom around 2003 with approximately 25,000 equity release loans completed, a lack of regulation still overshadowed the equity release sector. The market was still somewhat bighted by the previous misdemeanours.
Thankfully, partial regulation was soon imposed on the equity release industry with lifetime mortgages coming under the auspices of the Financial Services Authority on 31st October 2004. Home reversions soon joined lifetime mortgage schemes & by 2007 full regulation & confidence was brought back to the equity release marketplace.
Therefore, the market has evolved & strived to restore pride; a far cry from the negative perceptions of decades ago.
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So what does this all mean for today’s beneficiaries?
The main ‘clean up act’ came with the introduction of SHIP & its rules imposed on the members. The ‘no negative equity guarantee’ affords the greatest level of protection the industry has to offer.
Safe in the knowledge that any amount borrowed by their parents can never escalate to more than the eventual sale price of the property, they are at least guaranteed no debt can be passed onto themselves.
A crumb of comfort maybe, but certainly peace of mind for parents.
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As an equity release adviser, encouragement must always be shown to involve the heirs to the estate. With their input & assurance, feelings can then be vented either for or against equity release being taken as for many this is a major financial proposition.
Again qualified advisers should play an important role in explaining the pro’s & con’s of equity release mortgages & convey these issues to all parties concerned.
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What else does the equity release sector afford by way of protection?
Interest rates for home equity release schemes, albeit not the lowest ever, are still historically low. One positive feature of these schemes is the lifetime fixed rate on all equity release loans now.
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So what is the benefit of this?
If you borrowed an amount of capital, with a fixed interest rate for life it enables you to calculate the exact future balance.
This is building further reassurance for potential equity release applicants.
We know the equity release balance escalates over the lifetime of the scheme; this is the nature of plans & should never be entered into unless this has been clearly explained. The effect of the interest compounding annually, approximately doubles the balance every 10-11 years, depending on interest rate charged by the equity release companies.
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Sounds daunting? Well, let’s now look at the sums as promised earlier:
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One of the lowest interest rates around at present would be the Aviva Lifetime Lump Sum scheme, which currently has a fixed interest rate of 6.65% (6.9% APR) annual.
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A male, aged 65 borrowing a lump sum of £25,000 on the 6.65% Aviva Lifestyle lump sum would know exactly what the future balance will be, even before taking out the equity release scheme. The Key Facts Illustration provided by the equity release adviser will confirm these figures & also the costs & additional features involved.
For instance, based on a release of £25,000 in this scenario would lead to a balance in 10 years of £47,594 & after 20 years would be £90,606.
This may seem expensive given only £25,000 was borrowed initially; however there are two factors that could still rule in the equity releases favour.
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One common issue overlooked is the potential for property prices to increase. If so, & with 100% ownership of the house still retained the homeowner will fully benefit from any future escalation in the house price. This will then offset some of the compounding effect of the interest & mitigate its effect on the overall estate. Again, we are looking longer term & no guarantee can be given prices will go up; nevertheless historical data confirms they still have.
As a consequence, a rule of thumb is never to borrow anymore than required beyond the initial 12 months. Plans are now flexible enough with drawdown schemes being available that funds can even be drip fed over time as & when required.
hence, by taking a lower initial amount would result in less interest being charged, meaning more inheritance passed to the beneficiaries.
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The second factor affecting the balance accruing & is the main cause of equity release roll-up is purely down the fact that NO monthly payments are required. This helps retirees to have access to the equity tied up in their property & at the same time leave their budget unaffected.
Nevertheless, equity release schemes do have an increasing role in retirement planning for the over 55’s. Care must always be taken & never rushed into without discussion & involvement of third parties.
Advice should always be provided by an industry qualified equity release consultant. If so, & in the right circumstances equity release can provide a comfortable & enjoyable retirement.
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Finally, hopefully lessons have been learned from the past & the industry can move forward, innovate & develop further over time.
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To discuss any of these issues & with no obligation whatsoever, please contact the Equity Release Supermarket team on 0800 783 9652 or email mark@equityrelease supermarket.co.uk
Tags: drawdown equity release, equity release, Equity Release Adviser, equity release awards, Equity release calculator, equity release schemes, lifetime mortgages, No negative equity guarantee
Posted in Equity Release, News | No Comments »
Friday, December 24th, 2010
Equity release schemes can be beneficial for those retired individuals who suit the old adage where ‘asset rich but cash poor‘ features in so many circumstances.
Throughout one’s life we have many financial demands to fulfil including buying that first house, holidays, bringing up the children & financing through school then university. There’s the ongoing home improvements, weddings & christenings & then the when you think its time to look after no 1, there’s the grandchildren!
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It would seem that personal finances never get chance to take a breather!
However, this is all well & good whilst in continuous employment, as these expenditures can be funded out of regular income.
But how can one maintain these ongoing costs once retirement is reached? Many people do not realise or make enough financial provision via pensions or alternative retirement funding schemes as to how much money will be required to fund the remainder of their years. Afterall retirement is effectively the longest holiday of your life.
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We all know how much we spend on a short break holiday; consider how much this is likely to cost should this holiday last 20 years!
Average life expectancy has increased significantly over the last few decades, so as we live longer the greater the financial pension fund that is required. So can one really expect to be able to meet the financial needs of forthcoming retirement years? If so how can one fulfil this?
With lenders being few & far between in their numbers post retirement, how does one meet the potential shortfall that will inevitably exist for most of state pension age?
Well for the typical retiree, who has experience all the aforementioned lifestyle issues then equity release potentially could lead you into a financially secure future.
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There are two main types of equity release schemes – lifetime mortgages and home reversion plans. Of these this article concentrates on lifetime mortgage schemes
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Lifetime mortgages
Lifetime mortgages are special kinds of mortgage plans that are beneficial to individuals who are over 55 (for joint applicants, both should be more than 55 years of age). This is the most popular form of equity release & accounts for almost 90% of all equity release plans taken out. The reason is their flexibility & the fact the property will always remain 100% in your own name. This is important for many people whom have worked hard to build up towards their greatest asset, their home.
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With a lifetime mortgage, you get a secured loan which you can either take as an initial lump sum or ad-hoc withdrawals in the future whenever they are required. Interest accumulated on the loan will be rolled up over your lifetime until death or moving into long term care. At that point the property is sold off by the executors of the estate which they have between 6-12 months to complete this process of paying the redemption figure back to the equity release company.
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Advantages
Lifetime mortgages do not require you to make any monthly payments unlike other mortgage schemes. You can spend your money the way you want & be flexible in the withdrawal of the tax free cash. This is facilitated by the equity release drawdown plan that enables you to take cash lump sums from a reserve facility as & when its required.
The main advantage of drawdown is that you are only charged interest on the amount actually taken. Hence, whilst money is still sat in reserve with the equity release lender, you are not charged interest on this portion. This removes the necessity to take a large initial lump sum & have it languishing in the bank or building society at an interest rate that is lower than that being charged by the equity release plan itself.
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If any of the issues above feel of relevance to you, feel free to give the Equity Release Supermarket team a call to discuss the ways in which equity release could may be assist your retirement.
t: 0800 678 5159
e: mark@equityreleasesupermarket.co.uk
w: http://www.equityreleasesupermarket.co.uk
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Tags: drawdown equity release, equity release, equity release schemes, income, retirement
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Wednesday, December 15th, 2010
Do you want to unlock money against your property’s value? If your answer is yes, once all your options have been established, then equity release schemes can be perfect for you. These schemes are specially meant for retired people who are over 55 and own property.
To fulfill different financial needs, various equity release schemes have been introduced into the marketplace. From single lump sum schemes back in the early equity release days, through to the more flexible drawdown equity release schemes on offer today.
This includes two major types – home reversion plans and lifetime mortgages.
The lifetime mortgage equity release is further categorised into various schemes such as:
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Lifetime roll-up mortgages – Under this scheme, there is no need to pay the interest every month. The interest accruing will be rolled up annually on to the main debt. This means that you do not have to pay anything and can still continue living in your property. The property will remain 100% in your name with the equity release providers putting a first legal charge at the land registry. This is one of the main reasons why many people opt for this scheme.
Drawdown lifetime mortgages – This scheme is now preferred by many homeowners because it allows them to take payments whenever they want. The best thing about this scheme is that after taking the inital lump sum a reserve facility is created which is a cash fund for future use. This reserve facility allows withdrawals to be made whenever additional tax free cash is required. This could be for an emergency such as boiler breakdown; a purchase such as new car or annual holidays.
Interest only lifetime mortgages – Unlike roll-up lifetime mortgage schemes, this mortgage option allows you to pay monthly interest and avoid building debt. In effect, you are repaying the monthly interest which is accruing, thus maintaining the principle balance at the same level for the duration of the plan term. Schemes such as the Halifax Retirement Home Plan, offer these features whereby you are provided with a term of 40 years & interest only repayments only with NO repayment vehicle being required. Once you have selected this scheme then only the principal amount needs to be repaid to the lender which as with equity release schemes is repaid upon sale of the property.
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With so many different options available to release equity, why not contact the Equity Release Supermarket by calling freephone 0800 783 9652 today. We look forward to hearing from you.
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Mark Gregory CeMap CeRER
Director
mark@equityreleasesupermarket.co.uk
Tags: drawdown equity release, equity release, equity release schemes, Halifax Retirement Home Plan, providers
Posted in Equity Release | No Comments »
Tuesday, November 30th, 2010
There are many retired people who cannot find th quality of life they yearn for on the limited savings and small pensions they have. If you are suffering from financial difficulties then equity release can be the perfect solution for you. Equity release allows you to unlock money against the value of your home.
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How does equity release work?
To qualify for equity release, you must be above 55 years old and own a home which is worth more than £60,000. Once you have opted for equity release, you will receive a lump sum amount of money or monthly income from the lender.
If you have decided to go for equity release then you must know that there are two different equity release schemes in the market.
Lifetime mortgages – These schemes are preferred by many homeowners these days because they can be provided in different formats to suit people’s circumstances. The different types of lifetime mortgages range from lump sum equity release to the flexible drawdown equity release schemes. The lump sum plans do as the name says on the tin, in that they provide a single, one-off lump sum which is fine if no further cash releases are required.
However, this can be difficult to predict & when interest rates for the lump sum & drawdown are the same then invariably the drawdown plans are the most popular equity release schemes available.
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Home reversion plans – These equity release schemes allow you to sell the whole or only a percentage of your home to the home reversion lender. This means that you have the option to also keep some part of the property for your beneficiaries. These are the only type of equity release schemes that can guarantee an inheritance for your beneficiaries.
Both the above mentioned equity release schemes are regulated by SHIP (Safe Home Income Plans) and the FSA (Financial Service Authority). These organisations ensure that all the applicants get the protection that equity release UK schemes should receive in getting the appropriate deal for your circumstances.
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To ascertain which or how either of the aforementioned equity release schemes can benefit you, please contact Mark Gregory on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk
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Tags: Add new tag, drawdown, drawdown equity release, equity release, equity release schemes, home reversion, home reversion schemes, inheritance protection, lifetime mortgage schemes, lifetime mortgages, SHIP
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Saturday, September 11th, 2010
Over the last few years, there has been a rise in the number of people opting for equity release. The main reason for this is that these schemes provide a financial boost for those who have retired. This income is usually paid by either a tax free lump sum or regular income & can be used for any purpose. But while equity release schemes can be beneficial, there are a few things that they can affect.
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The can have an impact on benefits – These benefits are state income such as pension savings credit, council tax benefits and pension credit which can all be affected by equity release schemes. In fact, drawing too much equity can result in a reduction of benefits. However, you can avoid this by having a certified equity release adviser such as Equity Release Supermarket run through the calculations regarding specific details.
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Compounded interest – Starting an equity release scheme when you are 55 and living a long fruitful life could result in lack of equity in the property later on. This is because interest is added to the amount, which unlike a conventional mortgage is paid off. Therefore, with the interest rolling up will lead to an ever increasing repayment on eventual sale of the property. The good news is that this can be avoided through the No Negative Equity guarantee which must be prevalent in order for the scheme to be a member of the trade body - Safe Home Income Plans (SHIP). They insist that any equity release scheme provider MUST ensure the amount owed is never more than the home value.
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A large lump sum – Most people prefer to take a large lump sum at outset of the plan. But you should be aware that the larger the initial amount, the more interest that will accrue in the long run. Fortunately, this can also be avoided if you consider a drawdown facility in the equity release schemes. This will enable you to take the equity release in smaller amounts as & when required. The benefit of this is that only as much as is required for the first 12 months need be taken. Consequently, less interest will be charged leaving a greater amount of equity for the future. This would not only benefit the plan holders as they will have more equity left in the property to potentially withdraw in the future, but also a greater inheritance for the beneficiaries.
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Following these three points can make equity release schemes much better for homeowners who are short of income or have lump sum capital requirements.
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If you have any questions on how equity release can affect means tested benefits or how drawdown equity release can benefit you please contact Mark on 0800 783 9652.
Alternatively, please email mark@equityreleasesupermarket.co.uk.
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Tags: drawdown equity release, equity release, equity release schemes, No negative equity guarantee, Roll up lifetime mortgage, SHIP
Posted in Equity Release | No Comments »
Wednesday, August 11th, 2010
Equity release is money you receive for your home without having to sell it. It is nothing but a value for your house which you receive in the form of tax free cash.
Equity release can be paid as one lump sum or on a more regular basis.
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Regular income
Cash which is received on a monthly basis is treated as regular income. This regular income can be used in a similar way in which you use your salary. This proves to be a beneficial option for retired people. They do not have to depend on anyone for their basic needs and can spend this extra income on leisure activities or by utilising a drawdown equity release scheme they can use it to provide additional payments in the future.
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Investment
The lump sum payment allows a person to use it as they choose. This money can be used for investment purposes of which the main one is in a further property. This could be to buy a caravan or a second property for rental or holiday purposes. More commonly it is being used to assist children to get on the housing ladder by way of gifting them the deposit.
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Financial security in old age
Equity release is a way to protect you financially in old age. A higher percentage of the value of your home is paid to older people. The equity release loan is paid only to the title owner of the property.
Tags: drawdown equity release, Home Income Plans, impaired life, income plans
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Thursday, July 29th, 2010
Gone are the days when you needed to sell your property to unlock the equity in it.
Equity release schemes now give you an opportunity to stay in your home while you can still financially benefit from it. You can utilise the value of your home as a means to receive cash. This can be in one lump sum payment, lump sum & drawdown payments or in the form of regular monthly instalments.
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This new income source can be used in many different ways and is becoming quite popular among people of retirement age. The increasing costs of everyday living expenses puts financial pressure on particularly the retired population.
A lack of finance in retirement can to prevent us from living comfortably on a daily basis. This is when equity release schemes can fulfil their potential in offering homeowners the perfect option to enhance their lifestyles & enjoy life.
You may want to carry out home improvements, lighten some of your financial burden or just spend some more time fulfilling leisure pursuits such as holiday breaks or even worldwide cruises. Equity release schemes enable you to live out all your dreams. The money you get from the equity release scheme can be spent in the way you want. Obviously, this is where independent equity release advice is important.
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People often want to release the maximum possible from an equity release scheme & invest the proceeds. However this invariably is not the best option.
With the lowest equity release interest rates around 6.5%, by taking a large release from the property in the current econmic climate, it would be impossible (unless excessive risk was taken) that one could obtain the same 6.5% return.
Therefore, it is not good advice to take a large tax free lump sum from an equity release scheme just for investment purposes.
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A more cost effective way of achieving this goal of increasing your income could be by a drawdown equity release scheme. This scheme would enable an overall cash facility to be provided by the lender. From this facility, an initial tax free lump sum can be withdrawn, leaving the unused facility with the equity release lender that can be drawdown over future years.
The advantage of this method is that interest is only charged on the money withdrawn; not on the remaining funds in reserve. Interest is only charged on this as & when additional funds are taken.
This reserve facility is therefore the solution to providing the income required. The funds can be withdrawn as ad hoc payments in minimum amounts of between £2000-£5000 depending on the equity release lender.
Therefore, depending on the annual income required, this amount can be withdrawn from the equity release drawdown facility meeting the income objective.
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Considerations while opting for equity release scheme
While planning to opt for an equity release loan, there are few important things you need to consider. The lender, via the legal process will first check that all your mortgage & secured loan balances are completely repaid. They will also check whether you are the owner of the property by checking the land registry records.
Moreover, a valuation of your property will also be conducted by an independent local surveyor. Your age is also a determining factor on how much equity you can obtain.
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If you want to live a stress free life after retirement, choosing an equity release scheme can be an excellent solution.
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Contact Mark on 0800 783 9652 to discuss your income options further or visit http://www.equityreleasesupermarket.co.uk
Tags: drawdown equity release, equity release, equity release schemes, income, lifetime mortgages
Posted in Equity Release | No Comments »
Sunday, July 25th, 2010
Equity release schemes are especially designed for older homeowners. These schemes offer a lump sum amount of money or a regular income against the value of your home. One of the best things about these schemes is that they allow you to live in your home for the rest of your life.
Another important feature about equity release schemes is that they offer a tax-free amount of money by unlocking the equity in your home. This means that you can spend the cash in any way you want without an income tax liability.
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How much money you can release against your home?
The lump sum amount of money varies from a minimum release of £10,000. The maximum release is determined by two factors: -
- Age of the youngest homeowner
- Valuation & type of property
If you want to know how much can you release as you can see the important factors are your age, house value and outstanding debt. Nowadays, most people use an online equity release calculator to know the amount they can release.
Click here to calculate your maximum release.
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Nevertheless, it is not always advisable to apply & release the maximum equity release possible.
In every equity release case, advice must be provided by a qualified equity release adviser such as Equity Release Supermarket. The reason for this is that equity release schemes are regulated by the Financial Services Authority & most lenders who offer such schemes are also members of SHIP (Safe Home Income Plans). These levels of protection are essential in guaranteeing quality advice to people over 55 years of age.
Equity Release Supermarket advisers would only recommend you take an initial amount that would be required initially for the first 12 months from application. This is to reduce the impact of the roll-up effect of the equity release scheme over the longer term. By taking the maximum release from outset & having no plans for its expenditure would only leave the excess funds languishing in a savings account. With today’s interest rates this would not be financially savvy as the rate on the equity release scheme would be 3%+ higher than that of the savings account!
A more cost effective way of releasing equity in these circumstances would be by a drawdown equity release scheme. Here a cash reserve facility is provided by the lender. From this, you can take an initial release depending on your first 12 months expenditures. The remaining reserve funds can then be withdrawn as & when demand is required.
By taking this equity release route would mean that less interest is paid as you are drawing down a smaller amount & then ad hoc smaller payments over the years.
This is much better financially for beneficiaries also as there is also potentially a lower balance thus resulting in a greater inheritance for them in the future.
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If you have decided to opt for an equity release scheme, you must consult an advisor who will help you fill in the documents. There are some factors which need to be considered before releasing the cash against the property.
These include:
- The homeowner must be over 55 years of age
- There should be little or no outstanding mortgage
- The property should be worth at least £70,000
Subject to this criteria being met then the next stages of the application process can be achieved & your equity release adviser will explain the forthcoming stages to complete the whole process.
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If you need assistance with equity release calculations, please contact Mark on 0800 783 9652 or visit the Equity Release Supermarket website by clicking here
Tags: drawdown equity release, equity release, equity release schemes, maximum release
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