Posts Tagged ‘Drawdown Lifetime Mortgage’
Sunday, January 25th, 2015
Having been advising on Equity Release since the halcyon days of Norwich Union, I have seen a continual, albeit gradual decrease in the level of equity release interest rates. The latest news has it that Aviva will be aggressively reducing their interest rates today – Monday 26th January 2015 to an unprecedented lowest rate ever, starting from just 5.13%!
So what are the factors behind this interest rate drop, given the rest of the equity release companies trail so far behind Aviva in competitiveness?
History of Equity Release Interest Rates
Equity release interest rates historically don’t tend to move that regularly, or by very much. It tends to be market forces that dictate how competitively they wish to be & where they wish to be positioned in the market. Going back the early days of equity release schemes, particularly plans from Northern Rock (now Papilio) and Norwich Union (now Aviva), their early interest rates were in excess of 8%. However, comparatively mainstream mortgage rates were also higher at that time and therefore equity release plans were not considered as expensive as they look today.
Time to Consider Interest Rate Diversification?
However, the difference between mainstream mortgage rates and equity release interest rates is the fact that equity release schemes historically have a fixed interest rate for life. Residential mortgages don’t & therefore can be re-appraised frequently which enables the best interest rate to be achieved each time.
Perhaps it’s time that equity release providers took time to consider this fixed lifetime interest rate offering? Afterall, the reason that traditional equity release schemes have a fixed rate is to act as a safety net due to the compounding effect of interest as no payments are normally necessary, or permitted. This also aides the protection of their insurance policy, which is the ‘no negative equity guarantee’.
How Can Equity Release Lenders Reduce Interest Rates Further?
New Voluntary Repayment Plans from the likes of Aviva, Stonehaven & Hodge Lifetime accept repayments of upto 10%pa with NO penalty and therefore if managed correctly cancel out the potential compounding effect of interest. Therefore, would it not make sense for these lifetime mortgage lenders to offer a reviewable interest rate every so many years? A reviewable interest rate could have a bearing on the nature of early repayment charges where so many equity release companies use the unpredictable nature of government gilts as their barometer. Retirees are looking for greater flexibility these days and a change in structure could certainly assist.
Catering to the New Silver Surfer Generation
More retirees are becoming financially savvy, particularly those arriving at retirement still owning interest only mortgages. This crop of mortgagors have experienced the variances in interest rates & the different types of rates available during their mortgage years. For instance, is it not time for a standard variable equity release interest rate, or a tracker equity release interest rate? Why not, if the interest or upto 10% of the original capital is to be repaid each year, then why is it necessary to have a lifetime fixed interest rate?
If the equity release market is set to expand it needs further innovation & development of its equity release schemes. Therefore, should the forecast for future interest rates be historically low, then it would make sense to consider the options of tracker, discounted or variable interest rates. Perhaps the future of the no negative equity guarantee can be questionable given this has an effect of increasing the interest rate by upto 0.5%?
Why not have the option of choosing whether to include the no negative equity guarantee, or not. With that would come the choice of two representative interest rates; one including the guarantee & a lower interest rate without it. These options could all help to reduce the future interest rates of equity release plans & help the market move forward & expand.
A strong case in question for the optional inclusion of the no negative equity guarantee would be where retirees are committed to making repayments & managing the future balance of their lifetime mortgage scheme. Clearly advice of the consequences of not including this guarantee should always be provided, but we shouldn’t be treating the majority of equity release consumers with kid gloves. Equity releasers can themselves make informed decisions based on the facts & advice provided. As long as the adviser is giving quality impartial equity release advice then why can’t the industry open up & start becoming more diverse in its thought process & product innovation!
New Aviva Flexible Lifetime Mortgage Interest Rate
As stated earlier Aviva are to significantly reduce their minimum interest rate on their Flexible Lifetime Mortgage Plan. Equity Release Supermarket is able to obtain a lower interest rate than mainstream equity release advisers. This is set to continue from 26th January 2015 with the reduction in the minimum interest rate as calculated by the Aviva flex tool calculation. The lowest equity release interest rate with Aviva is determined by personal criteria, such as age, property value & also health.
Consider the following equity release scenario: –
Mr & Mrs Chambers are aged 67 & 64 respectively & own a property valued at £250,000 which is unencumbered. Unfortunately, Mrs Chambers had cancer last year and they now realised how important it is for them to enjoy their retirement. They wish to go on a cruise, carry out home improvements and release approximately £30,000 with access to a future cash reserve facility.
After conducting research with Equity Release Supermarket they were recommended the Aviva Flexi Plan with an interest rate of just 5.13%pa (5.33% representative APR). This recommendation was borrowing £30,000 & having a further cash reserve facility of £33,000 for possible future use.
Aviva’s Lowest Ever Equity Release Interest Rate To-Date
This 5.13% enhanced lifetime mortgage rate is the lowest ever equity release interest rate that any home equity release company has made available in the history of equity release & presents many opportunities for retirees to consider their future finances: –
- Those people with interest only mortgages – where lenders are demanding repayment as the end term has been reached & they are not prepared to extend can benefit from these interest rate reductions. By switching onto the Aviva Flexi Lifetime Mortgage Plan they could consolidate onto a mortgage for life, at a low fixed interest rate, thus enabling them to budget accordingly knowing the interest to be charged in the future.
- Existing equity release customers – who are on interest rates that are over 6%pa should consider whether to remain with their existing lender or switch equity release plans. By taking a lower interest rate would mean less interest charged & hence either a lower future balance, or less interest payments to maintain control over the balance. There are factors to consider such as potential early repayment charges & set up costs, however this is a calculation your Equity Release Supermarket adviser can arrange & analyse for you.
- Anyone over the age of 55 – who has been contemplating taking a release of equity, but maybe waiting for the optimum interest rate or occasion to apply for it. With the various lifetime mortgage schemes available now including interest only, drawdown & voluntary repayment schemes, the equity release market has never been so competitive.
So why have Aviva aggressively reduced their interest rates?
Word has it there are new lenders set to enter the equity release marketplace. With new names entering the market such as L&G and Santander, plus More2life have new funding available, Aviva are sure to find new competitors in their space. Perhaps they are trying to gather as much momentum & market share as possible now before they come under pressure?
We have already seen unprecedented movements in equity release interest rates so early in 2015. More2life’s Enhanced Lifetime Mortgage & Interest Choice plans have seen rate reductions, followed by Stonehaven’s Interest Select range in response to keep their market position above More2life. Whatever equity release 2015 has to hold its going to be exciting time and one for any future lifetime mortgage customer can benefit from with the lowest equity release interest rates ever seen.
Should you wish to request an Aviva Flexible Lifetime Mortgage quote & find out how low your equity release interest rate could go, please contact Mark Gregory on Freephone 0800 783 9652 or email me at firstname.lastname@example.org
Further information on equity release –
Compare Equity Release Deals | Equity Release Calculator | Ask Mark A Question
Saturday, March 22nd, 2014
Pure Retirement recently became the latest equity release provider to enter the lifetime mortgage market. Launched in January 2014, it signalled the re-emerging confidence & growing popularity in the equity release market.
However, it makes no sense for a new lender to enter the market without finding a niche for itself. So, over the past few months Equity Release Supermarket advisers have encountered practical experience of where the Pure Drawdown Plan has fitted in providing best advice scenarios. Here we help explain where we feel the Pure Retirement Plan wins, in an already competitive equity release marketplace.
First, the Pure Drawdown Plan in Detail
Before we enter the wheres & wherefores of how the Pure Plan fits in with equity release recommendations, let’s look at the Pure Retirement plan facts…
The Pure Retirement Drawdown Plan is the first offering from the new lender formed by funding assistance from equity release brokerage – Age Partnership. This follows the similar relationship that exists between more2life & Key Retirement Solutions and represents a growing trend where brokers have become equity release providers. This similarity is also evidenced from where the funding source is derived, in that Pure Retirement relies also on the same annuity backed insurer to give it the ability to fund its lending – Partnership Assurance.
The Pure Drawdown plan is a lifetime mortgage that starts later in life than most equity release schemes with a minimum age at commencement of 70. It’s aimed towards the higher end of the loan-to-value ratios without any medical underwriting, which the enhanced lifetime mortgage plans have the advantage of.
The starting percentage is 36% of the property value at age 70, which compares favourably with other high LTV products. Albeits not the highest maximum equity release plan out there, it has a neat trick up its sleeve with how it can still compete with these maximum lifetime mortgage plans. Details of how are explained later in this article.
As a member of the Equity Release Council, the Pure Drawdown Plan offers a free no-negative equity guarantee and 100% ownership of the home. Portability enables you to still move house once the plan has been set in force and the interest rate is fixed for life, launched at a reasonably competitive 6.74% monthly rate (7.1% representative APR).
The minimum loan is higher than most at £25,000, which is where Pure Retirement’s market lies and is available in England, Scotland & Wales.
This is a roll-up lifetime mortgage plan with the option of a cash reserve facility. Therefore, Pure Retirement will calculate the maximum release possible, from which an initial amount can be withdrawn. Any funds untaken, remain in a cash reserve held by Pure Retirement at no cost until needed in the future. Should it later be necessary to access these funds, they can be drawndown in minimum amounts of £5,000 with no further charges.
Where Pure Retirement Lifetime Mortgage Strengths Lie
As an independent equity release adviser, one of the most common reasons for client objection lies in the costs of implementing an equity release scheme. Here is where the Pure Drawdown Plan wins – set up costs!
Only one equity release company has previously offered a scheme whereby the standard terms dictate a cost effective route to market for any client taking out a lifetime mortgage, & that’s Partnership’s Enhanced Lifetime Mortgage. Some lenders will temporarily create pockets of time whereby a cashback exists or a reduced interest rate for a limited period, but these come & go.
However, Pure have created these features as a permanent fixture & all credit to them in seeing this gap in the market and understanding what the consumer requires. Afterall, many applicants want a release of equity to help them financially as they have limited funds in the first place. By asking them for more money up front, it makes the process more difficult for them to get the whole application underway. Pure Retirement alleviate these areas, both pre & post application stages, let me explain how and why.
Pure’s Set up Costs
Pure Retirement provide a two tier set up cost operation; one for equity release loans between £25,000 & £44,999, the other based on loans in excess of £45,000.
All equity release schemes will normally incur set up fees in four main areas – Valuation, application, solicitor & adviser charges.
Pure approach this differently in the sense they aim to cover the majority of costs; the more one borrows, the greater the help provided. For loans over £45,000 the cost is enhanced furthermore by them providing: –
- FREE valuation
- NO application fee
- Contribution of £600 towards legal costs
- Contribution of £500 towards the advice fee
Therefore, dependent upon how much the advice fee being charged is, which in the case of Equity Release Supermarket its £895; the net advice fee cost would only be £395. Bearing in mind we can source an ERSA equity release solicitor, for a reasonable £495 + VAT & disbursements (including home visit) the £600 contribution from Pure Retirement should cover this on a standard freehold property. This effectively means to implement a Pure Drawdown Plan with Equity Release Supermarket would only cost approximately £395!
Where Does the Pure Retirement Plan Offer Clients Best Advice?
As previously stated, Pure Retirement Drawdown Plan has been targeted to meet those clients looking towards a maximum equity release in order to assist them with their retirement needs.
A recent example of how the Pure Drawdown Plan can still offer a client a greater net amount, even though the maximum release is lower than a competitor, can be illustrated by a case I recently encountered: –
Pam, aged 79 was looking to move property & required a lifetime mortgage to help her with the purchase. She was in good health & needed the maximum release possible to not only help with the purchase but also the moving costs & legal fees.
The purchase price for the 3 bedroom flat in Cornwall is £140,000.
Pamela requires the maximum release possible which following extensive research would point towards the Just Retirement Lump Sum Plus plan which would release £64,400 at an annual interest rate of 6.75%. This comes with a free valuation, £600 application fee, legal costs & advice fee.
Looking further down our research table identifies the Pure Drawdown Plan with a 6.74% monthly interest rate. However, the maximum release Pure would offer would be a lower amount of £63,000. But upon delving deeper into this product & by analysing the charging structure it shows that the actual Pure Retirement net release could be higher.
Fee Type /Provider
| Just Retirement
Evidently, the Pure Retirement plan has £1700 reduced set up costs, compared to the Just Retirement plan. The next part of this calculation is then offsetting this £1700 advantage that Pure Retirement has against the £1400 extra that Just Retirement can release as their maximum.
The final result therefore shows that Pure Retirement will have a greater net release to Pam of £300 and therefore proceeds with the recommendation as the £300 would be more advantageous in her pocket.
The message therefore is never look at the top line maximum amount, but always to consider any incentives that may help improve the net offering.
Existing Equity Release Customers Looking for Additional Funds
Other areas where Equity Release Supermarket customers have already benefitted from the new Pure Retirement lifetime mortgage is under two scenarios: –
- Where they have an existing equity release plan & need further funds.
- If looking to obtain a lower interest rate, yet no lender can provide sufficient funds to enable the equity release remortgage
Following the routine check to see if any additional borrowings are available with their existing lender, it’s then our duty to research the whole of the market to see if any other equity release providers could assist.
One of the issues against switching equity release schemes is usually the set up costs that prohibit the transfer. Under the two scenarios, in the first the charges could swallow up any of the spare cash being targeted, and in the 2nd scenario the set up costs make any transfer non-profitable as these costs offset any future savings in interest.
Its therefore the case that set up costs can prevent future maneuverability with any home equity scheme.
This is where the Pure Retirement Drawdown Plan can come into its own with its lower set up costs. Under both scenarios, Pure’s reduced set up costs will help with the switching of equity release schemes. Under the 1st scenario it will lead to more funds being available to withdraw & secondly in obtaining a lower interest rate its helps bring forward the break-even point.
Set up costs are an important aspect in the consideration of accepting any equity release recommendation. However, your adviser should consider the whole picture and features necessary in your meeting your requirements. This is why any equity release adviser should be experienced, qualified and importantly independent too.
If you feel that the Pure Drawdown Plan could be of benefit to you, please contact Mark Gregory on 0800 783 9652 or email email@example.com.
Request Pure Drawdown Quote | Pure Product Specs | How Much Can I Borrow? | Contact Us
Wednesday, December 18th, 2013
During 13 years of giving equity release advice, one of the first questions I ask new clients is whether they receive any means tested benefits or not. It’s a crucial part of the advice process as a professional adviser needs to check what impact, if any, equity release might have on vital state benefits that they receive.
It’s also really important to find out the exact income of every client to check for potential means tested benefit entitlement. I’ve interviewed equity release clients who didn’t even realise their entitlement and thereafter have subsequently made a successful claim which has led to extra available income.
How do I check to see if I’m eligible for benefits?
I would strongly recommend anyone who is about to retire, or is already retired, call the pension credit Freephone number to check for eligibility on 0800 991234 to get their situation individually assessed. You can also click on the attached link: https://www.gov.uk/pension-credit-calculator to check your eligibility online.
Similarly, you should also call your local council tax benefit enquiry helpline number to check for council tax benefit. The telephone number will be on your last annual statement. Usually, if you qualify for pension credit you should also be able to get a reduction of some or all of your council tax benefit.
As a part of my recommendation process, I would fully assess your financial situation which would also include reviewing your means tested benefits during our meetings. As the initial consultation is free, I place no financial burden on you, so use my experience to the maximum & see if there are further entitlements you could claim.
Qualification rules and how much benefit can I receive?
The earliest age you can qualify for pension credit was aged 60, but this is gradually increasing to age 66 from 2020. For tax year 2013/2014 pension credit should be available if a single person’s income is less than £145.40 per week, or £222.05 for a married couple. Your savings can also impact your eligibility for pension credit and council tax benefit but the relevant agencies do ignore the first £10,000 of savings that you hold. Savings between £10,000 and £16,000 can still mean that you receive some benefits but savings in excess of £16,000 normally mean you’re not entitled to any benefits.
From age 65 you may also be entitled to savings credit of up to £18.06 for single person and £22.89 for a married couple. You might be eligible for this as long as your income is less than £190 per week for a single person or £279 per week for a married couple.
Will I lose my benefits if I take a release of equity?
With advice from a skilled adviser at Equity Release Supermarket, you shouldn’t normally lose any benefits. If you’re already receiving means tested benefits and you’re thinking of equity release it’s best to have your situation analysed by finding a qualified equity release adviser. I also suggest that you contact the pension credit and council tax benefit helplines to discuss your situation. However, the rule of thumb is that if after releasing equity your savings are less than £10,000 your benefits shouldn’t be affected. Equity Release can be carefully planned to ensure that this this remains the case.
Let’s look at recent clients I’ve met and provided lifetime mortgage advice to:
Brian was aged 65 and his home was worth £200,000. He wanted to release equity of £20,000 to buy a new car and bathroom but he was in receipt of pension credit and council tax benefit. As Brian was spending the money straight away there wasn’t any changes to his benefits, as he only kept his existing savings of £5,000 in the bank. He released £20,000 on the Aviva Lifestyle Flexi Plan and also had another £23,500 available in the reserve facility we created by recommending a drawdown equity release lifetime mortgage. Again, this money in his reserve doesn’t impact his benefits as it falls below the £10,000 limit imposed. He can thereafter take small amounts of at least £2,000 whenever it’s needed. This will mean that his savings are still kept below £10,000 and therefore not affect his benefits.
Terry & Margaret were both aged 67 and their home was worth £180,000. When they retired 2 years ago, Terry received a tax free lump sum from his pension which paid for a new car, a conservatory and they had a couple of holidays, but were left with less than £2,000 in the bank. They were in receipt of pension credit and council tax benefit. They could manage on their income but wanted funds to pay for a new kitchen costing £5,000 and wanted money for holidays over the next 10 years. Although they could release over a one off lump sum of around £50,000 from various equity release providers this would have proved catastrophic as they would have lost their entitlement to their much needed benefits. This is where careful planning by an equity release adviser can help. Instead they took out a drawdown lifetime mortgage with an initial loan of £10,000 to pay for their kitchen and for 2 holidays. They were also able to set up a reserve of capital of £41,000 with New Life and will be able to release regular withdrawals of at least £5,000 to fund their future holidays. This doesn’t have any affect on their benefits.
Additional lenders offering drawdown equity release schemes are Hodge Lifetime whom allow further withdrawals of £1,000, with Just Retirement, LV= and Aviva having a minimum of £2,000 cash reserve withdrawal limit.
Please remember that state benefits rules can change at any time. Special rules apply to making gifts with equity release. The benefit figures above relate to tax year 2013/14 & maybe subject to change.
How do I get more information on equity release and state benefits?
Whenever you consider equity release it’s important to get a fully authorised equity release adviser to carefully check your situation regarding means tested benefits, as well as checking overall suitability of the schemes.
Here at Equity Release Supermarket, we’re able to help you with this during our meetings. We do not charge for your initial consultation which can be conducted either in the comfort of your own home or over the telephone, to suit.
Please feel free to contact myself if you have any queries on equity release schemes and how they could affect your state benefits. My name is Mark Rumney & can be contacted on mobile 07957 974826 or email firstname.lastname@example.org
Sunday, October 20th, 2013
With an ever increasing ageing population, more and more retired homeowners find that their properties are becoming too big to live in. In conjunction with this another significant financial burden is the ever increasing energy costs associated with heating larger properties.
This could mean that they make a choice whether to ‘eat or heat’. An old cliché yes, but a very apt and true one.
Specialist housing, or retirement apartments have been around for more than 30 years and just 1% of over 60’s are estimated to live in these types of properties. For most, moving to a retirement property can ease the pressure of excessive bills, plus give a new lease of life and community spirit.
For others though, a retirement apartment could be seen as not being financially prudent or comes with some uncertainty for a number of reasons:
- Location: Specialist retirement apartments may be more expensive than the value of your own home.
- Service charges: These are payable annually, and in line with inflation, they tend to be an increasing sum.
- Pension income: May suddenly be reduced upon the demise of an occupier.
If you already live in a retirement apartment, you may have the concern that with increasing costs and service charges, you may not be able to maintain your cost of living, and have the worry of potentially needing to sell.
Did you know however, that there could be a solution?
As an Equity Release Specialist, I have over the last 12 years been able to provide homeowners with an alternate way of being able to purchase a retirement apartment or to raise funds to cover on-going costs and services if you already reside in one.
Firstly, if you are looking to purchase a retirement apartment, by releasing equity, you could raise the shortfall between the sale of your current home and the purchase price of your proposed new property. The equity release could be raised on your new property and would complete at the same time as your sale and purchase. The equity release application could also be on a roll-up, or even interest only lifetime mortgage basis to fit in with one’s inheritance requirements, or household budget.
Secondly, if you are already residing in a retirement apartment, you could have the option of releasing equity to cover your annual service charges. This could be by way of a lump sum lifetime mortgage which additionally has the option of a cash drawdown facility. This would particularly suit those looking to take annual withdrawals to supplement their income & cover the costs of maintaining residence in their retirement home. The drawdown facilities with many equity release schemes can allow as little as £1000 withdrawals at a time to suit those not wishing to withdraw too much.
Case study 1
Mr & Mrs F lived in the West Midlands, but had always dreamed of retiring to the coast and live out their remaining years in the peace and tranquility of a property with a sea view. Their 3 bedroom house was worth £175,000.00 and they wanted to downsize. Mr F was not in particularly good health and he wanted to make sure that Mrs F didn’t have the financial worry or burden that their large home would have if he pre-deceased her. Downsizing though didn’t necessarily mean down-pricing. The purchase price of their dream apartment by the sea was £200,000.00, meaning a shortfall of £25,000.00 plus the associated moving costs.
By giving Mr & Mrs F full impartial equity release advice and recommendation, I was able to offer them a Lifetime Mortgage lump sum through a specialist interest only lifetime mortgage lender for £35,000.00. This allowed them to cover both the £25,000.00 shortfall to facilitate the purchase, plus £10,000.00 for moving costs. Overall, this not only assisted with the purchase of their retirement apartment by the sea, but also enabled them to live there in financial comfort.
Case study 2
Mrs S was already living in her retirement apartment when there was the untimely demise of her husband. Now just in receipt of her own pension, Mrs S was concerned that she would not be able to cover the on-going living expenses.
The service charges amounted to £2,704.00 per annum (£52.00 per week) and being on a reduced pension, Mrs S would struggle to maintain her standard of living plus pay her normal household expenses. Being a specialist in equity release, I was able to advise Mrs S of her options, including a full benefits check.
Mrs S was just over the threshold for benefits, therefore I could look at the option of a drawdown lifetime mortgage. Mrs S released an initial amount of £10,800.00 to cover four years’ service charges, leaving her with a remaining cash reserve of £21,600.00. The drawdown facility allowed Mrs S to release sufficient funds each year thereafter to pay her service charges on an annual basis.
How Equity Release Supermarket can help…
Over the years, I have helped many clients in the same or similar situation and have such pride in doing the job I love and being able to assist purchasers and homeowners alike. Being independent lifetime mortgage advisers Equity Release Supermarket have vast experience in assisting its clients with retirement apartment purchases or releasing equity on them.
In addition we have access to the best equity release deals including cashback, free valuations and specially reduced interest rates. We always offer a free initial consultation, to see whether we can assist the over 55’s with retirement mortgages and financial help.
If you would like more information on how these equity release plans work, please contact Marcelle on 0800 783 9652. Alternatively, please email email@example.com
Monday, October 14th, 2013
During my 10 years as a Lifetime Mortgage specialist I have come across a plethora of reasons to make genuine use of equity release schemes. There are the most obvious and popular reasons such as remortgaging and debt repayment; but there are also some that aren’t so obvious.
Equity Release Case Study #1
One that springs to mind is a case whereby I helped an individual back in 2007. This was a 74 year old male who lived in South Cheshire. The situation was terribly sad, but not without hope and possible happiness on the horizon.
His only child had been his son, who had unfortunately died a few years previous in a car crash. To compound matters further he had sadly lost his wife within the last 6 months of our meeting. Their greatest pleasure when they were together, was to go on cruises around the Mediterranean and Caribbean which they could fund from their regular income.
Following on from these unfortunate events, he re-evaluated his retirement plans with a positive outlook. He therefore decided that his life would now be split between 6 months at home and 6 months cruising, and it was now just a case of being able to finance his revised situation.
He decided he would like to raise a total of £150,000 by releasing equity after calculating that figure would cover his costs for the next 10 years.
I therefore arranged a flexible drawdown lifetime mortgage, with just an initial £15,000 and a large enough cash reserve facility that he could then draw upon, as and when required. This suited him perfectly and for a couple of years at least, I got postcards from around the world. The drawdown lifetime mortgage plan was his ideal plan and met his requirements not only now, but also into the future when further cruises and retirement expenses would be required.
That’s what we, at Equity Release Supermarket call an aspirational equity release case. That is one that helps someone to attain their goals in life and we are only too happy to help advise on such cases.
The other side of the coin is a needs based equity release case. This is where there is an urgent need to raise equity in order to stave off potential severe financial repercussions such as mortgage repayment, insolvency or even bankruptcy.
Equity Release Case Study #2
From my experience, such a case was with a 68 year old lady in North Derbyshire who had accumulated personal loans and credit card debts amounting to over £80,000. The strange part was that these were from gambling regularly on the Canadian Lottery of all things. Her family had contacted us to see if we could help which indeed we could. However, in order not to fall into a similar trap, I advised the family to remove or better still destroy her credit cards.
In circumstances like this, equity release schemes can act as an almost immediate relief from stress and worry and several times over the years I have had a letter from the client’s family. This provided me with personal satisfaction as they were thanking me for my considerate actions and telling me how not only does the client feel and look better, but I may have also added another few years to his life expectancy.
Being an lifetime mortgage adviser can sometimes transform people’s lives for the better and is one of the many reasons that I feel so passionately about the equity release marketplace I work in.
These are just two case studies whereby I have been able to assist retirees with their financial issues in retirement. Have it be known they are two relatively extreme cases, but I use them to show the diversity of reasons for using lifetime mortgages.
The reason I have been exclusively involved with equity release schemes for the last 8 or 9 years and intend to stay so until I retire, is because of the instant reaction to either attain the wherewithal to achieve ones goals, or to remove the stress and strains of financial problems in retirement.
About the author
Barry Adnams is the author of this article. Barry is one of the most experienced equity release advisers at Equity Release Supermarket, having previously worked as an adviser & manager at NatWest/Royal Bank of Scotland Equity Release.
Having worked with RBS Equity Release in 2005, Barry has much experience in dealing with retirees financial situations and is fully aware as to the importance that a release of equity can be. Barry endeavours to meet all his clients face-to-face, if not only for a cup of tea! Dealing with his many clients this way enables Barry to discuss both the pros and cons of equity release and is always open to family members being present at such meetings.
If you wish to discuss anything in relation to Barry’s articles or any general questions about lifetime mortgage or home reversion plans, then please contact Barry Adnams at Equity Release Supermarket, on 07989 281108 for a free initial consultation.
Alternatively, Barry can be contacted by email at firstname.lastname@example.org.
To evidence the quality of Barry’s advice & feedback from his clients please check his testimonials on the Feefo link on the homepage (bottom right corner).
Thursday, July 11th, 2013
The most common research feature that customers consider with regards to equity release schemes is the interest rate.
Over the past 12-18 months with increasing competitiveness in the equity release market, interest rates have reduced significantly & are now lower than 6%.
However, today Equity Release Supermarket have secured funds with one of the leading equity release companies to secure a fixed rate deal for its customers that is just 5.48% (5.6% APR).
The equity release provider is Just Retirement.
This is the first deal of its kind below 5.5%, whereby an equity release company can offer a single priced product for anyone between the ages of 60-75. This limited tranche of funds is available on a drawdown basis, with a minimum initial withdrawal of £20,000.
Just Retirement have been in the equity release market for 7 years now & provide a drawdown lifetime mortgage plan which enables an overall cash reserve facility from which you can take withdrawals as & when they are required. This flexibility means that you are only charged on the monies actually withdrawn, not on any funds left in the reserve facility.
The minimum withdrawal from the cash reserve is just £2000 & once the equity release plan has been set up, there are NO further charges for withdrawals. Properties situated in England, Wales & Scotland are eligible with a minimum property value of £70,000.
Additional perks of this limited offer is a FREE valuation & £500 cashback payable on completion. Therefore, there are no upfront fees to submit this Just Retirement application through Equity Release Supermarket.
To request a Just Retirement quote on the new 5.48% interest rate please click here or call one of the Equity Release Supermarket team on Freephone 0800 678 5159.
As stated these are limited available funds at this rate so please do not hesitate in contacting us.
Wednesday, March 27th, 2013
Equity release schemes have risen in the popularity stakes over the past 12 months. With regular articles in the tabloids, and increasing government awareness, lifetime mortgages have certainly raised the bar. But how does equity release actually work in the whole scheme of things, and why has it become such topical subject matter for those looking for a comfortable lifestyle in retirement?
Equity release workings
Primarily equity release is available to home owners where the youngest person on the deeds is at least aged 55. Equity release works by allowing eligible people to raise tax free cash from the equity tied up in their home. The amount that can be released is based on an age-related ascending percentage of the value of the home. In other words, the older you are, the more you can raise!
For example a single person in good health, aged 65, with a property value of £250,000 could raise a maximum of 30% of the property value. This would mean a maximum equity release of upto £75,000 with Aviva.
Even better, is the fact there are now impaired life schemes that offer ‘enhanced’ rates to people who are not as fit and healthy as they used to be and these schemes increase the percentage that can be drawn.
Therefore, if the same person was a smoker with high blood pressure, having diabetes & a history of heart attacks could now release upto £115,500 on the Partnership enhanced lifetime mortgage scheme.
Popular uses for equity release
The money raised from any equity release scheme can be used for any legal purpose from clearing credit card balances and existing mortgages, to helping children or grandchildren with deposits to climb onto the property ladder. However, many would be treating themselves to some lifestyle indulgences such as a new car, world cruise or home improvements.
Today’s equity release schemes
The modern format of Equity Release started in the mid 1990s with Hodge Lifetime (part of Julian Hodge Bank), Norwich Union (now Aviva) & Northern Rock (now Papilio UK) with a simple roll up lifetime mortgage.
Today there are three basic equity release schemes:-
1) Roll up Lifetime Mortgage
This type of scheme has a few variations but basically the borrower takes an initial tax free lump sum, makes no monthly payments and the accrued interest is added to the loan and compounds annually.
The main variation to this is the “drawdown lifetime mortgage“ scheme. This is where only the immediately required amount is drawn down and a reserve cash facility is then offered with the remainder. No interest is accrued on this drawdown facility until it is taken in the future. The advantage here by taking it in smaller amounts is that interest is compounded at a much slower rate, than if it had be taken all at once.
Another variation of a roll up plan is offered through Hodge Lifetime on a roll-up basis. Hodge’s flexible repayment plan has an option to repay up to 10% of the original amount borrowed annually without any early repayment charges. Hodge also offer a unique ‘downsizing protection’ option whereby after five years, if the property is then sold and the owner moves & downsizes house, then no early repayment charges apply. A great solution for many who cannot sell now, but may do so in the future.
2) Interest Only Lifetime Mortgage Plans
There are two lenders currently offering this type of interest only scheme – Stonehaven and more2Life. Both schemes are fairly simple whereby a lump sum is withdrawn and the monthly interest is paid in order to maintain the balance outstanding level throughout the term.
This method has proved appealing to parents who are keen to minimise any inheritance reduction for their children. In recent times, since the withdrawal of the Halifax Retirement Home Plan lifetime interest only mortgages have become increasingly popular. Both these Equity Release Interest Only schemes have the added safety feature that should the monthly payments become too much (one applicant dying and their pension income reducing) then it can revert to a roll up equity release plan, where no payments are required thereafter.
3) The Home Reversion Plan
This is now the least popular type of equity release mortgage. Nevertheless, it can prove to be the best advice in certain scenarios. The workings are that the homeowner(s) must have a minimum age of 65. They have the option of selling part, or all of their property to the reversion provider and then lives in that property, usually rent free, for the rest of their life. In truth, this is usually only appropriate when there are no beneficiaries to the estate, or they wish to leave a guaranteed percentage of the final value of the house to their children.
Home reversion schemes only account for less than 5% of the market these days. The market has seen a few withdrawals from the market by lenders such as Aviva and Retirement Plus. The three remaining home reversion providers are Hodge Lifetime, New Life & Bridgewater.
About the author
The author of this article is Barry Adnams, who is a senior equity release adviser at Equity Release Supermarket.
Barry is aware of what a monumental decision taking equity release can be. He is a traditional adviser that would always advocate a home meeting with family involvement. Barry offers an initial cost free ‘face to face’ appointment and likes to include as many family members as possible to be present to discuss whether taking equity release is the right option, or not.
If you want to benefit from the experience Barry has to offer and understand how equity release works further, then please contact Barry Adnams at Equity Release Supermarket, on 07989 281108 for a free initial consultation. Alternatively please email email@example.com.
Thursday, March 14th, 2013
Suddenly you’re approaching retirement and you’re left wondering – ‘where did the years go?’
Realisation is dawning on you all too clearly that from hereon in you will be reliant on a fixed income, your savings may start diminishing and your future anticipated costs are anything but guaranteed!
The question therefore is how do you protect yourself & family from those unforeseen costs that might suddenly arise? Well, there’s good news and bad news, and also a possible solution….so please read on.
Firstly, the good news.
The population of England and Wales is living longer than before and the most common age at death in 2010 was 85 for men and 89 for women, compared to 77 and 84 respectively in 1980. Thirty years ago there were 2,280 centenarians, today the figure is 11,610. Indeed this trend is set to continue and we are entering the age of the super centenarian (110). That’s the good news!
Now, for the bad news.
The basic state pension is currently £107.45 per week increased each April by the highest of either the average growth in wages, the Consumer Price Index or 2.5%. Yes, the new flat rate of pension of £144 per week will be payable from April 2017, but not for those already drawing the state pension.
And what happens to a surviving spouse or partner when they are widowed? Just the basic state pension and possibly the bereavement allowance up to £106 per week for the first year depending upon National Insurance contributions and the age of your spouse on death. Added to this is possibly a reduced private or occupational pension for the surviving spouse (usually the widow) if you are lucky enough to have contributed to a pension plan during your working lives.
So how will you cope with the cost of home improvements, car repairs, increasing utility bills, let alone any care costs? And how do you provide for the financial security of your spouse after you have gone? A widow could easily have in excess of a decade to support herself on a reduced income.
The Possible Solution.
This article might have given you the impression that my job is to go around depressing people, but in reality my job is to ensure that my clients are fully aware of how they can use their major asset – their home, as a form of insurance against future financial difficulties.
Most people are familiar with a mortgage. A Lifetime Mortgage applies the same principles, however instead of running for a fixed term, will actually run for the rest of your life. It therefore allows you to borrow until the remaining owner dies or goes permanently in to care.
Types of Lifetime Mortgage
The most common equity release plan is on the roll-up lifetime mortgage basis, whereby NO monthly interest payments are required and the full repayment of the mortgage is made from the sale of the home on the last survivor’s death.
However, with the latest innovation in the equity release market, more lenders will now allow you to pay off the full, or even partial monthly interest payments if you want to keep the eventual loan lower than would otherwise have been on a roll-up basis. The interest only lifetime mortgage provides a flexible option to carry into retirement and can now be obtained on a drawdown basis with more2life.
All these Lifetime Mortgages are portable if you want to move house in the future and, if leaving an inheritance is important to you, you can protect a percentage of the eventual sale proceeds of your home. All these lifetime mortgages provide a guarantee that you would never leave a debt to anyone by way of ALL lenders providing a ‘no negative equity guarantee’.
The Drawdown Lifetime Mortgage
The major attraction with a Lifetime Mortgage is the “drawdown” option. This feature will provide you with a lifetime borrowing limit but does not commit you to borrowing the whole facility immediately. The drawdown lifetime mortgage was therefore borne with flexibility in mind.
Before drawdown schemes became available from the likes of Prudential, Just Retirement & Hodge Lifetime, customers only had the lump sum option. Given this cash amount needed was to last them at least 3-5 years, many decided to opt for a larger amount than would otherwise have been necessary. Languishing in a bank account & receiving less interest than paying on the equity release scheme was not best advice. Hence, the introduction of the drawdown equity release plan enabling retirees to take a lower initial sum, but taking extra funds in the future whenever they required.
As an example, a husband and wife aged 78 and 72 with a property valued at £250,000 could have a maximum loan limit of £52,500 but only start with the minimum loan of £10,000.
Interest would only accrue on the initial £10,000 loan and the balance of £42,500 would be readily accessible if they needed it and could be taken in stages. This is an excellent way of providing security for future unforeseen expenditure and would be available for the surviving spouse to use should he or she be alone and on a reduced income.
In should be noted that certain equity release companies cannot guarantee the drawdown reserve facility for life. Companies such as Aviva do retain the right to withdraw the drawdown facility under certain major events which would render them unable to fulfil their drawdown requirements. However, there are still companies available that will guarantee the reserve facility. By opting for the guarantee, you may pay a slightly higher interest rate, nevertheless you may feel more secure knowing these funds are available for a minimum of 15 years ahead. With living in such uncertain times, this could be a blessing.
This ”Lifetime Mortgage Drawdown” option, which only commits you to borrowing a minimum of £10,000, is sensible insurance for the future and if you would like to discuss the matter in more detail then please do contact myself – Mike Vicary on 07795 195302 or email firstname.lastname@example.org