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How A Drawdown Lifetime Mortgage Provides Insurance for the Future

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 mike@equityreleasesupermarket.co.uk

Live A Luxurious Life After Retirement With Equity Release Schemes

Wednesday, September 1st, 2010

Equity release is a financial product offered to retired homeowners who require a means of releasing equity to meet their requirements in life. For individuals who depend partly on pensions to meet their financial requirements, equity release may be a considered option to address any income shortfalls that may exist.

This is where new equity release schemes will allow people in their old age to enjoy life without any financial difficulties.

 

If you are over 55 years of age & looking for a solution to meet your financial needs, you should seriously consider equity release schemes. When planning to opt for equity release, it is worth seeking independent professional advice. Depending on your requirements, these qualified professionals such as Equity Release Supermarket, will be able to help you to get the best deal from the range of lenders at their disposal.

 

The equity release scheme enables you to get the exact amount you require, dependent upon your age & current assets. The amount that you will get through equity release will depend mainly on the age of the youngest applicant, valuation & the present condition of your property. This is why it is important to keep your property in good condition.

If your home is in an inappropriate condition, lenders may impose conditions on completion. This could range from a retention of some of the release until the specified jobs have been completed. Other lenders may not even proceed to completion until all work has been carried out. Finally, some equity release companies may not even insist works get carried out at all & can be lenient dependent upon the case proposition.

 

To enjoy a larger sum of money during your retirement, it is important to keep your property maintained. With equity release schemes, you can get the amount as a lump sum, via drawdown or in the form of a monthly pension. If you want to live a luxurious and comfortable life in your old age, an equity release scheme would be an ideal solution to opt for.

 

To discuss your equity release options, please call Equity Release Supermarket on 0800 678 5159

 

 
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