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Posts Tagged ‘Enhanced Equity Release’

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

Thursday, February 26th, 2015

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

How Your Medical History Can Enhance the Maximum Equity Release

Saturday, November 15th, 2014

Enhanced lifetime mortgage lifestyle questionnaire

While equity release schemes have been available for many years, the concept of the enhanced equity release seems to have been a more recent addition. However, the history of the impaired equity release has been around for almost a decade.

 

Companies back then such as Partnership & Hodge did offer enhanced or impaired life home reversion schemes. In fact Hodge themselves did have an enhanced lifetime mortgage that was withdrawn only pre credit crunch era. These plans were not sold a great deal and their impact was minimal.

 

More recently enhanced lifetime mortgages have seen a resurgence in popularity as they have been redesigned & improvements made to the underwriting process. Enhancement to an equity release mortgage means that the amount of equity available to you can be increased based on your current or pre-existing health conditions. It works similar to the impaired rates offered from annuity providers whereby based on a medical questionnaire, the lenders underwriters will assess the maximum equity release available.

 

Equity Release providers who currently offer Enhanced Lifetime Mortgage rates are:

  • Aviva
  • More2Life
  • Just Retirement
  • Partnership

Aviva equity release offer 2 plans; the Aviva Lump Sum Max offers a higher loan amount if you qualify for impaired terms. Alternatively, you could benefit from being charged a lower interest rate on the Aviva Lifestyle Flexible Option, with rates starting as low as 5.63% (5.7% representative APR).

 

More2life & Partnership offer a lower qualification threshold than Aviva for qualification on their enhanced lifetime mortgage schemes. Where Aviva offer one enhanced lifetime loan-to-value ratio, More2life & Partnership provide different levels of maximum release based on how serious the impairment is.

 

Just Retirement being specialists in the enhanced annuity market take a more scientific approach & will consider more illnesses including COPD. Their actuaries will individually assess each Lump Sum Plus case to determine the maximum equity release available.

 

What illnesses qualify for an enhanced lifetime mortgage?

 

Most of the impaired health conditions, which can qualify for enhanced terms, are similar with all of the above lenders and include-

  • Height and weight
  • Smoking details
  • High blood pressure
  • Heart attack
  • Diabetes
  • Stroke
  • Angina
  • Cancer
  • Parkinson’s Disease
  • MS
  • Early retirement due to ill health
  • Even whether prescription medication is being taken

The amount of extra money that you can release depends on three factors; age of the youngest applicant, the value of the property & which conditions you have & the level of severity of each impairment.

 

You may simply qualify for an enhanced lifetime mortgage based on your height and weight which is represented by your BMI (Body Mass Index). Typically, the greater the number of conditions you have, the higher the maximum equity release loan amount that is available.

 

What are the qualifying criteria for an enhanced equity release?

 

The minimum age is 55, which out of the four equity release companies only Aviva will accept and additionally there is no maximum age. Joint life customers can also apply although it’s usually the health of the younger person which affects any enhanced rate. The minimum property value can be as low as £60,000 from More2life while properties must be located in England, Scotland & Wales with Aviva also lending in Northern Ireland. The lowest enhanced equity release available is £10,000 with no upper limit from the likes of Aviva.

 

How much more tax free cash does enhancement provide?

 

A recent client of mine, age 69 had a property valued at £250,000. Based on standard terms he was able to release a maximum equity release loan of £86,250. However, he suffers with high blood pressure and diabetes. Based on his ill-health & completion of a health & lifestyle questionnaire, the loan amount was increased to £104,500 by More2Life, so he was able to release an extra £18,250.

 

He set the More2life enhanced lifetime mortgage plan on a drawdown basis. This enabled them to release an initial £30,000 and still leave a reserve facility of £74,500 with More2life which he can access in the future without incurring further fees. This meant he has the flexibility of a drawdown lifetime mortgage but with the benefit of an enhanced drawdown facility.

 

Will I need to have a medical?

 

The good news is that you won’t have to attend a medical to qualify for enhanced terms. Lenders ask you to complete a health & lifestyle questionnaire and sign to confirm that your medical details are correct. Following submission of the equity release application, each lender may simply write to your doctor to confirm that your conditions are accurate, so that you qualify for the best terms possible.

 

If you are a smoker, they may ask you to undergo a simple non-invasive test and require you to confirm your consumption and the extent of your smoking habit. The test, which they arrange and pay for, is carried out by a qualified nurse in the comfort of your own home.

 

How do I find out if I qualify for enhanced terms?

 

You should always to seek advice from an independent equity release specialist. As part of the process of checking whether equity release is suitable for you or not, we will always ask clients for details of their medical history to ensure that we can tailor any advice to their fit their circumstances. At the end of our initial meeting we would then conduct research from the whole of the equity release market to find the most suitable plan. If you do qualify for an enhanced rate, we can then produce an equity release key facts illustration to explain how the lifetime mortgage works.

 

Where can I get more information?

We have information on all the enhanced products in the compare equity release deals section of our website along with the useful enhanced equity release calculator.

 

If you wish to speak directly with me, please feel free to contact me direct on 07415 275669 or email simon@equityreleasesupermarket.co.uk for further information. There’s no obligation and any information you provide is confidential.

Now Aviva Accept Voluntary Repayments – Does this Change the Future of Equity Release?

Tuesday, May 27th, 2014

Aviva equity release voluntary partial repaymentsAviva equity release plans have proved the most popular form of lifetime mortgage scheme over the past 15 years.

The reason for their popularity has been down to a combination of brand name, simplicity and the fact that Aviva have regularly provided the lowest equity release interest rates.

 

However, during that time there has been a cloud hanging over their lifestyle flexi mortgage range and that is the issue over the maximum early repayment charge & the lack of a partial repayment facility. It’s always been a case of all, or nothing with regards to paying off Aviva’s equity release schemes – now we have a choice.

 

Aviva – time for change

In the past few weeks Aviva have bravely taken steps to alleviate these issues with some bold amendments to their lifetime mortgage range. In fact the impact these changes could make, will dramatically alter the way equity release schemes will be used & managed in the future. Other equity release companies will undoubtedly take note of these new features & it can only signal the start of further innovation in lifetime mortgage industry.

 

Aviva have introduced three new approaches to equity release: –

  • new voluntary repayment features can be used to actually clear the equity release loan over a set number of years
  • Aviva apply a different approach to enhanced equity release rates by actually reducing the interest rate on offer (see later article)
  • An early repayment charge exemption can be applied on first death for any new joint equity release lifetime mortgage (see later article)

 

Why Aviva needed to up the ante

Monday 28th April heralded the start of swinging changes to the Aviva Lifestyle Mortgage range. All Aviva’s new equity release applications from this date forth would have the ability for partial repayments to be made back to Aviva.

 

However, from our company perspective during 2013, Equity Release Supermarket had seen its share of applications move significantly towards the Hodge Flexible Lifetime mortgage range. This has been due to Hodge Lifetime’s two pronged attack on becoming the most popular & flexible lifetime mortgage product. Their innovative move towards being able to repay upto 10% of the original capital borrowed & the ability to downsize after 5 years & repay the loan with NO penalty has captured a large market share.

 

Aviva has now responded to the popularity of the Hodge Flexible Lifetime Mortgage plan by matching the 10% repayment option & additionally providing more beneficial features!

A new dawn for the equity release market has started.

 

How does the Aviva Voluntary partial repayment option work in practice?

From inception of the new Aviva equity release plan there is the inherent ability to make repayments of an ad-hoc nature back to Aviva. Aviva do have a cap of 10% of the original capital borrowed that can be repaid in any one year. Additionally, the earliest date that the first repayment can be made is 12 months from the commencement date of the plan. So some forward planning needs to be made & this ideally would have been made with the involvement of your equity release adviser at recommendation stage.

 

Consideration needs to be borne in mind that interest will be added to the plan in the meantime for calculation purposes. For example, if a sum of £40,000 equity was initially released at an interest rate of 5.68%, the balance before any repayment could be made would be £42,272.

 

This is where the first decisions on how much to pay back need to be made, and there are three options available:-

  1. If only a fixed budget is available, then a contribution towards the interest accruing could be made. Should this be less than the annual amount of interest charged, then the balance will still increase, albeit at a lower rate than would otherwise have been should nothing have been repaid.
  2. Should a level future balance be the choice moving forward, the sum of £2,272 could be annually sent back to Aviva, thus reverting the balance back to its original starting point of £40,000. This process could theoretically continue infinitum until the plan ends, which would be upon death of the last borrower or them moving into long term care. The balance would always flicker between these two figures, dependent at what point the repayments of £2,272 were made.
  3. If total repayment of the £40,000 is required, then a repayment strategy could be put in situ which would see this whole amount repaid over a set number of years. Dependent upon how much is initially borrowed & assuming maximum repayments of 10%pa can be maintained for the duration, Equity Release Supermarket can calculate at what point the plan can be fully repaid with NO penalty!

 

As an example Equity Release Supermarket have calculated someone borrowing £40,000, on the popular Aviva interest rate of 5.68%pa, & repaying the maximum £4,000pa could repay their Aviva lifetime mortgage shortly after the end of the 16th year.

Could this be classed as the first capital & interest equity release mortgage?

 

Please contact us on 0800 678 5159 for your personalised Aviva repayment calculation or click this link.

 

How do I physically make voluntary repayments back to Aviva?

A reminder to make repayments will begin with the receipt of your first annual Aviva equity release mortgage statement. This will evidence the amount of interest that has been added to your plan. It is at that point that the first repayment can be made back to Aviva. The question is how much to pay & this will be down to an individual’s personal preferences.

 

Aviva have cleverly side stepped the issue of MMR (Mortgage Market Review) here. Whereas companies such as Stonehaven & more2life have had to adapt their interest only lifetime mortgage process to the new MMR regime, Aviva due to their ad-hoc approach to repayments have avoided the MMR obstacle. Regular payments cannot be set up to repay the Aviva equity release schemes. Although Aviva do permit upto 4 payments each year, subject to a minimum amount of £500, the repayment process has to still be managed through their head office.

 

This repayment process would initially involve a phone call to the Aviva offices advising them of the fact a repayment is due to be sent to them. In reply they will provide a verbal form of quote which acts as confirmation. This can be confirmed in writing to you & optionally your adviser aswell so they are aware of your intentions.

 

The next step would be to send the money which can be in the form of a cheque, credit or debit card or a bank transfer for which Aviva will provide their details & reference number to track. They will not accept payments without this process having been accomplished, or contact being made beforehand. In fact they could return the funds should this process was not followed.

 

Important repayment points to note

As previously stated, repayments can only commence after 12 months from inception of the loan. However, Aviva have imposed further 12 month conditions on when repayments can be made following certain events: –

 

  1. Following withdrawal of cash funds from the drawdown facility of the flexible lifetime mortgage
  2. Should any additional borrowing be taken in the future

 

In both situations, no repayments can therefore be made for 12 months following these two events also.

 

Additionally, the same applies in reverse;

Should a customer have made repayments and has an available cash reserve under their drawdown plan, they cannot gain access to the reserve or additional borrowing until 12 months following their last repayment has been made.

Aviva may consider requests for a further release of equity in exceptional circumstances outside of that rule.

 

These rules are effectively to prevent to the to-ing & fro-ing of cash funds within the plan which would undoubtedly have made the Aviva equity release plans unmanageable and unprofitable.

 

Functional planning ideas for managing voluntary repayments & retaining a cash reserve

Although it’s still early days in the life of the new flexible repayment options, some ideas on managing the Aviva voluntary repayments have already sprung to mind.

 

Unlike Hodge Lifetime, Aviva do not impose a £10,000 lower capital threshold by which no further repayments can be made without penalty. In fact Aviva will allow the continued repayment of interest & capital with NO minimum amount down to zero, or even almost zero.

 

This could be beneficial for those who want to see the equity release balance to be reduced to a minimum level (e.g. £100 or less), yet still maintain the option of keeping their drawdown lifetime mortgage cash facility for the future. Bear in mind the small outstanding balance will accrue interest (albeit minimal), yet for many the comfort of retaining a cash reserve may have massive benefits should cash be required still in the future.

 

Summary

Aviva have responded well to the changing needs of the baby boomer generation as equity release moves into the next stage of its development. Retiree’s financial needs are becoming more complex with almost 75% of pensioners owning their own property, even carrying debt into retirement & living much longer than previous.

 

Aviva’s latest changes will therefore appeal to both advisers and consumers alike who are looking for more flexible loan terms on the long road ahead.

 

To request an Aviva Flexible Lifetime mortgage quote with voluntary repayments please click here.

Click the following link for your FREE Aviva capital repayment calculation.

 

To discuss any of the points raised in this article please contact Mark on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

 

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

Saturday, April 7th, 2012

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

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

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

 

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

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

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

 

So why the lethargy surrounding home reversion plans?

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

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

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

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

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

 

So why should you consider a home reversion scheme?

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

 

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

 

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

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

 

Home reversion redemption

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

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

 

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

 

 
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