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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 Low Can Equity Release Interest Rates Go?

Sunday, January 25th, 2015

Aviva's lowest ever equity release interest rateHaving 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: –

 

  1. 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.
  1. 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.
  1. 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 mark@equityreleasesupermarket.co.uk

 

Further information on equity release –

 

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Why London Housing Statistics show Equity Release on the Agenda

Tuesday, May 20th, 2014

London Equity ReleaseAnytime housing values begin to increase, it is time to assess the home buying situation. Retirement has been a topic of some concern for those heading into their 60s. In fact, over 55s are starting to realise while they have worked hard, they may not have enough in their pension portfolio to live on. The reason is all down to living longer – longevity. The average life is no longer to 70, but closer to 90 for females. Even in London families are cash poor, but property rich. Take advantage of new housing statistics and use a UK equity release calculator to determine if there is an equity release solution for you. London equity release schemes are being called upon because of their ability to help those who need cash, but own large amounts of equity in their property.

 

Equity Release Defined

Equity releases most popular form is the lifetime mortgage. This mortgage comes in various guises and can either come with or without a method of monthly repayment until the property is sold, either because the homeowners move, pass away or end up in long term care. The mortgage can be taken out from the age of 55. These lifetime mortgages do collect interest based on a fixed APR that adds up each year until the mortgage is repaid.

 

The London Housing Market

London housing prices have increased by 17.7 per cent in the last year. New and pre-owned homes in London are continuing to increase rather quickly. While housing prices are increasing, mortgage interest rates have actually decreased in the last few years, however storm clouds are on the horizon with news that early 2015 could see an interest rate rise. The monthly cost even on equity release is lower than in previous years. Now with lifetime mortgages it is true you do not make a monthly repayment; however, it is important to use an equity release calculator to compare the cost of your lifetime product against a standard mortgage.

 

By comparing the two you can determine if the low monthly cost stacks up against the equity lifetime release. Standard mortgages in London offer a loan to value of 75 per cent, meaning the other 25 per cent has to be a down payment for the purchase of the property. Even the LTV has been increasing over the last few years and markedly in the last few months. What this means for lifetime equity release is a higher percentage of lump sum tax free cash available for homeowners.

 

The increase of housing prices means more value is in the home, thus more money can be released with any form of available equity release product. Even though there is a potential for more money to be available, it does not mean all homeowners will take the larger lump sum. It is just important to know it is available and there as a back-up should anything untoward happen.

 

Agenda – Lifetime Mortgage

Lifetime mortgages are defined and the London housing sector is ripe for the picking. You have an idea of the solution, but why might lifetime mortgages continue to rise in popularity even in the Big Smoke?

 

Younger generations tend to spend more during an average week than older generations, say those in their 80s. Many retirees are in their 60s, which means they are still spending money as if they were working.

 

If you add the expenditures that occur each week to the recession issues of the past couple of years, there is a detriment to retirement funds for most individuals, even those in London. Especially people living in London, considering the expense of daily living without being overly effusive with spending.

 

Housing costs to run a large home, food purchases, travel, and entertainment are all going to be more in the capital city. As retirement pensions and other retirement investments lost a great deal with stock market troubles, it has left many retirees without enough funds to sustain their retirement life.

 

More so has been the fundamental flaw in endowment mortgage schemes whereby large shortfall are being evidenced upon maturity of the endowment plan. This has left many London homeowners with shortfalls on the repayment of their interest only mortgage. Therefore, London equity release schemes have come to fruition with the likes Of Stonehaven, more2life & Hodge Lifetime whom can provide an escape route via remortgaging onto their London lifetime mortgage schemes.

 

It puts lifetime mortgages on the agenda because they are a way to gain cash for mortgage repayments, general living, extravagant holidays, and any other type of entertainment retirees might wish to enjoy. The cash poor situation suddenly becomes obsolete as the property rich gain a little of that hard earned money back to use as they grow older.

 

Inheritance Factors are Imperative

As you consider whether a lifetime mortgage is right for you, it is imperative to think about inheritance, especially with the associated property values in London borough’s. A large estate when provided to family all at once is subject to inheritance tax over & above the £325,000 allowance for each party. This tax can be so large that it wipes out the entire inheritance. It is the reason those with a huge estate set up trusts and other tax planning instruments which can alleviate some of the IHT burden.

 

A lifetime mortgage can work in one of two ways, both as detrimental to any inheritance you may want to leave behind, but can also be used as a successful vehicle for mitigating IHT issues. Even in London, equity release can threaten an inheritance depending on the type of loan. For instance, the roll-up lifetime mortgage has the interest compounding as long as the mortgage is outstanding. On the other hand it is an opportunity to disperse inheritance without fear of taxes. By using a UK equity release calculator, can help you calculate the percentage of loan to leave as an inheritance.

 

Before entering into any equity release contract, you must seek independent equity release advice from a reputable company. For a full list of equity release brokers visit the Equity Release Council website, where using a postcode search can identify a London equity release brokerage near to you.

Can an Equity Release Adviser Provide Advice on Means Tested State Benefits?

Wednesday, December 18th, 2013

Claiming council tax benefits & pension creditDuring 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 markrumney@equityreleasesupermarket.co.uk

Equity Release Is For Life, Not Just For Christmas

Sunday, November 3rd, 2013

Equity Release is a Lifetime MortgageI recently read an advertisement in a National newspaper extolling the virtues of Equity Release and was surprisingly written on behalf of one of the main equity release brokers based in Preston. All fine I thought until I saw that it was aimed at grandparents struggling to buy Christmas presents for their grandchildren.

 

It created a small furore amongst my colleagues and peers. The blogs were alive with advisers & political commentators slating the fact that equity release was being considered for such short term measures. Not only that, but to take equity release to spend on the grandchildren, would effectively be spending their own inheritance!  With the compounding effect of the interest over the remaining years, this will turn out as one expensive Christmas present.

 

After all, the most popular type of equity release is the lifetime mortgage; appropriately named & for a reason. These schemes are designed for longevity, not short term or for frivolous reasons, where better alternatives may exist.

 

Some were arguing that whatever legal reason people wanted a release of equity for, withdrawing capital was their choice, not ours as advisers, and on the face of it that is correct.

However, when I looked into this scenario further this played on my conscience for personal reasons and I had serious reservations.

 

I have five grand-kids, all under five years old. I had to check with my wife, but on average we spend about £150 to £200 on each. Extravagant ? Maybe. Worth it ? Definitely.

 

With various other gifts for family and friends we spend about £1,500. Agreed not easy on low pension income and little liquid savings.

 

If I was in that position and saw the advertisement I would almost certainly look into the possibility of equity release schemes. I would hope that I would employ the services of an independent equity release adviser i.e. someone like me who would strongly advise not to go down this route.

 

And here are the reasons why:-

  1. The minimum initial lump sum on any equity release scheme is currently £10,000. This would have to equate to £2,000 for this Christmas, £8,000 in the bank for the next 4 Christmases. The cash in the bank may attract 1-3% interest whilst I would be paying up to 6% interest on the mortgage. Not a good idea
  2. The set up fees, depending on the lender, could be as high as £2,000. Acceptable if you are considering a large expense such as buying a new car, a holiday of a lifetime, clearing an mortgage or giving the grand-kids a start in life for house deposit or university fees. Therefore, as a proportion of a £10,000 release, set up costs can be a considerable percentage of the initial release. Not so good to borrow £2,000 for Christmas gifts on this basis.
  3. If, like me, your intended beneficiaries are your grand-kids then they are actually buying their own gifts via their future inheritance. Let’s assume £10,000 on a normal roll-up lifetime mortgage, even on the lowest rate with Aviva Flexi Plan currently at 5.62% (5.8% APR) and deducting the set up costs from this, would in 10 years have accrued to about £17,276. So 10 year’s worth of Christmas gifts has cost £7,276.

 

I applaud the fact that some of the broker companies are bringing Equity Release to the fore and the pros and cons of equity release schemes are highlighted to the general public.

 

As a dedicated Equity Release specialist I am convinced of the merits of raising capital by these means as long as the following measures are taken: –

  • All possible alternatives are discussed with your adviser and broached with the children. Equity release is classed as a loan of last report by ourselves
  • The initial release matches your needs for the first 12 months of your spending plans i.e. don’t take any more than you actually need
  • You receive independent equity release advice from a FCA (Financial Conduct Authority) qualified adviser
  • The schemes recommended are members of the Equity Release Council (ERC) which ensures they come with the equity release code of conduct indoctrinated
  • You receive separate legal representation from that of the lenders. As from 2014, this will need to involve a face-to-face meeting with your solicitor for added protection
  • You receive a Key Facts Illustration and Suitability Report covering all aspects of your adviser’s recommendation including set up costs, interest rate, future balance & early repayment charges.

 

I have personally seen the benefit equity release has made and have the testimonials to show the satisfaction & difference a lifetime mortgage can make to someone’s life.

If taken for the right reasons, under the right circumstances and with the right advice, equity release schemes can prove to be the right choice.

 

If you require further information on whether equity release schemes could be the right choice for you, please contact Barry Adnams on 07989 281108 or email barry@equityreleasesupermarket.co.uk

 

Are you Releasing the Potential from your Retirement Apartment?

Sunday, October 20th, 2013

Releasing equity on a retirement apartmentWith 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:

  1. Location: Specialist retirement apartments may be more expensive than the value of your own home.
  2. Service charges: These are payable annually, and in line with inflation, they tend to be an increasing sum.
  3. 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 mark@equityreleasesupermarket.co.uk

 

How Long Does the Equity Release Application Process Take?

Sunday, October 7th, 2012

The equity release market is currently at its peak with a record number of applications. For those aged over 55 and are considering releasing equity, here we review how the equity release application process works, how long it takes and the involvement required.

 

The equity release sales process is now the most streamlined since the product was originally conceived. Increased competition in the marketplace from new providers has resulted in equity release companies looking at ways to steal an advantage. As better interest rates for customers are now also on offer and today’s equity release plans are much more flexible than those available until a few years ago, never has there been a better time to consider a release of equity for the over 55’s.

 

Timescales

An equity release application usually takes somewhere between 6 to 8 weeks for a lifetime mortgage scheme and 10 to 12 weeks for a home reversion plan, assuming the title on the house is clear. The actual amount of time your equity release process takes, also depends largely on how efficient and experienced your solicitor is. Applying for equity release involves legal paper work, which needs to be handled by a solicitor and solicitors with expertise in equity release plans can help to avoid any potential delays in your application.

 

The First Steps

The whole process starts with completion of an application form which must come in conjunction with financial advice as NO equity release provider will accept an application without it. At this stage any fees required which would be clearly stated in the Key Facts Illustration (KFI) would need to be paid. Normally this would include the valuation fee made payable to the lender. Some equity release brokers do charge an advice fee on application; however Equity Release Supermarket would only charge their advice fee upon completion, so beware of paying unnecessary upfront fees.

 

Valuation

On completion of the application form, it is then submitted to the equity release provider who will instruct a local surveyor to complete a basic valuation on the property. The role of this surveyor is to complete a report which will advise the current market value based on a relatively quick sale. The surveyor’s role will be to assess the local proximity to the property and establish similar properties and the price they had sold for within the last 3-6 months. Additionally, the surveyor will ascertain whether any essential repairs will be needed should the property have material defects that could affect the long term structure or re-saleability of the property.

 

Legalities

At the same time as application submission, for speed of completion it is wise for the legal process to get underway. Unless a client specifically requests to use their own family solicitor, we would recommend an equity release solicitor from ERSA (Equity release Solicitors Alliance). One of the former members of ERSA is Goldsmith Williams, whose organisation offers a fixed fee agreement with Equity Release Supermarket clients of £395 +VAT & disbursements. Additionally, these solicitors will provide a ‘no completion, no fee’ agreement with our clients which should be considered for any future lifetime mortgage or home reversion application.

 

The solicitor’s role

Two sets of solicitors must be in place to carry out the whole process. Under Equity Release Council (formerly SHIP) rules different solicitors must be employed on behalf of the client and the lender. Once instructed by the client or broker, the solicitor acting on behalf of the client will send out an initial questionnaire requesting further information. This will include a request for information on whether any mortgage exists currently, the owners to the title, any restrictions, further tenants or major improvements that have been carried out with respective planning permissions. This questionnaire also provides the permission for the prospective solicitor to act on their behalf.

 

What about existing mortgages or secured loans?

Should any existing charges by way of mortgages or secured loans be present on the title deeds then they must be removed prior to, or upon completion. Any mortgage will usually be settled by the proceeds from the equity release scheme at funds release stage. However, another role of the solicitor will be to establish exactly how much will be required on the proposed completion date. This will be achieved by requesting a redemption statement from the mortgagee, who will provide the current balance and the daily accrual rate of interest being added during the interim period to completion date.

 

Provider requirements

For an application to proceed through to completion, the lender will carry out certain checks to meet money laundering and the consumer credit act requirements. This will be proof of ID including passport, driving licence or government backed evidence such as your annual state pension letter or Inland Revenue tax code notification. Should none of these be available most lenders will also require a birth and/or marriage certificate as satisfactory proof of who you are. Additionally, proof of address will be required, so a recent utility bill or bank statement will be necessary.

 

Equity release and adverse credit

Some lenders will carry out credit checks. You may ask why this would be necessary as NO monthly payments are usually required with a lifetime mortgage scheme. The lenders view is that if someone has been negligent with previous credit payments, then there may be a tendency to not look after their property, thus affecting the lenders security.

 

Nevertheless, there would have to be severe credit problems for a lender to decline an equity release application due to adverse credit. Most lenders will accept previously missed payments, defaults and even CCJ’s (County Court Judgements) on their credit file, unless they are significantly large. Even then, most lenders such as Stonehaven will accept the application as long as the applicant has been forthcoming with an explanation as to why the CCJ’s had been applied. Undischarged bankrupts would usually be unsuccessful with any equity release borrowings.

 

Latter stages

Upon successful valuation and title checks, the solicitor acting on behalf of the client will set the completion date. Once your equity release scheme has gone through, you can receive the money by having it paid directly into your nominated bank account, or if you wish to save the telegraphic transfer fee (approximately £30), you can receive the funds in the form of a cheque. Depending on the particular scheme, money can be borrowed either as a one-off capital lump sum or by taking ad hoc withdrawals from a cash reserve set up from the outset.

 

An equity release plan can be a great way to turn the equity tied up within your estate into something tangible and usable. But like any large loan, it has its own risks. Therefore, before you decide to release equity from your home, make sure you speak to your solicitor or independent financial adviser first.

 

Companies such as Equity Release Supermarket provide the ‘complete equity release service’ whereby we provide guidance to clients from the start to finish of the application process. If you have any questions with regards to the equity release application process please call 0800 678 5159 where a qualified adviser can discuss your requirements.

 

What are the Best Early Repayment Charges on Equity Release Schemes?

Saturday, August 18th, 2012

If you are considering taking equity release and early repayment maybe on the horizon, then selecting the right equity release plan is essential to avoid potentially high penalties. Here we illustrate the pitfalls of early repayment of an equity release scheme and what to look out for, if one day you are considering paying off your plan early.

 

Equity release schemes are in simple terms a mortgage that runs for your lifetime & commonly has NO monthly repayments. The principle reason for the growing popularity behind equity release schemes is that they enable you to free up the equity tied up within the bricks and mortar of your home.

 

With hindsight, once we all reach retirement age we should all have sufficient income & capital in the bank to meet our retirement objectives. However, such forward planning doesn’t always materialise for one reason or another; ill-health, redundancy or poor investment return can always interrupt anyone’s best laid plans. So what contingency plans can one put in place, or how can one minimise the risk of achieving retirement age without the funds to enjoy the longest holiday of your life?

 

Equity release schemes

We have witnessed the virtues of equity release mortgages & how they have come to the rescue of many retirees over the past 15 years. However, what can be a life saver initially can become a financial liability in the future unless professional equity release advice is provided by a qualified & experienced lifetime mortgage adviser.

 

One of the fundamental advances in the emerging equity release market is the protection this industry is now affording to its customers. With FSA (Financial Services Authority) regulation, trade bodies such as the newly formed Equity Release Council (formerly SHIP) & in-built protection features such as the no-negative equity guarantee, equity release clients have never been more re-assured of the improvements in these lifetime mortgages for the over 55’s.

 

What are the potential pitfalls of equity release schemes?

One area that hasn’t seen much improvement in the equity release marketplace would be the impact of early repayment charges (ERC’s). As equity release providers are lending over a potentially long duration; in some cases in excess of 40 years, they need to set their long term borrowing plans accordingly. Equity release on the face of it may seem very profitable to lenders, however for a large initial outlay it can be many years before they receive their capital & interest in return. To ensure that their profitability & future of the plans remains they must make contingencies in case of early surrender.

 

Hence, like any mortgage the lender, equity release providers need to include a penalty on early repayment of an equity release plan. To many this would not be seen as an issue as we may have all experienced some form of ERC with our mortgage companies in the past. The difference between residential penalties & equity release penalties are the basis of, the size, & duration that the penalties can be levied over.

 

What kinds of penalties are charged?

Whereas all residential mortgages charge some form of fixed penalty over a fixed number of years, equity release schemes in general are nothing like. The majority of lenders have now reverted to the old Norwich Union formula of using government gilts as the basis for their early repayment charge. Companies that have now followed suit are Just Retirement, more2life, Partnership, Stonehaven and more recently New Life Mortgages switched from a fixed rate basis onto gilts also.

However, there are a couple of exceptions to this rule who come from the likes of: –

 

  • LV= (Liverpool Victoria) – who still use a fixed penalty of 5% of the capital borrowed in the first 5 years to 3% in the next 5 years, then nothing thereafter.
  • Hodge Lifetimewho use a combination of a fixed rate penalty over 5 years and swap rates which relate to the long term effect of interest rates. However, they do have the advantage that if you move after 5 years, then no ERC’s will apply. Additionally, they permit 10% overpayments each year without penalty.

 

Is it all gloom and doom?

The answers to this could be both yes and no; depending if you have an existing equity release plan or not.

For equity release customers who took out a gilt related plan in the past it could be bad news. However, remember this is only bad news if you intend to repay early! If you have no intentions of early repayment, then no ERC’s would be applicable. All equity release schemes will NOT apply any penalty on repayment of the equity release due to death or long term care. Additionally, with the Equity Release Council (SHIP) rules in place if you are moving or downsizing you can take your existing scheme with you with no penalty. Equity release schemes have clearly made it known they are a lifetime mortgage. Therefore, the plans are not designed to provide short term borrowings.

 

You could however hedge your bets on occasions, but as the phase goes…let the buyer beware. For instance, with gilts rates currently at such low levels, unprecedented in the years that equity release has been around, could now be a good time to consider a gilt related equity release plan over the medium term?

The reason for taking out such a plan now would be the fact that these gilt related ERC equity release providers will not levy an ERC should the gilt rate have risen since the mortgage was taken out. In fact companies such as Aviva won’t charge an ERC if the gilt rate remains the same or even falls by a margin of 0.12%.

It is a gamble, as there is still much uncertainty in the economy, but the markets would expect that gilts are sure to go back up in the future when interest rates maybe rise. When though is the golden question.

 

So, gauging which equity release scheme is the best doesn’t all boil down to interest rates. A combination of assessing your future plans and how much, and when you actually require these funds can be just as important.

 

Afterall, what is the point of taking out an equity release plan with Aviva an interest rate of 5.66%, when upon early repayment you could be charged an enormous penalty of upto 25% of the amount you originally borrowed! It may be better to pay a slightly higher rate, with the knowledge that you either have no penalty or at least a known penalty from the outset.

 

Having an experienced equity release adviser is paramount in helping to decide which is the best equity release scheme, for your particular circumstances. By not only looking at your current situation, but also your future plans; your requirements now and also in the future will help your adviser assist in making the right equity release decision for you.

 

Equity Release Supermarket provide independent equity release advice from the whole of the market. Having the experience of actually working with the likes of Aviva, Prudential, NatWest and Norwich Union, gives our advisers the advantage of knowing the ins and outs of lenders early repayment charges and being able to give quality advice.

 

If you have any questions about equity release early repayment charges then please call one of our specialists on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk.

 

The Long Awaited Relaunch of SHIP as the ‘Equity Release Council’

Monday, May 28th, 2012

SHIP (Safe Home Income Plans) will relaunch itself as The Equity Release Council and expand membership applications to include equity release advisers, solicitors, surveyors and any other relevant organisations.

 

From now on, all areas regarding equity release advice & products made available to the general public will be covered by this new body. This will aim to ensure consumers are fully protected & aware of equity release mortgages & what they are entering into.

 

There will be a new Equity Release Council website that will front the trade body whereby consumers will be able to identify equity release advisers, the providers, equity release solicitors & other organisations that will abide by their standards.

 

Headed by new appointed chairman Nigel Waterson, the Equity Release Council will help oversee the new direction of the Council. Andrea Rosario’s role moving forward will be involvement in the more daily aspects of the organisation.

 

Additional appointments will be Chris Pond who will head the Board & determine & fulfil the rules that members must abide by. A technical committee will work with all members of the Equity Release Council to assist with moving the equity release market forward & make improvements along the way. This aims to create a more positive attitude towards equity release schemes in general for advisers & alike.

 

Commenting on the newly formed organisation Nigel Waterson said – “This is a really significant day for thousands of older people in the UK. After an extensive engagement process, equity release schemes now have a trade body which represents the entire sector – The Equity Release Council. “

 

“This is excellent news for the industry as by working together we can ensure that government and potential customers understand the benefits that equity release can provide.”

 

Andrea Rozario also commenting – “With equity in people’s homes likely to be at the heart of many people’s retirement planning now and in the future, it is vital the equity release industry, adapts to meet consumer needs.

 

Ms Rozario also added – “The launch of the Equity Release Council provides us with an excellent opportunity not only to make equity release products easier to access for customers but to encourage more product development to meet UK consumers’ changing retirement needs.”

 

Chris Pond’s comments followed – “Equity release could help many people meet their needs in retirement & a better quality of life, meeting the costs of long-term care, giving a helping hand to a younger generation or just clearing debts. But the market for equity release can only grow if the public and policymakers have confidence that the highest standards of consumer protection will be maintained.

“That’s why it’s important that all those engaged in equity release sign up to a code of conduct that meets consumer needs. The Equity Release Council will fulfil a vital role in building on the work of SHIP by extending that commitment throughout the industry.”

 

These changes and strengthening of the equity release market, further underlines the commitment of this lifetime mortgage industry to helping the over 55’s fulfil their retirement years with financial peace of mind.

 

Equity Release Supermarket also underlines their commitment by supporting such movements in the development of greater understanding of equity release plans. Thus, if you have any questions on these equity release matters please call us on 0800 678 5159 or email admin@equityreleasesupermarket.co.uk

 

Has Your Prudential Equity Release Application Expired?

Monday, April 12th, 2010

Prudential equity release schemes were withdrawn on 31st December 2009, however the application period was extended in order for pipeline cases to reach satisfactory completion.

 

However, this period was only extended until 31st March 2010 & Prudential invoked strict guidelines as to their final outcome.

Initially it seemed the 3 month extension seemed quite generous as most equity release cases should normally complete within a 6-8 week period.

However, in certain circumstances delays may be incurred which may not have been apparent from the outset. It is becoming inceasing apparent that clients are now experiencing scenarios resulting in this deadline being missed.

 

One example such example is aligned to the fact that a previous charge may have been placed on the property; often many years ago.

As an equity release company will not permit any other charge being present on the property, then this previous charge must be removed.

The solicitor must therefore include this procedure in the legal process & thus could result in considerable delays in finding who originally put on the charge.

 

Over the past decade, many financial institutions have changed name, been taken over or even ceased trading. It can therefore prove difficult for the solicitor to trace the original source of the charge & then getting this removed in order for the equity release to complete.

Nevertheless, a solicitor of experience in these matters would seek to obtain proof from the subject lender to prove the charge still exists. If they are unable to do this then the lender must remove the charge from the land charges register & subsequently the equity release can proceed to completion.

However, from experience this period of dialogue between lender & solicitor can take time, cost & has resulted in the Prudential application being cancelled.

 

Obviously, this Prudential deadline has now passed & it is become evident that clients have now become stranded & out of pocket given if their application had not completed by 31st March 2010.

 

All is not lost.

 

Equity Release Supermarket are increasingly assisting customers left stranded & financially out of pocket by the Prudential. Client fees that have been paid already could include valuation fee & solicitor’s fees for work incurred upto the cancellation of the Prudential application.

We are able to take over from where the Prudential left off & with liaison with the solicitor concerned, can take over the case, find an alternative lender & endeavour to complete quickly with the existing information.

In many cases we are able to provide reduced fees in setting up the new application.

This is due to Equity Release Supermarkets ability to obtain free valuations, reduced interest rates & cashback deals that will go considerable distance in alleviating some costs already incurred.

 

If you have experience of the Prudential cancelling your equity release application & would like to explore your options with transferring to a new lender, please contact Mark Gregory on

t: 0800 678 5159 or

mark@equityreleasesupermarket.co.uk

 
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