Anytime 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.