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Legal & General Equity Release – Visionary Views & Sea Change Needed

Wednesday, October 14th, 2015

Legal and General Equity releaseThe equity release marketplace in 2015 has been undergoing a period of growth and innovation which has been long overdue. There are major factors influencing this potential golden generation of competitive equity release plans. Helping matters has been a new big brand household name – Legal & General who are aiming to take a large share of equity release business, but not necessarily in the conventional manner.

 

Realising the lifetime mortgage market needs a sea change in order to reach the heady predictions made, Legal & General are almost starting with a blank canvas & fresh approach to how equity release UK plans are marketed & advised. These ideas I’m sure will soon be rolled-out to the equity release broker community, who need to awaken to the concept of change, not much of which has really been seen over the past few years.

 

Personally, equity release brokers & lenders need a complete overhaul of its thinking & messages it needs to portray to the consumer to build confidence. Conventionality needs to be erased & brought into the 21st century using the latest of technology & wider distribution. This shouldn’t be just by one or two brokers strangling the marketplace, effectively restricting the entry of new lenders/funders, but an across the board approach by everyone (brokers & providers) working together.

 

Furthermore, for growth, new advisers are needed to be brought in from outside the industry & trained to meet the rigorous measures imposed by the Equity Release Council to ensure safe route to market for the consumer. There is a shortage of quality equity release advisers which needs immediately addressing, otherwise how can the market grow?

 

Legal and General Home Finance ‘Sea Change’

Let’s analyse what Legal and General Home Finance have achieved since entering the equity release arena by acquiring NewLife Mortgages in early 2015. They have provided a series of plans which have effectively matched the best crop of products in the market at entry point. Features such as the 10% voluntary repayment option, lowest interest rate, high loan-to-value products & inheritance protection facility have competed significantly well against its peers, such as Aviva Equity Release.

 

Understandably Legal and General had to start somewhere & their efforts so far are commendable. With product research underway & their own analysis of how the market should look moving forward, we welcome a fresh voice & innovative product development. With electronic applications & valuation instructions to commence in the New Year, these are exciting times for the industry, but not before time. Branding themselves as Legal & General Home Finance indicates their proposition will be more diverse than just traditional equity release plans.

 

Areas where development is needed is greater flexibility for all pre & post retirement homeowners and remedying the issues for the over 55’s sensibly borrowing into retirement which MMR has stunted. We have seen how the Marsden Retirement Mortgage has filled a niche in post lending advice & this gap between equity release schemes & residential mortgages is a void that needs consideration. Equity release plans in their current state, albeit the most flexible ever, will not meet the future needs & demands for all retirees. New ideas and new forms of retirement mortgages are needed, but maybe one’s that somehow interact with lifetime mortgages, switching between as the homeowner’s future circumstances dictate.

 

 

Can Legal & General Exert Influence?

There is a vision for the expected growth in post-retirement lending, which some market analysts have projected could reach £5billion by 2020! This is still a mere drop in the ocean compared to the residential mortgage market of over £200 billion, yet there is still almost £1 trillion in untapped equity remaining in the over 55’s property portfolio’s. Is the figure even realistic? Not in its current format & lenders thought process. This is why Legal & General’s introduction could be what the market needs.

 

We are aware of the history of equity release schemes, resulting in the lack of confidence with many retirees & press alike. However with the efforts from Nigel Waterson from the Equity Release Council & the voice of important members of the equity release sector such as Andrea Rosario, the market is starting to answer back. In essence, the external adverse publicity maybe due to lack of knowledge of equity release and of how the newer breed of lifetime mortgage schemes work in practice & how it’s strictly regulated by the FCA. But this is where the equity release industry has plotted its own downfall. Lenders themselves should stand up more & be accountable, especially when adverse publicity arises, as it tends to be the market correspondents alone who respond.

 

Frustration ensues when column inches and comments about equity release are misconstrued. But that will happen when the market is so inhibited by a few brokers who have their own interests at heart. We already have an ‘equity release club’ in the industry, but designed for brokers for equity release referral purposes. Equity release brokers themselves should form their own ‘club’, thus joining forces and work out they can ALL assist the growth in the equity release sector. A new era of consumer openness and transparency needs to develop so there is a clear voice representing the industry, with a collective approach from ALL, not just the monopoly of a few.

 

A Sea-Change of attitude, products, innovation and lenders is what’s required for equity release & retirement lending as a whole, to progress. At least one of these requirements seems to have been met, with the household name of Legal and General becoming a new lifetime mortgage provider. The next 12 months may define the future of this industry. These could be exciting times for all those involved from brokers through to lenders, but not forgetting the true beneficiaries to all this – homeowners over the age of 55 who genuinely need a mortgage vehicle to enhance their retirement!

 

For further information on the range of Legal & General equity release schemes, please contact Mark Gregory – mark@equityreleasesupermarket.co.uk or call 07966 889597.

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 –

 

Compare Equity Release Deals | Equity Release Calculator | Ask Mark A Question

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 A Drawdown Lifetime Mortgage Provides Insurance for the Future

Thursday, March 14th, 2013

Suddenly you’re approaching retirement and you’re left wondering – ‘where did the years go?’

Realisation is dawning on you all too clearly that from hereon in you will be reliant on a fixed income, your savings may start diminishing and your future anticipated costs are anything but guaranteed!

 

The question therefore is how do you protect yourself & family from those unforeseen costs that might suddenly arise? Well, there’s good news and bad news, and also a possible solution….so please read on.

 

Firstly, the good news.

The population of England and Wales is living longer than before and the most common age at death in 2010 was 85 for men and 89 for women, compared to 77 and 84 respectively in 1980. Thirty years ago there were 2,280 centenarians, today the figure is 11,610. Indeed this trend is set to continue and we are entering the age of the super centenarian (110). That’s the good news!

 

Now, for the bad news.

The basic state pension is currently £107.45 per week increased each April by the highest of either the average growth in wages, the Consumer Price Index or 2.5%. Yes, the new flat rate of pension of £144 per week will be payable from April 2017, but not for those already drawing the state pension.

 

And what happens to a surviving spouse or partner when they are widowed? Just the basic state pension and possibly the bereavement allowance up to £106 per week  for the first year depending upon National Insurance contributions and the age of your spouse on death. Added to this is possibly a reduced private or occupational pension for the surviving spouse (usually the widow) if you are lucky enough to have contributed to a pension plan during your working lives.

 

So how will you cope with the cost of home improvements, car repairs, increasing utility bills, let alone any care costs? And how do you provide for the financial security of your spouse after you have gone? A widow could easily have in excess of a decade to support herself on a reduced income.

 

The Possible Solution.

This article might have given you the impression that my job is to go around depressing people, but in reality my job is to ensure that my clients are fully aware of how they can use their major asset – their home, as a form of insurance against future financial difficulties.

 

Most people are familiar with a mortgage. A Lifetime Mortgage applies the same principles, however instead of running for a fixed term, will actually run for the rest of your life. It therefore allows you to borrow until the remaining owner dies or goes permanently in to care.

 

Types of Lifetime Mortgage

The most common equity release plan is on the roll-up lifetime mortgage basis, whereby NO monthly interest payments are required and the full repayment of the mortgage is made from the sale of the home on the last survivor’s death.

 

However, with the latest innovation in the equity release market, more lenders will now allow you to pay off the full, or even partial monthly interest payments if you want to keep the eventual loan lower than would otherwise have been on a roll-up basis. The interest only lifetime mortgage provides a flexible option to carry into retirement and can now be obtained on a drawdown basis with more2life.

 

All these Lifetime Mortgages are portable if you want to move house in the future and, if leaving an inheritance is important to you, you can protect a percentage of the eventual sale proceeds of your home. All these lifetime mortgages provide a guarantee that you would never leave a debt to anyone by way of ALL lenders providing a ‘no negative equity guarantee’.

 

The Drawdown Lifetime Mortgage

The major attraction with a Lifetime Mortgage is the “drawdown” option. This feature will provide you with a lifetime borrowing limit but does not commit you to borrowing the whole facility immediately. The drawdown lifetime mortgage was therefore borne with flexibility in mind.

 

Before drawdown schemes became available from the likes of Prudential, Just Retirement & Hodge Lifetime, customers only had the lump sum option. Given this cash amount needed was to last them at least 3-5 years, many decided to opt for a larger amount than would otherwise have been necessary. Languishing in a bank account & receiving less interest than paying on the equity release scheme was not best advice. Hence, the introduction of the drawdown equity release plan enabling retirees to take a lower initial sum, but taking extra funds in the future whenever they required.

 

As an example, a husband and wife aged 78 and 72 with a property valued at £250,000 could have a maximum loan limit of £52,500 but only start with the minimum loan of £10,000.

Interest would only accrue on the initial £10,000 loan and the balance of £42,500 would be readily accessible if they needed it and could be taken in stages. This is an excellent way of providing security for future unforeseen expenditure and would be available for the surviving spouse to use should he or she be alone and on a reduced income.

 

In should be noted that certain equity release companies cannot guarantee the drawdown reserve facility for life. Companies such as Aviva do retain the right to withdraw the drawdown facility under certain major events which would render them unable to fulfil their drawdown requirements. However, there are still companies available that will guarantee the reserve facility. By opting for the guarantee, you may pay a slightly higher interest rate, nevertheless you may feel more secure knowing these funds are available for a minimum of 15 years ahead. With living in such uncertain times, this could be a blessing.

 

This ”Lifetime Mortgage Drawdown” option, which only commits you to borrowing a minimum of £10,000, is sensible insurance for the future and if you would like to discuss the matter in more detail then please do contact myself – Mike Vicary on 07795 195302 or email mike@equityreleasesupermarket.co.uk

The Birth of the Equity Release Calculator UK Style

Wednesday, March 13th, 2013

Equity Release Calculator UKThe improved confidence in the equity release sector has been borne by the industry providing accessibility to flexible and competitive products. Additionally, by introducing clarity, regulation and new online tools such as equity release UK calculators, customers can now partake in their own means of research to obtain information. These factors combined have seen a market spike in equity release enquiries, with an unsurpassed  level of interest than ever before.

 

This openness about equity release has allayed many fears. The negative influences of the past have been quashed when lifetime mortgage schemes & home reversion plans weren’t clearly understood by all. Although these products were fully regulated, they had never been embraced as a source of genuine retirement provision for the over 55’s.

 

Granted further innovation has been effected in recent times by companies such as Hodge Lifetime with their flexible repayment option, but it has only taken until then for confidence to take hold. Additionally, Stonehaven have gone against the grain with its range of interest only lifetime mortgage plans but this has been some time in the making.

 

This has all come about by the equity release lenders playing a leading part.

 

However, recognition must go to the various equity release brokers who have introduced their own means of building confidence in the equity release process. The brokerage sector has also adapted by devising tools and applications to help customers understand different products and find out how they would work in their personal circumstances. One of the most significant of these applications is the equity release calculator. Let’s look at equity release UK calculators and how they have made things much easier for the customer.

 

Until a few years ago, that is before the advent of free and instant equity release UK calculators, customers who wanted to find out the maximum amount they could potentially release given their age(s) and property valuation, had to literally go from door to door to each provider for an answer. This was an awfully tedious process simply to obtain the answer to a very basic question.

 

But then some providers and independent companies like Equity Release Supermarket started to offer the online equity release calculator. The idea was simple – users had to enter some basic information, including age and property value, so that the calculator could go through different equity release plans to find out the maximum potential release for the given age and valuation.

 

This not only made it much easier for customers to understand how equity release plans could work for their particular situation, but also benefitted providers by making the process easier and attracting more customers. At the same time, companies like Equity Release Supermarket that offer independent advice could inform customers quickly and efficiently through this simple free online service. Confidence was starting to return.

 

With the latest technology, retirees can now browse on their laptops, Ipad’s, Iphone’s, androids, Mac’s or the trusted desktop PC within the comfort of their own home and gather all the information they need at their fingertips. With the biggest growth area of the internet being the ‘silver surfers’ what better way to encourage online growth for the over 55’s and at the same time save hours and cost on the telephone.

 

Today, equity release UK calculators are commonly available, and most providers and advice companies have their own calculator on their website. However, beware of those who purport to provide a calculation, but merely gather personal data for marketing purposes. A true online equity release or lifetime mortgage calculator won’t need to hide any maximum calculation results for their own gain.

 

Upfront and personal, as they say, should be the key to a quality equity release calculator!

 

Taking the calculations one step further are some independent equity release information companies, for instance CompareEquityRelease.com who now offer not only the standard terms, but also a calculation free of charge, based on an impaired life. This means that should any potential applicant suffer from any qualifying illnesses, then a greater maximum lump sum could be expected. The enhanced lifetime mortgage calculator has therefore also evolved.

 

Furthermore, with the introduction of the interest only lifetime mortgage deals, new interest only lifetime mortgage calculators have been developed. Therefore, people looking to repay some or all of the interest charged can now benefit for the latest tools on the market to ascertain how much these schemes could possible lend. Technology evidently has had its part to play in the development of breeding confidence within the equity release market.

 

These new breed of equity release advice centres do seem to offer free, transparent and user friendly equity release UK calculators that show an unbiased & independent picture of the maximum equity release amount you could release from your property, healthy or otherwise.

 

To calculate the maximum equity release currently available based on your own personal situation click here or call 0800 678 5159 to speak to an independent equity release adviser.

Will Equity Release Providers Accept Repayments of Interest and/or Capital?

Sunday, January 13th, 2013

A common question that the over 55’s are asking these days is whether equity release schemes are flexible enough to accept repayments of interest and/or capital. With an increasing financially savvy population, particularly those approaching their retirement, this poses an interesting debate.

 

Typically, equity release plans have been associated with the roll-up lifetime mortgage principle, whereby NO monthly payments are necessary. For many retirees this is a daunting prospect given the fact that with the compounding of interest, the inheritance they would leave behind could be severely reduced, if not eliminated.

 

Equity release innovation needed

Equity release providers have therefore been posed themselves the question about how to develop this sector that has historically been devoured of innovation. This lends us back to the original scenario regarding the switched nature of the over 55’s, and how they are now demanding more equity release plans to meet their changing needs.

The baby boomer age group has historically grown up on a life of credit lines such as their residential mortgage, personal loans, hire purchase and credit/store cards. For them, the continuation of a mortgage in retirement is not a serious concern providing adequate pension income is received to fulfil their monthly commitments.

 

Some of these people will have ended up with a mortgage leading into retirement potentially affected by endowment shortfalls or pension fund under performance. Whichever way they have an outstanding mortgage at retirement, there needs to an option available that can address this common problem.

 

Halifax tried and failed

Certain equity release companies have researched this and taken note, particularly given the popularity that the now defunct Halifax Retirement Home Plan. Until August 2011, this Halifax equity release plan offered the over 60’s a mortgage based interest only scheme that would run for the rest of their lives. The void this product has left since being pulled from the market has been enormous and left an opportunity for another interest only provider to fill.

 

Equity release mortgages have now come into their own. Where once they were categorised as a vehicle to enhance lifestyle, they have now become an instrument of necessity, for many who wish to address their retirement shortcomings. These lifetime mortgages can, with product development, provide the ideal solution to an interest only mortgage situation that will only become an even greater issue in years to come.

 

Changes have started

Today the equity release market has opened up and a variety of new plans are now available. 2012 has seen new products come to market that are pushing the boundaries of how the equity release concept can be expanded and accommodate more people into the fold.

 

Therefore, to answer to the question – ‘Do Equity Release Providers Accept Repayments of Interest and/or Capital, the answer is categorically ‘YES’.

 

The next article – ‘Which Equity Release Companies Accept Payments of Interest &/or Capital will discuss the three current equity release providers that will accept repayment of interest and/or capital. Here we can look in greater depth at them: –

 

Hodge Lifetime – Lump Sum Lifetime Mortgage & the Flexible Lifetime Mortgage

Stonehaven – Interest Select Plans – Including Interest Select Lite, Plus, Select & Max

more2life – Interest Choice Plan

 

To discuss these products further call the team on 0800 678 5159 or click here to read the next article on this subject.

Equity Release – The Only Way is Ethics

Sunday, October 21st, 2012

With news that equity release schemes are becoming more of a mainstream mortgage for the over 55’s, we look at how the equity release market is regulating the protection of its consumers.

 

We have all heard the stories of how equity release schemes are bad for you and the local gossip columnists berating the expense of these plans. However, the equity release industry has come a long way since the original equity release plans were offered in 1965 when the average house price was approximately £4,000!

 

Why was regulation introduced?

It was the earlier version of equity release schemes that started creating a stir. Back in 1988 a new type of plan was introduced called a ‘home income plan’. They relied on using two financial instruments – an annuity or investment bond to provide an income, which in turn paid an interest only mortgage that raised the initial capital. The annuity income would have been sufficient to not only pay the mortgage but also provide additional funds to supplement the applicant’s income.

 

In 1988, the principles of the scheme were sound. However, there was no account taken of how future interest rates may change after a years of economic stability. Therefore when interest rates rose steeply in 1990 and property prices fell significantly, there were unfortunate cases of people experiencing negative equity. Additionally, as a consequence of higher interest rates, the annuity income became insufficient to cover the monthly mortgage payments, thereby wiping out the residual personal income also. These home income plans were subsequently banned.

 

The launch of SHIP

Such disastrous events were the catalyst for greater regulation of these equity release type products and led to providers in this market forming a coalition. This was heralded as SHIP (Safe Home Income Plans) and was introduced in 1991 to protect the holders of such schemes and their beneficiaries.

 

Further bad news

However, the problems were not answered immediately. During the mid 1990’s we had certain banks – Barclays and Bank of Scotland introducing SAM’s (Shared Appreciation Mortgages). These schemes worked on the basis that the mortgagee released an amount of equity in return for a proportion of the house value. No monthly payments of interest were required. However, the banks took not just the current value, but also a percentage of the future value.

You may recall that the mid to late 1990’s house prices thereafter soared. The bias was obviously in the banks favour (no changes there) to the tune of approximately three to one in their favour in any property escalation.

These schemes were consequently withdrawn and we are still hearing stories in the news today about people who took out SAM’s & have no redress financially from the FSA.

 

Step forward the FSA

Sooner, rather than later the Financial Services Authority stepped in to regulate the market & by 2004 the Government had brought forth legislation protecting lifetime mortgage customers. The protection didn’t just stop with the schemes; financial advisers now came under the auspices of the FSA and had to meet certain criteria to be able to provide equity release advice.

The FSA then introduced the Financial Ombudsman Service and put the FSA Compensation scheme in place to recompense people who had been mis-sold. Previously, applicants only had the courts as protection and taking on the banks could prove an expensive exercise.

By 2007, Home Reversion schemes were also governed by the FSA leading to stricter controls on all types of equity release schemes.

 

By this time some of the major equity release companies such as Norwich Union (now Aviva) and Northern Rock had joined SHIP. Equity release schemes started going through innovation with drawdown equity release plans becoming popular and being released initially by Prudential, Just Retirement & Hodge Lifetime. With mixed attitudes towards beneficiary’s inheritance, we had the introduction of interest only lifetime mortgages from Stonehaven which allowed some, or all of the interest charged being paid off.

So, not only has the market emphasis changed towards regulation, but also the products themselves have seen massive changed in concept and design.

 

Further peace of mind – legals

So far we have talked about how the FSA has helped regulate the market and the equity release companies themselves designing better products, but what about the equity release process itself?

 

The legal aspects of equity release have now been indoctrinated within the SHIP rules. It is here that extra layers of protection have been provided by the equity release solicitors and provide the final checks of the equity application process. From checking the identity of the applicants, establishing genuine reasons for the raising of capital, particularly when gifting to family and ensuring legal title & conveyancing thereof, solicitors have an important role to play.

 

Under SHIP rules, two solicitors must be involved – one for the applicant & the second on behalf of the lender. This is to ensure there is no conflict of interest and protect both the lender & equity release customer. The applicant’s solicitor must also sign a SHIP certificate to state he is satisfied that all aspects of the equity release have been brought to their attention, implications & that the rules of ‘caveat emptor’ persist. Until the SHIP certificate is signed then no equity release application can complete.

 

SHIP update

Further rebranding of SHIP was felt necessary as the market grew and a louder voice was felt necessary for the equity release market as a whole. After much debate it was proposed that ‘The Equity Release Council’ would provide the new voice of the industry. SHIP has now moved on and hopefully the feeling and attitude to all things equity release. It has travelled much distance since 1965 and overcome some dark days along the way.

 

Nevertheless, this is a new dawn for the equity release industry. With greater trust, greater demand and greater product innovation still to come the future is looking bright for the protection of its customers.

 

If you are considering equity release and need assistance on receiving the best equity release advice call the team on 0800 678 5159.

 

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.

 

Can I Still Leave an Inheritance if I Take an Equity Release?

Sunday, July 8th, 2012

Equity release schemes have become increasingly safer over the past few years with inheritance protection options becoming more available. It is becoming apparent that equity release plans are now evolving further and diversifying. In today’s market a number of different providers have entered the arena with a variety of different equity release schemes. Although equity release plans prove to be a great option for many people, it is important to understand the concept & implications of equity release before going ahead with it.

 

You’re possibly wondering – is equity release a good idea?

If so then you need to understand the main reason for people being anti-equity release, which is the effect it has on their beneficiary’s inheritance. You therefore need to gather more information on equity release mortgages and the role they have to play in the retirement planning process.

 

One of the most common concerns that people have with equity release schemes is whether it will affect the amount of inheritance they leave behind. An equity release mortgage allows you to release some of the equity that is built up on your home, thus devaluing the property initially by the same capital amount. Over time however, this amount significantly increases as compounded interest gathers momentum, thus reducing the value of the estate. This essentially means that you’re using up some of the equity of the home, and leaving a devalued property behind.

 

There are different types of equity release schemes, and the two most common types are home reversion and lifetime mortgage schemes. A lifetime mortgage is a loan taken against the value of the property, which is repaid only when the owner has died and the house can be sold. A home reversion plan is the process of selling a part of the house to a reversion company, the proportional value of which is recovered once the owner has died. By selling a small part of the home, you can ensure that you leave something behind. This is one of the main advantages of home reversion plans over lifetime mortgage schemes, However, lifetime mortgages have come a long way in design & functionality over the past couple of years.

As equity release schemes have evolved they have endeavoured to become less risky. One of the characteristics of new equity release plans is that they come with a no negative equity guarantee. This means that whatever is left over after your debt is repaid goes to your beneficiaries, but if your debt is larger than the sale value of the property, the negative equity is cancelled out, and does not get carried over to your family. This is particularly relieving to those who want to release the equity on their home but are concerned about its repercussions on those they leave behind. Of all schemes this would be beneficial for would be the roll-up lifetime mortgage scheme whereby the borrower has taken the maximum advance possible.

 

Modern lifetime mortgages also have a new security option built into them which is called the ‘inheritance protection guarantee’. Equity release providers such as Aviva, Stonehaven, more2life all offer this safety feature available. By selecting a percentage of the property value you wish to protect, allows a fixed percentage of the property value to remain on the eventual sale of the property. The higher the percentage inheritance guarantee selected, reduces the maximum loan amount available from inception of the plan.

Equity release schemes have their advantages and disadvantages. While they may not work for some, they may be the perfect option for many others. As far as protecting your loved ones goes, modern equity release plans provide both a no-negative equity guarantee and an inheritance protection guarantee so as not to affect your family. However, always bear in mind taking out the equity from your house automatically reduces the value of the property you do leave behind.

 

 

Therefore, ensure you speak to a qualified equity release adviser who can explain both the pros and cons of equity release. Equity Release Supermarket provide a free initial consultation to discuss all issues around all aspects of inheritance protection including interest only lifetime mortgages.

Call the team today on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

 
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