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How Equity Release and Power of Attorney Can Work In Tandem

Thursday, December 11th, 2014

Equity Release Using an Enduring Power of AttorneyHere at Equity Release Supermarket we occasional experience children and attorney’s contacting us asking whether they can take out equity release on behalf of someone they hold an Enduring or Lasting Power of Attorney over? The answer is yes.

 

However, there are systems in place from equity release companies to protect the homeowner and ensure that any release of equity is being utilised for the correct reasons and correct legally. Looking after someone else’s affairs financially is a big responsibility, not only in looking after the homeowner, but also the responsibility to their beneficiaries.

 

Being an independent equity release adviser with Equity Release Supermarket, I recently dealt with an Enduring Power of Attorney case which was being utilised to meet ongoing long term care costs that were being provided to enable the homeowner to remain in her home. The following case study illustrates the steps involved in helping the attorney take equity release on behalf of someone they were looking after, due to the onset of Alzheimer’s and the inability for the homeowner to contract themselves.

 

 

Equity Release & Power of Attorney Case Study

Initially, I had a call from a solicitor who held an Enduring Power of Attorney over a frail lady in her late 80’s. The lady had nominated the solicitor to be Power of Attorney over 15 years ago as the only family she had was a son living abroad. The solicitor contacted me as the lady had now developed Alzheimer’s and needed 24 hours a day care and was concerned that the lady was about to lose her home and be forced into a care home.

 

The homeowner was unable to live on her own and the cost of paying for full time carers to stay in the property was costing over £2,500 per month. Due to the ongoing nature of these costs and the fact her income was insufficient to cover much of these expenses, her savings were rapidly reducing and apart from the bungalow, she had no other assets. The attorney, who was also the solicitor had looked into all other options including help from the state, alas none were available.

 

Additionally, moving home was not a viable option due to the lady’s poor health and she did not want the upset of leaving her bungalow of 20 years and she still had something recognisable to her which was her Labrador. Therefore, with only £15,000 left in savings, time was running out to find a solution as to how to finance the remainder of her years.

 

The Equity Release Advice Process

I basically dealt with the solicitor as if they were my client taking out the equity release scheme. After taking suitable identification for both the homeowner & the attorney I was able to gather the background to the older lady’s finances. This gave me an insight as to how much was required monthly in order to meet the ongoing long term care costs. My job then was find a suitable equity release scheme that would fulfil the needs of maintaining the payments for the long term care for the first 12 months and then beyond.

 

 

After conducting my initial equity release research I advised that a guaranteed lifetime mortgage drawdown schLiverpool Victoria Equity Releaseeme was the best option. One particular lifetime mortgage meeting these requirements was from Liverpool Victoria. LV= offer an equity release scheme with a guaranteed drawdown facility, so no matter what happens in the next 15 years money can still be taken from the creation of a cash reserve facility, to guarantee money for future care costs would be available.

 

 

This is the advantage of taking completely independent equity release advice as we can research the whole of the marketplace to find the correct scheme to fit with clients individual circumstances. The LV= Flexible Lifetime Mortgage scheme ticked all the right boxes to meet the Attorney’s requirements as a concern of hers was that money would be need to be guaranteed in the future to guarantee the future of her care.

 

The next step to save time & possible heartbreak later was to check the legal paperwork of the Enduring Power of Attorney was suitable from the lenders perspective. Therefore, I sent a copy of the Enduring Power of Attorney document to LV= legal department who checked over & made sure it was registered with the Court of Protection. It was & met their requirements which enabled me to pass on the good news to the solicitor which gave the green light to continue the process to application.

 

Not only were LV= happy that the Power of Attorney was registered with the court of protection, but also that there was no conflict of interest between the attorney and the homeowner with the Alzheimer’s. The only other concern for LV= was that there was full time carers living in the property, but who rotated their shifts on a weekly basis. The carers were employed by an agency and after seeing a copy of the agency employment agreement, LV= were happy to proceed as long as the agency would sign a letter to state that upon the death of the homeowner they would cease to remain in the property. This they had no issue agreeing to.

 

Why Should Equity Release Clients Take out a Power of Attorney?

I always recommend Lasting Power of Attorney to my clients (changed from Enduring Power of Attorney in 2007) as you can nominate someone you trust; family member, friend or solicitor to make decisions on your behalf if needed in the future. However, most people think they will never need it and do not want to think about it is reassuring to know as in the above case that your best interests are being looked after by someone that you trust.

 

There are two elements to this in England and Wales – the Property and Financial Affairs & the Health and Welfare. This enables attorneys to provide cover for permanent or temporary control of finances and also medical treatment consent. The attorney also has the power to make the decision as to whether the homeowner should be taken into care, or stay in own home & be looked after there.

 

It is not compulsory with equity release, but is recommended that a Lasting Power of Attorney (LPA) is taken out, so if you get to a stage either through Alzheimer’s or any other reason if you cannot make financial or medical decisions then someone you trust can be nominated on your behalf to make decisions for you. LPA’s can even be used on a temporary basis where then can be utilised if a situation arises and you are unable to sign documents due to a temporary event such as illness, holiday or even broken wrist!

 

Summary

In the above equity release case the advantage of having Power of Attorney in place ultimately enabled the lady to stay in her own home in the first instance and with a guaranteed lifetime mortgage drawdown scheme from LV= it enabled her to stay in her own home for the foreseeable future. This would be via an initial lump sum covering the first 12 months costs, with the option if still required a cash drawdown facility, sufficient to cover a further two years costs, subject to any changes.

 

My name is Glen Pike & I am a specialist in equity release case studies such as this involving Power of Attorneys.

 

If you have a similar decision to make on behalf of a parent, or someone close to you and would like a free initial equity release consultation, please contact me on 07510 835613 or email glen@equityreleasesupermarket.co.uk

What Leasehold Property Criteria is Acceptable to Equity Release Companies

Friday, October 18th, 2013

Equity release on leasehold propertiesWhen meeting new clients who are interested in releasing equity from their home, I’m often asked whether equity release companies will accept leasehold properties. The answer is more often than not…yes, however with certain caveats.

 

Around 2 million properties are currently owned on a leasehold basis in the UK. These leases are often originally set to 99 years or 999 years from the date the lease was set up. Older properties in the UK tend to have leases arranged to expire in 999 years, whilst new builds or retirement developments are usually shorter and can be typically around 99 years+. Typically flats tend to be leasehold, as freehold flats do incur issues with ownership, particularly when there is more than one floor.

 

Equity release providers usually require a minimum of 75 unexpired lease years in order to qualify for an equity release scheme. Just Retirement and more2life insist on a minimum of 75 years. Likewise LV= and Aviva equity release like to see 80 years left on a lease while Hodge prefer 90 years of unexpired lease years.

 

For properties built with a 999 years lease, these don’t usually cause any problems at all as they are unlikely to expire within one’s lifetime! However, for properties arranged on a 99 year lease, it may mean that the lease has reduced below 75 years depending on when the property was built. For equity release purposes this is where problems can arise as if the remaining leasehold term is below the lenders minimum then action needs to be taken.

 

In this instance, there are two possibilities: –

  1. It may be possible for you to buy the freehold. Further good news is that the cost of acquiring the freehold can be paid for from the proceeds of the equity release application.
  2. Extend the lease for a term of 90 years on top of the unexpired term of the existing lease.

 

Both the aforementioned solutions will not only enable meeting the criteria for the equity release companies, but also will invariably add value to your property. Basically, as the term of a lease reduces, it can have an impact on the property value and can be especially significant with expensive leaseholds in London.

 

The legal paperwork necessary to either extend or buy the lease is relatively straightforward and is done by the same solicitor who is acting on behalf of the equity release client. Ashford’s solicitors specialise in leasehold extensions and freehold purchase. They are one of the former members of ERSA (Equity Release Solicitors Alliance).

 

Peter Barton, a partner at Ashfords said “I have seen over recent years an increase in the number of clients using equity release to extend their lease. Whilst the process may appear daunting we at Ashfords can take you through the process at the same time as dealing with the equity release, and it can be timed to complete at the same time.”

 

Additionally Peter Barton of Ashfords advises the following –

 

“We would always recommend speaking with your Landlord/Managing Agent to ascertain their costs in extending the lease. If those costs seem excessive it is always worthwhile speaking with any neighbours who may have extended their lease to see if they were charged the same, alternatively there are websites that contain calculators to give you an estimate of Landlord costs for extending the lease. We have found those very useful and have saved clients many thousands of pounds by enabling clients to negotiate with their Landlords.”

 

Leasehold properties can present a challenge with regards to applying for an equity release mortgage, however upon inspection of the deeds including the lease document can unravel the exact lease criteria. Additionally, by checking the lease can also clarify any unusual rules in relation to retirement properties or sheltered accommodation. These could include such clauses such as a sinking fund, where the freeholder can make provision for improvements or repairs, or even age restrictions on who can live there.

 

Other issues that leaseholders are obliged to pay for, & can be too prohibitive to some equity release companies, are the service charges.  These are often paid for via maintenance charges and are usually determined by the freeholder or their agent who can decide the work that needs to be done, who will does it and the ultimate cost. All these issues should be investigated beforehand, so that if issues do exist they can be resolved as part of the equity release process.

 

For any questions about leasehold properties or to check your eligibility for equity release, please contact Mark Rumney at Equity Release Supermarket on 07957 974826. Mark can also be emailed directly at markrumney@equityreleasesupermarket.co.uk

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.

 

Are there Advantages in Swapping Your Equity Release Lender?

Thursday, June 7th, 2012

There are many ways to obtain financial security in retirement. Most people depend on pension plans and any savings for income during retirement. People are also increasingly looking at equity release to improve income during retirement. Equity release plans allow you to unlock some of the value built into your property without the need to sell or vacate the house. There are a number of attractive equity release plans available, and even if you already have an existing equity release mortgage, you could swap your this for an alternative one.

 

Reasons for switching plans

There are many reasons to shop around for alternative equity release scheme and lenders are more than willing to accept such prize business. This is because interest rates have recently been changing, for the better. If you have an existing equity release UK scheme that is locked into old interest rates, you could get a much better deal by switching to a new plan with lower rates.

As with any financial advice, you must always explore your options before jumping at the opportunity. All maybe not as it seems in swapping interest rates around 8%, down to current rates which are currently lower than 6%. The overriding factor in whether one should swap schemes is usually whether early repayment charges exist. If so, the size of these penalties, if in existence could determine if swapping equity release schemes would be worthwhile.

Before considering switching equity release plans the reason need to be established as to why this course of action is being considered. Is it for additional funds, or to save the estate compounded interest be achieving a better interest rate, thus benefitting the inheritance one’s heirs would receive?

 

Consider your options first

If additional funds are required then first of all, as with any mortgage, it would be worthwhile to see what your existing equity release mortgage can offer. This would save considerably on set up costs & if early repayment charges are applicable then it would avoid these being levied. A qualifies equity release mortgage adviser would look into this first for you.

However, the tendency of equity release providers is to offer a less than competitive interest rates on the further advances taken. This is evidenced by the main lenders such as Aviva which is the largest equity release lender by far. Nevertheless, an overall analysis should be undertaken to establish whether staying or swapping lenders is best.

 

Potential savings of remortgaging

By comparing different lifetime mortgage plans can help you work out potential savings over the long term. For instance, a new Aviva drawdown flexi plan has a current rate of 5.92%, as opposed to say an older Northern Rock lifetime mortgage scheme of 7.9%. With current incentives offered by Aviva to new customers of a £500 cashback & free valuation, it has been calculated that over a 15 year period this kind of differential in interest rates can save over £13,000.

Another reason why you may consider swapping equity release is because equity release loans have become much more flexible today than just a few years back. For instance, until 6 years ago, the only equity release schemes available were lump sum plans. These were not particularly viable for those who did not want to borrow too much initially, but instead, wanted to borrow in instalments or regular smaller amounts. Hence, today we have the option of drawdown lifetime mortgages that are more suitable & offer more cost savings than previous.

If you have exhausted your current mortgage facility and your lender will not advance any further funds then you could swap your equity release plan for an alternative scheme that offers ‘enhanced’ borrowing levels. There are now equity release schemes that consider the applicant’s health and lifestyle before lending. This would be suitable should people have grave health & therefore wish to take the maximum now before their term expires.

 

How enhanced equity release schemes can help

For instance, if you have a history of ill health, an ‘enhanced’ or ‘impaired equity release mortgage’ may be available to you which based on a series of health questions can distinguish whether you qualify for a greater lump sum than normal. Some enhanced equity release providers such as more2life, Partnership and Aviva can offer up to 15% higher than regular equity release schemes.

Swapping an existing equity release plan for an alternative one is a matter of careful consideration by an independent equity release expert. There are professional equity release advisers who can help you shop around for new and better products and based on your existing circumstances, including your current plan, the current value of the house, your age and state of health etc and advise you on the best possible alternative to swap your equity release plan.

 

If you wish to benefit from an equity release remortgage analysis, please call the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

Equity Release – An Alternative Means To Generate Funds

Monday, September 20th, 2010

Equity release schemes offer optional loans to homeowners who wish to use their property as a source of income generation after their retirement. It is a type of flexible mortgage that offers tax free cash to homeowners secured against the current market value of their home.

 

Equity release schemes are available in two formats – home reversion or lifetime mortgage. If you are retired, over 55 years of age and own a property with a good market value, lifetime mortgage equity release scheme could be the ideal option for you.

On the other hand, a home reversion equity release scheme could be attractive for different reasons. It is only appropriate for homeowners above 70 years of age & is the only scheme where you can guarantee a specific inheritance for your beneficiaries. This can be useful if you have a specific attitude that you wish that at least some of your residual estate will pass to someone after your death.

 

With equity release schemes, you can either get the loan amount as a lump sum or in the form of monthly payment. Equity release schemes are fully regulated mortgages and as such come under the scrutiny of the Financial Services Authority (FSA). This ensures that you have full protection & recourse should inappropriate advice be given.

In addition to the protection offered by the FSA, you also will require the services of an equity release qualified solicitor. Upon processing your equity release application, your solicitor will be required to sign a SHIP (Safe Home Income Plans) certificate. This will confirm that he/she has discussed your requirements & noted that you are happy & fully aware of the equity release scheme & its implications.

 

What if the value of the property falls?

If the value of your home drops, this will also affect the remaining equity in your property & have the knock on effect of reducing the amount your beneficiaries receive. The final equity release balance will be repaid once the property is sold after the homeowner passes away or moves into care. Nevertheless, you do have the assurance of the ‘no negative equity guarantee‘. This ensures that at final repayment, should the equity release balance be higher than that of the property value, the lender will receive no more than the property value.

 

All equity release companies have to provide a Key Facts Illustration (quote) to confirm the set up & associated costs including surveyor charges, legal charges, application fees and redemption charges. This document should always be discussed with a qualified equity release adviser who can explain the features & benefits of the scheme.

 

If you wish to request an equity release quote, contact Equity Release Supermarket on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

All You Should Know About Equity Release

Sunday, August 22nd, 2010

Equity release is a concept which is often misunderstood. It is a common myth that you lose your property if you opt for this scheme. This is not the case.

Equity release is the equity tied up in your property that you can now release. This facility lets you still enjoy the ownership rights by mortgaging your assets. Equity release schemes give you 100% ownership of your property till you die.

 

What are the different types of equity release?

There are two types of equity release schemes:

  • Lifetime mortgage: A lifetime mortgage scheme lets you retain complete ownership of your assets. An individual who takes the loan has no responsible any monthly payments. The loan is eventually repaid by the legal heirs after the holder moves into care or eventually dies. Hence, the reason why this is known as a lifetime mortgage scheme.
  • Home Reversion scheme: You need to sell part or all of your property to the reversion provider for this scheme to work.

 

There are three reasons how the size of the release can be affected: –

  • The greater the percentage of the property sold, the greater the size of the release
  • The older the equity release applicant, the higher the amount that can be raised
  • If their is an element of ill-health, then the home reversion provider can release a larger than normal cash lump sum

 

Types of payment

There are two types of method of receipt of the cash payment you get in an equity release scheme; a lump sum and a monthly income payment. You can opt for one of these payments dependent on your needs.

A lump sum amount can be used for capital expenditures, while monthly payments can be chosen by those who need a regular income in retirement.

The most important benefit of equity release is that it gives you tax-free money. The only thing you need to remember is that you can mortgage the property which you own.

The minimum age to be eligible for these schemes is 55 years for a lifetime mortgage and 65 for the reversion scheme.

 

To obtain advice on which is the right equity release scheme for you please ring the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

How To Fund The Purchase Of A New Property With An Equity Release Scheme

Wednesday, January 20th, 2010

The advantages of equity release being used to raise capital from property have been widely advertised. It is commonly known that their uses have been to enhance retirement lifestyles by way of home improvements, holidays, debt consolidation etc.

 

However, a further function of this increasing popular over 55’s mortgage is its ability to assist with a house purchase.

 

In essence, an equity release scheme is a mortgage secured on ones property; however unlike a conventional mortgage there are no monthly payments. Instead, the interest charged by the lender is added to the loan & compounded over the term. Therefore, similarities between equity release & a household mortgage co-exist. Furthermore this similarity extends to the house buying process.

 

When funds need to be raised to assist with a house purchase, a conventional mortgage is normally utilised to bridge the shortfall between the purchase price & any deposit already held. Equity release can also assist a house purchase by using exactly the same principles as a mortgage.

 

Experience has shown that as people move through their retirement years their health may deteriorate & disability may result. As a consequence, their existing property may become less accessible if stairs or even property location is an unsuitable feature.
Aspirational requirements may dictate that a move to a more ‘up market’ is required. Many reasons for a move in retirement exist.

 

Upon review therefore, it may be necessary to look for an alternative property which meets the new objectives of accessibility, which could either be buying a bungalow or even moving nearer to children, who can take more care.
As the purchase price of a bungalow or new house could be more expensive, there may be a cash shortfall to fulfill the transaction.

 

Equity release can therefore be applied for on the new property to bridge the difference between the equity available from the sale of the existing house & the purchase price of the new house. At this point, it would be advisable to approach an experienced independent equity release adviser such as Equity Release Supermarket, who can source the most suitable equity release scheme available for house purchases.

 

The adviser will need to make calculations to ascertain exactly how much capital will be required, as not only is there the equity shortfall, but also whether any additional costs including solicitors fees, stamp duty, removal costs even home improvements may be required to be included in the equity release application?

 

A recommendation can then be made as to which equity release scheme would offer the best terms for the purchase; be it lowest interest rate, flexibility via drawdown or early repayment charges & taking advantage of any special lender offers that are currently available.

 

Other factors which need to be considered are whether any existing mortgage needs to be deducted from the sale proceeds, as this will reduce the equity that can be used as a deposit. Once these calculations & recommendations are made, the application can be submitted to the prospective equity release company.

 

The equity release application process is virtually the same as any mortgage: –

  • Valuation carried out by a independent surveyor appointed by the lender
  • Solicitor instructed to commence legal work & enquiries made on behalf of the applicant
  • Upon satisfactory valuation, an offer is then made by the lender
  • Upon receipt of the offer, the paperwork is drawn up by the solicitor which is signed by the client in due course
  • Exchange takes place & completion date set.
  • On the day of completion, the solicitor requests funds from the equity release provider & along with the client’s deposit, transfers the proceeds to the vendor’s solicitor to complete the legal process & purchase.

In summary, an equity release plan can be used to actually move up market to a more expensive or suitable property to meet future retirement needs. This could be for disability reasons, live in close proximity of the children or even aspire to a house of your dreams!

 

How To Minimise The Setting Up Costs Of An Equity Release Plan

Monday, January 4th, 2010

Keeping the initial equity release set up costs down to a minimum will be of great benefit in maximising the gross release from the lender… & in turn your pocket.

 

It will also have an immediate impact on the APR (annual percentage rate) of the equity release scheme in that the lower the set up costs, the lower the APR. Traditionally, there are four main associated costs involved: –

  • Valuation Fee
  • Lenders Application Fee
  • Solicitors Fees
  • Adviser Fee

These will be discussed in turn & assistance given on where to look for potential savings.

 

  • Valuation Fee – paid upon application & can vary significantly from lender-to-lender.

The fee as with any mortgage is directly related to the property value & can vary from a percentage of the property value to a banding system. One area of savings here would be in the banding system. First establish what the bands are from the potential equity release lender & ensure that you have not placed your property value into a higher band than required. Dropping to the one level below can save at least £30 – £100.

However, bear in mind the valuation of the property will affect the maximum release so don’t jeopardise this figure if you are looking for as much as possible. The biggest savings you can make is with a free or subsidised valuation which some independent brokerages like Equity Release Supermarket can obtain. Certain lenders will make these special offers from time to time & would result in NO upfront costs being incurred.

 

  • Lenders Application Fee – these are usually fixed no matter the size of the release or value of the property.

Some home reversion companies have no fee, as this is accounted for in the full or partial transfer of ownership. Lifetime mortgages application fees however can vary from £500 up to £695. Again, special offers can be made by lenders or even cash-backs can be obtained to reduce the net costs overall.

 

  • Solicitors Fees – due to the fact the solicitor can be selected, considerable savings can be made here.

Local or family solicitors can be contacted & a quote for equity release conveyancing requested. Borne within the quote would be the solicitors flat fee & any disbursements including VAT. Consider obtaining several quotes from solicitors or take the recommendation of your independent adviser as they may have special fixed cost arrangements with solicitors from ERSA (Equity Release Solicitors’ Alliance).

*Equity Release Supermarket has a fixed fee arrangement of £395 + VAT & disbursements with a leading equity release legal firm.

 

  • Advice Fee – dependent upon which brokerage advice is being sourced will determine how much the adviser is charging.

Care should be taken here. Fees of £1495 can be levied for taking out the same equity release plan as another brokerage charging only £595! Some companies will also charge an upfront fee, some will offer an initial consultation free of charge. Establish with the adviser how they are remunerated & shop around if you feel a better deal can be found elsewhere.

 

In summary, considerable savings can be made by conducting in depth research & dealing with a specialist independent firm of equity release advisers such as Equity Release Supermarket.

 

If you have any queries regarding equity release fees & costs, please contact Mark Gregory on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

 
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