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Posts Tagged ‘Financial Conduct Authority’

The Importance of Annual Equity Release Reviews

Thursday, October 23rd, 2014

 

Feefo 100% Trust equity release reviews

 

It’s always a thrill to call my clients when their equity release application finally completes. That’s the time when they’ll receive their equity release proceeds and have the necessary funds to meet their objectives, such as home improvements, new car, helping their family or simply repaying debts. Although the application process has now completed, it’s actually the start of what should be a long relationship between the client and myself.

 

How Equity Release Supermarket can assist…

 

Here at Equity Release Supermarket we pride ourselves on the quality of our whole service proposition. Therefore, following completion of any application we always invite our customers to provide feedback as a measure of how their equity release has been handled. An equity release application can take on average between 6-8 weeks and during that time there are many steps we manage on behalf of our clients to make sure it’s transpires as smooth and as quickly as possible.

 

Our feedback request starts at the first stage of the equity release process which is where we provide the independent equity release advice governed by the regulation of the Financial Conduct Authority and following the Equity Release Council’s code of conduct. Thereafter, we ask for feedback regarding our administration team who process the cases and manage liaison between the client & solicitor & the lender. This aspect is of paramount importance to us as this governs the speed & efficiency of the whole application.

 

Feefo Equity Release Reviews

Feefo 100% Trusted Merchant

Our genuine online Feefo reviews illustrate our dedication to servicing equity release customers and its testament to the fact Equity Release Supermarket received the prestigious Feefo 100% Trusted Merchant Award for 2013. In fact during 2014 we are still on track for 100% positive Feefo reviews from our clients. By visiting the www.equityreleasesupermarket.co.uk website & clicking on the Feefo logo you can read how our customers view our excellent service & shows how our advisers will go that extra yard in order to provide their clients with our excellent customer service proposition.

 

As an example, one such review I received recently was as follows: –

‘I was really impressed how quickly Mark Rumney sorted things out for me and even though he was going on holiday this did not stop him. He made sure that everything was in place for me before he went, even well into the evening. So thank you Mark and I would definitely recommend your services.’

 

Continually Innovating – Equity Release

 

Today’s equity release schemes are very flexible, and clients circumstances can change, therefore I like to call clients annually to touch base, remind them of their options and review their situation. During the annual review I like to: –

 

  • Remind clients of the ability to make voluntary interest payments
  • Check whether any new products may be more suitable
  • Check whether interest rates have reduced and are still competitive
  • Check that interest only lifetime mortgage schemes are still affordable

 

Let’s look at each of these in turn…

 

Voluntary Interest Payments:

Both Aviva & Hodge Lifetime have equity release schemes which allow you to make voluntary interest payments of up to 10% of the original loan amount, once schemes have been in place for 12 months. This can dramatically reduce the outstanding balance at the end of the term, so it’s important we remind our clients of this and explain the mechanics of how they make ad-hoc payments to their lender.

 

New products:

New providers and products are often launched which may prove more suitable, although you need specialist advice when considering switching schemes. I offer a free initial consultation to complete a switch plan analysis in order to determine whether it is best advice to switch equity release plans.

 

For example, Pure Retirement launched a drawdown lifetime mortgage plan in 2014, which tends to offer the highest reserve on the market, with the possibility of receiving £1,100 in cashback that can cover all the remaining set up costs. This may therefore appeal to customers of older equity release schemes, as they can possibly switch to a lower rate at the same time as have a new cash reserve facility for future use.

 

We are also starting to come across former Halifax Retirement Home Plan mortgage customers where Halifax/Scottish Widows have declined further borrowings due to the new MMR rules on affordability. Fortunately, we have assisted some of these retirees with the new ‘interest servicing’ products from the likes of Stonehaven, More2life & the Hodge Retirement Mortgage. All these plans could be made available following a full equity release review, where if appropriate we can find a scheme that allows further funds to be made available.

 

Lower Interest Rates:

There are legacy equity release schemes out there from companies that formerly offered lifetime mortgages. These companies, however have since stopped offering new lifetime mortgage or home reversion plans. These equity release companies can include Norwich Union (now Aviva), Prudential, NatWest Equity Release, Portman etc.

 

Another legacy equity release scheme we commonly come across is Papilio UK Equity Release (formerly Northern Rock), where many existing customers could benefit from new equity release plans that offer lower interest rates. There are ex-Northern Rock customers that are being charged over 7% with Papilio UK. The Aviva Flexi Lifetime Mortgage Plan can currently offer equity release interest rates as low at 5.63% (5.83% representative APR). By switching equity release schemes I have saved my clients £1000’s in compound interest over the longer term. A good deal for them & their beneficiaries!

 

Check ongoing affordability

Some of my clients have taken out a lifetime interest only mortgage with either Stonehaven or More2Life. They’ve chosen to pay a fixed monthly payment for the duration of the plan. However, both plans offer the flexibility of being able to stop payments at any time and let the interest roll up. Similarly, with the Hodge Retirement Mortgage you’re also able to switch to rolled up interest when the younger borrower reaches aged 80. These are things that should always be discussed at annual reviews.

 

Overall, the annual review call that I make to clients can be really worthwhile. It’s always nice hearing how they’ve spent and enjoyed their money. It’s usually another common time when they ask me to call one of their friends and family who’d also benefit from my specialist advice, as their friends and family have seen how equity release has changed their lives.

 

Other areas where I receive many calls from existing clients, which impact the need for further equity release advice, can include:

 

  • Moving House
  • Death of one borrower
  • Additional borrowing

 

Looking at these in turn…

 

Moving House:

Most equity release schemes are flexible and allow you to move at any time. However, advice is needed with regards to value of you property you can move into. You’re also able to repay most schemes early but this could be subject to a variable, or fixed, early repayment charge.

 

Death of a borrower:

It’s obviously a distressing time when you lose a loved one. I often receive calls from the survivor asking what options they have or what happens next. I’m able to answer their queries and explain the simple process of informing the lender. The main query is whether the survivor can remain in the family home, where the answer is usually yes.

 

Additional Borrowing:

Most lifetime mortgage schemes are set up with an automatic drawdown facility where you can contact the lender when you need funds from an agreed reserve at outset. However, once this is exhausted, or if you’ve got an older scheme without a reserve facility, I often get telephone calls to check eligibility for additional borrowing. Here we can help & contact the lender to check whether further funds could be made available from the equity release company.

 

Summary

Remember, equity release schemes are designed as lifetime mortgage contracts and therefore you need to review your situation regularly. I pride myself in offering this unique bespoke service and many of my customers can vouch for the benefits.

 

Should you feel you may benefit from an equity release review of your existing plan, please contact me – Mark Rumney DipPFS CeMAP on: –

 

m: 07957 974826 or

e: markrumney@equityreleasesupermarket.co.uk

New Plans, New Providers, New Horizons – Equity Release 2014

Friday, January 24th, 2014

Equity Release 2014 Having been in the equity release industry for the past 14 years, there has never been as much optimism & confidence in this sector as there is now. Against a backdrop of reductions & barriers to lending in retirement, the equity release marketplace is expanding faster than most other areas of financial services.

 

Equity release 2014 holds the greatest number of reasons why the over 55 age group are now considering equity release schemes as their route to financial freedom & lifestyle improvements.

 

But first we need to understand the issues arising in 2014 for many retirees and how the stress associated with managing retirement finances can be alleviated. Furthermore, we’ll discuss why there is a change in attitude towards equity release, people’s inheritance and how the equity release lenders are developing products to meet the future needs of today’s baby boomers.

 

So why now & what are the reasons?

 

Firstly, it looks like 2013 laid the foundations for the recovery of the equity release market. A record £106billion equity release lending took place, which was a 10% increase on the previous year and this takes us back to the halcyon equity release days of 2006. But the numbers do not explain the underlying reasons, only the resultant effect.

 

I believe the huge growth in demand is down to a number of factors as follows:-

 

 

1. Baby Boomers – Primarily there are a record number of so called ‘baby boomers’ who are reaching retirement age. It is estimated that up until 2018 record numbers of upto 700,000 people will turn 65 each year and begin to draw their pensions and purchase annuities.

 

At that point, once the new financial landscape is established, will it dawn on many that the difference that retirement has made to their disposable incomes & the sacrifices & cut backs that will need to be made. But surely retirement should be time to retire & relax & enjoy the fruits of one’s career?

 

The transition from a paid salary to a reduced fixed pension can be difficult and for some, one many never really come to terms with. There have been many cases at Equity Release Supermarket, whereby following the first few years of retirement we are arranging equity release for the consolidation of debts such as credit cards & loans. This was a result of continued spending following retirement without carrying out what should be a mandatory income & expenditure analysis.

 

 

2. Indebtedness – Many of these baby boomers reaching retirement have grown use to managing debt during their working lives. This generation have lived through vast fluctuations in the economy such as interest rates, inflation & the recent credit crunch. Having come through the worst of this & still showing such positive signs of equity, gives them the confidence of maintaining such debts into retirement. Afterall, this age group are probably the ones with the best repayment history, credit record, guaranteed incomes and all coming with security of tenure in their properties!

 

A recent study showed that one in six over 65’s expect to borrow money in retirement to meet their retirement goals. In fact in the last year alone, 16% of over 65’s applied for a loan or credit card. The issue nowadays is of course that credit is not as readily available and one in ten applications from over 55’s will be declined, as lenders become far less willing to lend into retirement.

 

This applies to mortgages also. Lenders are increasingly calling in mortgage balances from customers aged over 55. It’s estimated 1.3 million households over 55 are still paying their mortgage, of which 289,000 over 65 year olds are still saddled with a mortgage debt! These are the people who will be looking towards equity release solutions in 2014 & beyond.

 

 

3. Interest only Mortgage Prisoners – Worse still are the Financial Conduct Authority (FCA) figures confirming the size of the ‘interest only time bomb’ looming. Of the volume of interest only mortgages due for repayment by 2020, 1 in 10 of these mortgages have NO repayment plan and upto 1.3 million interest only borrowers face shortfalls averaging £72,000.

 

So how will these people find these shortfalls and where do they turn for advice?

 

Well as we mentioned, lending into retirement has been constricted by the FCA’s stance and with MMR (Mortgage Market Review) being implemented in April 2014, lenders are under further scrutiny as proof of affordability becomes entirely their responsibility.

 

Therefore, as we are already seeing by the upturn in the volumes of business, the equity release industry is becoming the saviour for the interest only mortgage short fallers. In providing an equity release safety net, many of these trapped borrowers have another option than having reluctantly to sell their homes to fund the shortfall.

 

However, the solution will only be made available should loan-to-values fall within lender criteria, which for lifetime mortgages are currently stand at a maximum of 30% at age 65, rising to a maximum of 54% by age 85. These calculations can be confirmed using the Equity Release Supermarket calculator.

 

However, two further factors could influence these results; health & lifestyle and incomes.

 

Firstly, should a history of adverse health be prevalent then a range of enhanced lifetime mortgage products are available which will release a greater lump sum than standard equity release schemes. Secondly, the signs are more retirement mortgages could be introduced during 2014. Already the Hodge Retirement Mortgage has been bravely launched against the tide of lenders withdrawing such products. Currently, the Hodge Retirement Mortgage will lend upto 50% of the property value at the current interest rate of 4.75% (5.1% APR), subject to income(s). Click here for details on the Hodge Retirement Mortgage or call 0800 678 5159.

 

 

4. House Purchase/Moving Home – we are seeing the data already in 2014 from mortgage lenders regarding the upturn in mortgage lending which has been due to the housing market improving significantly. With support from the government with its ‘Help to Buy’ scheme, this has stimulated the housing market from the bottom end and resulted in a knock on effect up the ladder.

 

We are seeing an increasing number of Equity Release Supermarket clients using interest only lifetime mortgage products to assist with their house purchase. We can advise on products from Stonehaven, Hodge Lifetime & more2life whereby the interest element & possibly more can be repaid back to the lender with no penalty, & are becoming a high percentage of our overall equity release plan recommendations.

 

Additionally, we are experiencing retirees at a critical point in their lives looking to downsize, or move nearer to their families. This could be for disability or financial reasons and moving into a retirement properties where less maintenance is required. Purchasing such property may still require finance to bridge any shortfalls, or create surplus funds for other financial/personal reasons.

 

 

5. Burgeoning Confidence & Optimism – There has been a silver lining to the issues of retirement finance…PROPERTY. Staggeringly, 69% of the over 65 year old population own their home outright & unencumbered. The most recent research has calculated the over 65’s own a combined £752 billion in housing wealth!

 

With this kind of security behind them and the changing attitude towards inheritance is beginning to shape the equity release landscape we are seeing & being developed as we speak. Traditionally, roll-up equity release schemes were the norm. Compounding of interest put many people off releasing equity. As a consequence, interest only lifetime mortgages have come to the fore. In being able to control the balance by making regular or ad-hoc repayments, one can now maintain a level balance, or even reduce it year-on-year. We have evidenced the growth in inheritance protection via lifetime mortgages and will become another of the factors affecting the growth in equity release for 2014.

 

Flexibility is key for many now entering the market. One major step forward for equity release mortgages came with the advent of drawdown lifetime mortgages. Here borrowers can withdraw tax free cash in stages from a pre-agreed facility. Drawdown equity release now accounts for over 64% of all plans written during 2013. Hence, another good factor to influence the popularity moving into 2014.

 

Finally, we have the latest news there will be a new equity release provider in early February – Pure Retirement will be entering the market with an initial 2 product launch, followed by more products they anticipate later in the year. This comes hot on heels of recent press murmurings over the weekend that L&G could soon be re-entering the equity release arena after originally departing in 2004 when they white labelled Northern Rocks equity release proposal. There is also much product development behind the scenes with Aviva revamping their lifetime mortgage. Details once known will follow on this website.

 

All this development and equity release press coverage stokes up the interest in a market that has previously been in the doldrums, but has listened to the consumer & now developing products to match retirement planning needs.

 

Summary – Equity Release 2014

Equity Release will take off in 2014 because providers have listened to their customers and they can be very demanding and rightly so. Customers want flexibility, they’ve got it, Customers want no early repayment charges, they’ve now got it, Customers want to repay capital without penalty, they’ve got it, Customers want to pay off the interest, they’ve got it, and customers want to partially repay the interest without being tied or committed, guess what? …they’ve got it!

 

There has never been a better time to consider equity release, so here’s to looking forward to 2014.

 

Call freephone 0800 678 5159 to discuss any aspects of this article or complete our contact form to register for 2014 updates as & when they are announced.

 

 

Equity Release Is For Life, Not Just For Christmas

Sunday, November 3rd, 2013

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

 

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

 

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

 

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

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

 

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

 

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

 

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

 

And here are the reasons why:-

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

 

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

 

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

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

 

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

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

 

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

 

The FSA is now the Financial Conduct Authority (FCA)

Friday, May 31st, 2013

The financial market is one that typically needs strict oversight to help regulate the marketplace, making it a safe and comfortable place for consumers to invest and plan financially. Reassurance is key to a successful & thriving financial services industry.

 

Most consumers know the Financial Services Authority (FSA) to be the overall regulator of the financial industry. However, as of April 3, 2013, the regulator known as the Financial Services Authority (FSA) has undergone changes and has been renamed the Financial Conduct Authority (FCA).

 

There are several reasons for the change and there are also some impacts that may be felt by consumers, smaller firms, and accountants. For all intents and purposes, the FCA will be a more intense champion for the consumer than the FSA. The Financial Conduct Authority will better aid the average consumer and investor in finding the right products and investment strategies.

 

Despite the recent change, there are still several aspects of the regulator that have remained constant. For one, the Financial Conduct Authority will be largely staffed by the same people that staffed the FSA. They will be working out of the same location and will be regulating the same financial services and firms that were regulated under the FSA.

 

However, there are some differences between the FSA and the Financial Conduct Authority. The biggest of these changes is the idea that the business of regulating the capital adequacy of the largest financial firms, approximately 1,700, is now outsourced to the Prudential Regulation Authority (PRA), which a sister regulator of the FCA. Under the PRA, the Financial Policy Committee (FPC) will be overseeing the “macro” issues relevant to the industry. Both the FPC and the PRA are essentially a part of the Bank of England.

 

The Financial Conduct Authority has also gained some authority and power that was lacking in the FSA. For one, the FCA can intervene in the promotion of market-wide products. This means that the FCA has the power to ban the sale of fraudulent products.  This means that the FCA may have a stronger presence when it comes to advocating for the consumer’s best interest. This can only be good for the consumer and genuine financial advisory services companies.

 

For consumers, the change from the FSA to the FCA may not be felt very strongly. However, the FCA is an advocate for the consumer. The regulator allows the consumer to have a market place that promotes reliable products to the consumer. Without the FCA, consumers would have a much more difficult time planning for their financial futures.

 

All promotional materials showing the FSA are to be phased out by April next year, however many firms have already taken the initiative, embraced the changes and adopted the new Financial Conduct Authority as the necessary changes to keep on improving the industry.

 

Equity Release Supermarket are directly authorised by the FCA with permissions under their FCA no 584063. For assurance purposes all financial services firms can be checked on the FCA register to ensure they are fully authorised, or even what permissions and authorisations they have. To check any companies details click this FCA register link.

 

In addition for equity release purposes, we only recommend lifetime mortgage & home reversion schemes from companies that are members of the Equity Release Council. Both authorities combined, provide the assurance to our customers that Equity Release Supermarket provide the exact standards required to offer our customers peace of mind & the security that regulation can offer.

 

If you have any questions about the impact of the FSA/FSA changes or further details on the Equity Release Council contact Mark Gregory on 01925 830816 or email mark@equityreleasesupermarket.co.uk.

 

How the FCA Interest Only Mortgage Review May Impact Sales of Interest Only Lifetime Mortgages

Sunday, May 5th, 2013

May 2013 will be remembered as the wake-up call for customers with interest only mortgages. After all the talk about time bombs ticking down to zero, the FCA (Financial Conduct Authority) has now issued a regulatory warning, advising that action should be taken, and also how.

 

The interest only mortgage has been sold in bucket-loads for reasons a plenty. Ideally, an interest only mortgage should always have some form of repayment vehicle which is confirmed to the mortgage lender at inception.  This could be in the form of a low cost endowment, personal pension plan, regular savings ISA, stock and shares, investment bonds or even sale of 2nd home such as buy-to-let or holiday home. The only way of guaranteeing repayment of a mortgage is by choosing the capital & interest repayment mortgage route.

 

However, the relaxation of lending rules during the pre-credit crunch era meant that these mortgages where only interest is repaid were all too often taken due to being the cheaper option. It soon became apparent that these mortgages were not necessarily taken for the right reasons.  Not only that, where repayment vehicles were set up using pre-determined growth rates, these have fallen way short of their target growth rate.

 

These statistics have been confirmed by the FCA, who stated that almost half of the 2.6 million customers with a UK interest only mortgage won’t be able to clear their mortgage by the end of its term. In fact the average only interest mortgage balance will be approximately £72,000 by its eventual settlement date. These interest only mortgagors will somehow need to find this repayment amount, or end up having to sell their home and downsizing.

 

How Can Interest Only Lifetime Mortgages help?

This will depend upon at what stage of the mortgage term any retrospective action is to be taken. The best situation would be if remedial action could be effected during the interest only mortgage term itself. This would mean assessing the amount to be repaid & the time remaining for repayment of the original capital amount. Using a suitable interest only mortgage calculator, you can check to see how much you should be repaying in order to meet the mortgage outstanding. This will illustrate the size of the problem and what strategy is vital moving forward.

 

However, this is all & well if the situation can be nipped in the bud with many years remaining. Unfortunately, there are many mortgagors where the FCA interest only mortgage review has come too late. These are the people who have now reached retirement and realisation has sunk in that they still have no means to repay their mortgage. Mortgage lenders are reigning in these mortgages, many with no remorse.

 

Nevertheless, there is a small crumb of comfort for some as the FCA statistics do show that 85% of interest only mortgage cases maturing up to 2016 will have a 39% loan-to-value, or less. We also know from their data that over 48% people are over age 55 at this point. Fortunately for them there is a mortgage solution in the form of another type of interest only mortgage. Here is where the equity release industry can come to their aid.

 

Interest Only Solutions

An interest only lifetime mortgage works on the same principle as the interest only mortgage. The difference comes in the term, as the interest only lifetime mortgage will never need repaying until the last person has died or moved into long term care. Therefore, if affordability into retirement is not an issue, then committing to a life of interest only payments could prove a solution. Given the size of the interest only epidemic due to inflict itself upon the UK mortgage population this form of lifetime interest only mortgage could prove salvation for many who wish to keep their home.

 

The enormity of the situation could therefore be of benefit to the interest only lifetime mortgage providers such as Stonehaven, more2life and Hodge Lifetime. Where the applicants are aged over 55 and the loan-to-value criteria fits, then one of these equity release providers may be able to assist. With interest rates now closer to conventional mortgage rates than ever before, the differential in pricing is not that far apart.

 

In particular, where the discipline of monthly repayments are required, then the Stonehaven Interest Select Lite provides a solution whose interest rate begins at 5.99% (6.40% APR). The Stonehaven range of plans eventually rise upto 6.81% (7.3% APR) with the Interest Select Max, but offer a higher maximum lump sum.

 

As an alternative, if a more flexible repayment approach is preferred and the youngest applicant is 60 or over, then the Hodge Lifetime Plans may suit. The Hodge Lifetime flexible repayment option allows upto 10% of the original capital borrowed. Repayments can only start after 12 months have elapsed and a maximum of two payments are allowed each year thereafter. This effectively could provide an even better solution to interest only short fallers, as should the full 10%pa be repaid off the mortgage balance, then this would prove to be a new type of equity release scheme – a capital & repayment lifetime mortgage!

 

If you are one of the thousands of interest only mortgage customers with your mortgage company demanding repayment, then contact the Equity Release Supermarket team on 0800 678 5159 today or complete our contact request form.

Newlife Rekindle Their Unique Buy-to-Let Equity Release Plan

Thursday, April 25th, 2013

With a timely return to a buoyant buy-to-let mortgage market, newlife (formerly New Life Mortgages) have re-launched their unique ‘Landlord Loan’.

 

Originally released in 2006, the newlife Landlord equity release scheme was withdrawn a number of years ago, coinciding with a general drop in equity release applications & funding.

 

The newlife landlord lifetime mortgage is another welcome addition to the developing equity release sector, which is seeing a resurgence in lending with similar innovative products & lowest ever interest rates.

 

What is the landlord loan?

Effectively, the newlife Landlord Loan is a buy-to-let equity release mortgage. It is designed specifically for the over 55 age group, who are using rental property for investment purposes in order to help boost their retirement income.

 

Being able to release equity from their portfolios, the landlord loan could help finance more buy-to-let projects and also help with capital gains tax mitigation.

 

How does the landlord equity release scheme work?

Based on the principle of the roll-up lifetime mortgage, the buy-to-let equity release scheme helps landlords with rental properties withdraw equity tied up in their portfolios.

 

Normally strict rules apply to equity release schemes as the property concerned must be the main residence. However, newlife have bucked this trend & designed this landlord equity release plan around the rental market and have coincided this release with a 2nd home or holiday home equity release plan.

 

In essence, any UK landlord over the age of 55 with a qualifying buy-to-let property can release a percentage of the property value with NO monthly repayments necessary. There must be no mortgage present on the property; otherwise the existing mortgage will need to be repaid from the proceeds of the landlord loan.

 

The equity release landlord loan attracts a rate of interest at 6.55% (7.1% APR) and is fixed for the lifetime of the mortgage. The interest rolls-up on a monthly basis and is eventually repaid upon death or the last person.

 

The landlord scheme carries all the principles laid down by the Equity Release Council including a no negative equity guarantee, thus protecting the beneficiaries from ever owing more than the property value itself.

 

Qualifying criteria

Applicants must be 55 attained and have a buy-to-let property valuation of at least £150,000. The property must be in England & Wales and let on an Assured Shorthold Tenancy basis. A portfolio of upto 5 properties can be included, with a minimum loan of £25,000 and the maximum being £250,000.

 

How much can I borrow on the landlord loan?

The size of the release is determined by age & property value, therefore income verification is not required. Nevertheless, newlife will require the rental income to at least cover the interest charged in the first month of the term.

 

An example release could be illustrated by considering a male aged 65, with a rental property value of £200,000. The newlife landlord loan would release upto 23% of the property value – a maximum release of £46,000.

The range of LTV’s stretches from 13% at age 55, upto a maximum 42% once age 85 is attained.

 

Benefits for buy-to-let property owners

  • the release of equity is free of tax & can be spent in whatever way you choose
  • landlord equity release helps cash flow in retirement as you continue to receive rental income, but without having to make any monthly repayments
  • Open-ended mortgage with no fixed repayment date
  • Opportunity to restructure your property portfolio to provide additional retirement income
  • The lump sum could be used to settle any outstanding interest only mortgages still running due to failed endowment policies
  • Can be utilised as part of a divorce settlement where the matrimonial home is to be retained by one party
  • Help the funding of long term care by converting the main residence into a buy-to-let which can then provide a tax free lump sum and additional income to pay care costs
  • The opportunity presents itself now to delay the sale of a BTL property, when property prices may still have growth potential in the future
  • The tax free lump sum could be used to purchase an annuity or enhanced annuity which has its own tax advantages and provides additional income in retirement.
  • A fixed interest rate of 6.55% which means the future balance of the buy-to-let lifetime mortgage scheme will be known from the outset
  • Tax advantages arise whereby the property sale can now be postponed if a landlord loan is taken instead. This can then defer, or even avoid potential capital gains tax in the future
  • The landlord equity release plan is portable & can therefore be transferred to a new qualifying  property
  • Further advances can be considered after 3 years, with a minimum top-up of £10,000.

 

If you are a 55+ landlord and looking to release equity from you buy-to-let portfolio, then call Equity Release Supermarket today on 0800 678 5159.

 

*To obtain a quote you can visit our newlife landlord page by clicking here.

 

Are Self Cert Mortgages Available in Retirement?

Tuesday, April 23rd, 2013

Self-certification mortgages are mortgages that are available without a formal income check. Self cert mortgages can be a good option for self-employed or independent professionals who would otherwise have a hard time finding a mortgage lender. Self-certification mortgages are also now available within the retirement sector, in conjunction with the right equity release advice.

 

In fact, lifetime mortgages and pensioner mortgages where the repayment vehicle is the sale of the property are all essentially self-certification mortgages as they do not depend on the income of the applicant. The lending criteria for these pensioner mortgages are mainly the age of the applicant and the property valuation.

 

For instance, Stonehaven’s Interest Select Plan is an interest only lifetime mortgage. Clients can borrow a tax free lump sum against the value of their property. Interest can be repaid in full every month, and the principle amount of the loan is repaid when the property is sold. In fact, Stonehaven equity release will allow you to set up a partial repayment facility, if the full amount of interest is out of your budget range. Therefore, rather than all the interest being repaid, a contribution towards this amount is paid.

 

Therefore, rather than the balance remaining level for the duration of the lifetime interest only mortgage, there will be an element of roll-up interest, albeit significantly lower than if no repayments were made at all. This scenario is ideal for candidates who are risk averse and wish to control the future balance of these pensioner mortgages for their children’s inheritance.

 

Being a lifetime mortgage, there is no fixed term and the loan will continue indefinitely, which will be until sale of the property, which is usually on death or moving into long term care.

 

Self Cert 2013 Lending Criteria

The lending criteria for this loan are based on the age of the youngest applicant and the value of the property. Plans start at age 55 with a minimum property valuation to qualify of £70,000. The property can now be situated in England, Wales & mainland Scotland.

 

As long as applicants can make the minimum monthly repayment of £25, there is no question of requesting income. Stonehaven’s Interest Select plan can therefore be safely categorised as a self cert mortgage. Once the mortgage is set up however, the premiums cannot be amended, other than to stop interest payments completely and convert to a roll-up lifetime mortgage plan. This feature can be used as a safety net in case the mortgage becomes unaffordable in the future & effectively prevents a situation whereby normally repossession would ensue. Repossession for none payment of premiums cannot therefore occur with the Stonehaven Interest Select Plan.

 

Another feature that appeals in today’s economic climate is that of adverse credit or poor credit rating. These lifetime interest only mortgages have leniency towards this. They will permit arrears and defaults. Additionally, they will accept CCJ’s (County Court Judgements) upto a certain level as long as they are repaid from the proceeds and were for understandable reasons.

 

Like most equity release schemes, Stonehaven base the lending on a loan-to-value principle. Stonehaven have four tiers of loan-to-values and each comes with its own interest rate. In essence the more you borrow against the value of your house the higher the interest rate becomes. Conversely, the older you are the greater the amount that can be borrowed, hence it is important you receive independent equity release advice to assess which tiered rate of interest applies and is best for you.

 

For instance a male aged 65 with a property value of £250,000 could release the following with Stonehaven: –

 

 Product Name

Maximum Borrowing

Interest Rate

Loan-to-Value

 Interest Select Lite

£52,500

5.99%

21%

 Interest Select

£60,000

6.08%

24%

 Interest Select Plus

£67,500

6.17%

27%

 Interest Select Max

£72,500

6.81%

29%

 

Who else provides self cert lifetime mortgages on an interest only basis?

Other pensioner mortgages are becoming increasingly available such as the more2Life Interest Choice Plan. This is another self-certification mortgages whereby no income checks are made by the lender. The mortgage is only repaid once the property is sold, which is when the client dies or moves into permanent care, or decides to make an early sale for any other reason.

 

Self-certification mortgages are not very common in the regular residential mortgage sector as lenders are reluctant and wary of lending without formal income checks under FCA (Financial Conduct Authority) regulations. Interest rates are often higher and the loan to value ratio may be lower than traditional mortgages. However, they have been designed with security in mind, something which interest only mortgages of the past haven’t been.

 

Many pensioner mortgages which rely on the property sale for repayment are essentially self-certification mortgages as they don’t carry out income checks for approval. For these mortgages the main relevant criteria are the age of the applicant which helps determine the expected term of the loan and the property valuation which helps determine the loan to value ratio.

 

For a full assessment of eligibility criteria with the range of interest only lifetime mortgages that Equity Release Supermarket have available, please call Freephone 0800 678 5159 or email mark@equityreleasesupermarket.co.uk.

 

Further information on the range of self cert interest only lifetime mortgages can be found on our Compare Equity Release Deals page.

 
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