Posts Tagged ‘home reversion’
Saturday, July 3rd, 2010
Equity release schemes are more commonly & individually known as lifetime mortgages, home reversion or home income schemes. These schemes are the perfect solution to purchase a new car, get funds for a new home improvement project, to pay for a holiday or to simply make your everyday life more comfortable.
Equity release schemes enable you to release money against the overall value of your home. The debt is then repaid from the sale of your property after your death, moving into long term care or earlier sale of the property.
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How do equity release schemes work?
While there are different schemes that offer a lump sum or/and regular income, they work on two principle’s.
The lifetime mortgage schemes provide you a with a capital amount from the value of your home with the amount to be repaid being determined by the interest rate charged & how long the interest roll’s up over.
Home reversion schemes still provide you with a capital amount, however the reversion company takes a percentage of the value of the property in return. Therefore, there is no interest element. Once the property is finally sold on death or long term care, the original percentage sold is retained by the reversion company & the beneficiaries receive the remainder. e.g. if 50% of the property was initially transferred to the home reversion provider, then on the eventual sale of the property there would still be 50% of this value to pass to the beneficiaries.
The minimum age for lifetime mortgages is only 55, whilst the minimum age for a home reversion scheme is 65. The property should must be owned & be in a reasonable condition. If a mortgage exists before inception, then this needs to be repaid from the equity release proceeds or any savings held. The equity release scheme, whether lifetime mortgage or home reversion scheme can be the only secured loan on the property.
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The attractive features of an equity release plan
Equity release plans can offer you a regular income, a lump sum amount or both with the money released being free of income tax. However, if the amount is invested & you are a taxpayer, you may need to pay tax on any interest gained.
In order to unlock equity, there is no need to sell or move your home. Using an equity release scheme, you get assurance that you can continue to reside in your home until you die.
If you do not have any family or children to leave your inheritance to, then an equity release scheme can be an extremely attractive concept.
With the above advantages that equity release schemes offer, it could be the perfect way to unlock your money & enoy a comfortable retirement.
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If yu have any questions on the topics discussed above then please contact the Equity Release Team on 0800 783 9652.
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Tags: equity release, equity release schemes, home reversion, home reversion schemes, lifetime mortgages, Roll up lifetime mortgage
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Friday, July 2nd, 2010
We all like to save money, but in today’s economic climate sometimes this can be difficult.
However, saving is actually a source of investment that proves to be helpful in times of financial trouble. And, the need to save and have an investment fund available is more important when people reach old age.
Equity release schemes are a good solution for older people to overcome their income problems if they do not have adequate savings. Current equity release schemes provide different means in which to provide peace of mind to elderly people so that they no longer need to support themselves with only a small pension.
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Home reversion equity release schemes
With the help of a home reversion scheme, you can sell your home or a part of it to a reversion company in return for a monthly income or a lump sum or both. Technically, you will become a tenant of , although you continue to live in your home rent free. You receive a lifetime tenancy from the reversion company which gives the right to live in the property for the rest of your life.
When your property is eventually sold, generally after your death, the reversion company will get its payout. For instance, if you sell 50% of your property to a reversion company, they will get half the sale proceeds including any escalation in the property value. Just as importantly your beneficiaries will also receive a guaranteed 50% of the sale proceeds. If you sell 25% of your property, the reversion company will get 25% of the proceeds etc.
Additionally, the reversion company will also pay you a fraction of the present market value for the share of property it purchases from you. This is because you continue to live in the property till your death, and the reversion company will have to wait to get their return.
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This illustrates one of the main advantages of home reversion schemes in that you can guarantee the percentage of the final property value that can be passed on.
This differs from ‘roll-up’ equity release schemes whereby there is no guarantee as to how much the beneficiaries will receive, if anything. Nevertheless, a no negative equity guarantee is included in all SHIP (Safe Home Income Plans) equity release schemes to provide the guarantee that no more than the final property value can be owed to the lender.
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For further advice on Home Reversion schemes please ring 0800 783 9652
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Tags: equity release, equity release schemes, home reversion, home reversion schemes
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Friday, July 2nd, 2010
Good news is back in the equity release market as Home Reversion Plan provider Home & Capital increase on two fronts the amounts they will lend on their products.
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Recently there has been a reduction in the number of equity release schemes available in the market which has resulted in fewer options for those in need of cash for their retirement plans.
Therefore news that Home & Capital are reversing this trend with its home reversion plans is excellent news.
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The latest calculations now show that for a male aged 70 the home reversion rate has now increased from 43.25% to 47%. That’s a healthy increase on the amount Home & Capital will lend & represents a good increase on the equity release scheme funds clients will receive.
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Secondly, all Home & Capital reversion plans have had an increased the ceiling on the maximum amount customers can raise.
This has now risen by over 41% from its previous maximum of £85,000 upto £120,000.
The maximum percentage of the property you can sell with Home & Capital home reversion plans is 95%.
Existing offers on the Home & Capital reversion plans will continue. This includes no arrangement fees & a special offer of a free valuation on all applications made before 31st July 2010.
The minimum age for the home reversion plans is 65+.
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These increases come at a time when retired people who wish to consider equity release are being hit on most sides.
Lower interest rates on their savings coupled with the impending increase in VAT will all affect the elderly population greatly over the next 12 months & beyond.
Therefore, there is some light at the end of the tunnel for the elderly who need financial assistance & a supplement to their capital or to boost income.
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With property values showing a steady, yet unspectacular increase since the start of 2010 many people in retirement can be sitting on a large amount of equity that can be utilised.
People are increasingly beginning to embrace the idea that their property is a legitimate asset that can be used to release equity - either via downsizing or via equity release schemes.
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To discuss your equity release requirements further please contact Equity Release Supermarket on 0800 783 9652 or email - mark@equityreleasesupermarket.co.uk
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Tags: Add new tag, equity release, equity release schemes, free valuation, Home & Capital, home reversion, home reversion schemes, lifetime mortgages, no application fee
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Wednesday, March 31st, 2010
Andrea Rozario, chief executive of SHIP, has stated that the Government should assist in helping to raise more awareness of equity release as a real option for the retired population.
She commented on yesterdays Government white paper on elderly care, “SHIP welcomes the Health Secretary’s white paper on social care. With an ageing population and pensions failing to cover the costs of elderly social care, it is a problem that does, and will affect us all and needs to be addressed urgently”.
Equity Release schemes therefore can have an important part to play.
A vast majority of homeowners now realize their home is their most valuable asset and equity release could be a serious consideration in assisting financial planning into retirement.
In addition…
“The current system sometimes places elderly people in the position where they must sell their home to pay for long-term care that they may require. By limiting the number of years that the elderly will have to pay for residential care to just two, the suggestions in the white paper may be a step towards combating this problem.”
For further advice on how lifetime mortgages or home reversion schemes can assist with care & retirement planning issues please contact Mark Gregory on 0800 783 9652 or
e: mark@equityreleasesupermarket.co.uk
w: http://www.equityreleasesupermarket.co.uk
Tags: equity release, equity release schemes, government white paper, home reversion, lifetime mortgages
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Sunday, March 28th, 2010
An increasing phenomenon in later life is the number of couples who are now deciding to divorce.
Often having lived together but had separate lives for many years, retirement then can seem the final straw in their relationship. Perhaps the knowledge of the impending hours of greater social time together once retirement arises is the most common reason!
Nevertheless, statistics show increasing numbers are deciding to end their marriages in retirement and move on, once their children have left home.
This works well for many people, but one of the major problems of divorce in retirement is dividing assets when you are approaching or have reached the end of your earning power.
Someone who was set for a comfortable retirement as part of a couple may well be struggling as a single person on half the assets. The marital home is often a bone of contention because it is usually the most valuable asset and often represents stability and security to the occupants.
However, pensions can also create many issues & this will be discussed in a separate article including pension sharing on divorce with offsetting & earmarking being the methods of distribution.
With reference to the marital home, equity release can often help in these situations.
The person who remains in the marital home can release cash from the value of the property either by a lifetime mortgage or a home reversion plan to ensure that the spouse receives their share of the property.
In most cases, it would not be possible for the person living in the marital home to take out a conventional mortgage because they may not have enough income to support it. However, by taking out a lifetime mortgage or a home reversion plan, they know they can stay in their home for life without having to make repayments during their lifetime.
‘A house is not a home’ may be easy to understand in normal circumstances but in the context of divorce, particularly from a woman’s point of view, a home is where you nurture and provide for those you love and care for and where you feel secure. Divorce is a traumatic time when normal life is disrupted. If it’s possible to maintain some security by doing a lifetime mortgage or home reversion plan to keep your home, many would take that option.
So How Can Equity Release Assist?
Well depending on the percentage split to each party, whether it is 50/50 or similar proportion, equity release could contribute either partial or in full towards the settlement.
However this would be dependent on age.
The size of the equity release is calculated based on the age of the youngest party & in some circumstances the health of the remaining party.
For example at age 60 the maximum release could only be provided by a roll-up lifetime mortgage & the percentage currently is only 26%.
Nevertheless at age 65 a lifetime mortgage can release 31%, however a reversion scheme can also now be considered.
As age increases, so do the percentages, to the extent that at age 80 one can release a maximum of 46% on a lifetime mortgage & 56% on a reversion scheme.
In circumstances of ill health, some lenders will even increase the home reversions 56% giving a more favourable lump sum based on an impaired life facility.
Therefore, via a combination of negotiation of existing assets & the application of equity release could result in the remaining party not having to move or downsize at a distressing time.
This enables stability throughout the remainder of their retirement..or until a new partner is found!
For further information
e: alison@equityreleasesupermarket.co.uk
t: 0800 783 9652
Tags: divorce in retirement, equity release, equity release schemes, home reversion, pension sharing, pensioner divorce, Roll up lifetime mortgage
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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 £295 + 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 783 9652 or email mark@equityreleasesupermarket.co.uk
Tags: application fee, equity release, equity release schemes, home reversion, lifetime mortgages, set up costs, solicitors fees, valuation fee
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Sunday, November 22nd, 2009
More commonly, people enquiring about equity release have an existing mortgage or loan still secured on their home.
However, for an equity release scheme to be accepted by the lender, the mortgage or secured loan balance must be fully repaid.
In order to ascertain whether the mortgage can be repaid by an equity release we need to know the valuation of the property & the age of the youngest property owner (minimum age is 55).
Once established, as long as the figure calculated is at least the size of the current mortgage, then the equity release can be applied for.
Even in situations where the full mortgage balance cannot be effectively be reached by releasing equity, if the difference can be found by way of additional funds such as existing savings/investments, then the application can still proceed.
The major benefit of being in a position to pay off the mortgage is that no more monthly payments will be required in the future.
This will alleviate any financial pressures of maintaining the mortgage payments maybe at a time of redundancy, retirement through ill-health or severe debt issues.
Potentially, this course of action would avoid the issues of repossession & even incurring an adverse credit record.
Nevertheless, it must be bourne in mind the consequences of this course of action.
Yes there are no more monthly payments, however the interest that would normally have been repaid is instead added to the mortgage balance. This has the effect of an ever increasing debt that effectively doubles every 10-11 years, dependent on the interest rate obtained.
There may be concern that this equation would, & can, have the effect of eroding the value of ones estate, especially given the fall in property prices recently.
However, the optimists amongst us would assume that over the longer term property values will recover & escalate over time.
Effectively this would counter the roll-up effect of the increasing equity release balance.
Unfortunately, we would not know the full extent of this & hence the reason for the inclusion of the no negative equity guarantees built into these SHIP regulated schemes.
This ensures that any beneficiaries cannot be saddled with any personal debt, with the worse case scenario effectively being that the lender takes the value of the property; no more.
For these reasons from a lifetime mortgage lenders point of view, they do not permit any second charge as there maybe no security left for the subsequent lender in case of default.
Why a second charge would want to be placed given there maybe no future equity remaining anyway would be a questionable issue.
Therefore in summary, anyone looking at taking out equity release must be able to redeem any existing mortgage with the new lifetime mortgage being the only secured loan on the property.
Please contact mark@equityreleasesupermarket.co.uk
http://www.equityreleasesupermarket.co.uk
Tags: equity release, equity release & repay mortgage, equity release schemes, home reversion, home reversion schemes, lifetime mortgages, mortgage redemption, redeem mortgage
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Saturday, October 31st, 2009
For the 2nd year in succession Equity Release Supermarket have been nominated at the prestigious Equity Release Awards Ceremony on 13th November 2009 at Merchant Taylors Hall in London.
This follows their success in 2008 where they won the award of Best Financial Advisers - less than 10 employees.
Director - Mark Gregory commented, “Im extremely pleased with the recognition the company has achieved yet again, given the current market conditions & so proud of the effort his advisers have made over the past 12 months”
Equity Release Supermarket are independent specialists advisers the over 55’s lifetime market.
mark@equityreleasesupermarket.co.uk
Tags: equity release, equity release awards, equity release schemes, home reversion, lifetime mortgages
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Thursday, October 29th, 2009
This November, under the budget changes made in April, sees the pension credit limit being raised from £6,000 to £10,000. The effects of this would be felt by over 500,000 pensioners on modest incomes & should result in additional income of upto £8pw.
The current capital disregard limit of £6,000 has been present for the past decade. Previously, any savings above this level of savings reduced the amount of benefits a person would get from pension credit.
However, The Chancellor - Alastair Darling has stated this is to change from November. This increased limit to £10,000 will benefit pensioners on low incomes in different ways.
One will be the direct benefits will be in the pocket.
However, a further implication on this will be on people considering equity release. Previously, anyone receiving pension credit with savings over £6,000 & considering equity release would lose £1pw for every £500 over the limit they went.
Subsequently, with this limit now being increased to £10,000, results in the additional £4,000 allowance providing people with upto an extra £8pw.
This was a major factor in any equity release advice provided. As part of any advice & fact finding process the adviser should ascertain whether means tested benefits are being received.
However, the resulting advice would limit any equity release to the provider minimum of £10,000. This being above the £6,000 limit could result in a loss of benefits, unless immediate capital expenditures were being made or an Income Assessment Period (AIP) was still in force.
Therefore, Novembers increase to £10,000 will rule out this potential loss of benefits on such withdrawals & as a direct consequence will result in more pensioners confidently taking out equity release schemes.
Equity Release Supermarket welcomes such moves & if anyone wishes to receive further information on this subject should contact Mark Gregory on 0800 783 9652.
Tags: Add new tag, benefits, equity release, equity release schemes, home reversion, home reversion schemes, lifetime mortgages, means tested benefits, pension credit
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Wednesday, October 28th, 2009
The industry definition of an equity release scheme is an over 55’s mortgage, albeit with no monthly repayments & finally settled on death or moving into long term care.
It is now becoming more apparent that whereas equity release was once considered a lifetime mortgage, people ‘temporarily’ have the opportunity to take advantage of one of a providers’ shortcomings in its plan features.
As equity release has been designed to run for the rest of the person’s life, lenders have always seeked to include potentially heavy early repayment charges, should the equity release scheme be redeemed early.
This penalty could be either linked to the change in government gilt rates, expire after a set number of years or as we shall discuss; link to the Bank of England base rate.
It is this feature that has provided a window of opportunity should people over 55 require short term borrowing facilities.
Experience has recently shown that retired clients are now struggling in retirement; income from investments has fallen, annuity rates are not favourable & pensions are falling in popularity with more reliance on fund performance & contributions than defined benefit schemes.
Increasingly more debt is also evident in this age group & control of finances is becoming more difficult to manage in the present economic climate, credit cards & loans seeming the preferred choice.
Nevertheless, there are options available that can resolve these issues - part time work is becoming more apparent to increase retired incomes. Better management of debts & more consumer information being available as the silver surfers become more online savvy.
Advice on the suitability of equity release schemes will primarily discuss all these options & more. Should none of the alternatives be suitable from the client’s point of view, then at this point, equity release can be considered as a last resort.
However, another one of these options would be downsizing.
This would involve the emotive issue of selling a property that may have been a family dwelling for a generation. However, in order to raise the necessary funds required this may be the correct solution.
Unfortunately, this option may not provide an immediate resolution.
House sales are eventually beginning to rise, however this is marginal at present & for someone who requires funds as soon as possible, today’s marketplace could prove an obstacle.
But all is not lost - & this is where a temporary bridging facility is available & can be provided by a current equity release provider.
Subject to eligibility, the Prudential’s equity release schemes can meet this objective.
By taking equity release now with Prudential you would be benefiting from their link with the Bank of England base rate & early repayment charges.
In summary, the Prudential equity release schemes will only levy a penalty should the Bank of England base rate fall from inception to the time of repayment. With this rate at an unprecedented low rate of only currently 0.5%, it is highly unlikely (but not impossible) that the rate would be lower than 0.5% in the future.
It can therefore be safely assumed that if either of the Prudential’s equity release plans are taken out, whether it be their single lump sum product or innovative increasing cash reserve plan, NO early repayment charge would apply.
Therefore, this can be great news therefore for people who have debt issues or need access to short term funds & not have it affect their tight budgetary constraints. With no monthly repayments required, clients can raise funds this year & after a 12 month period could repay in full or partially, with only a deeds release fee of £105 being levied.
This could tie in conveniently with the property market improving around this period of time.
With Prudential equity release interest rates currently as low as 6.3%, this is an excellent time to consider this form of borrowing for eligible people over age 55.
So while the Bank of England base rates remains at just 0.5% it would be advisable to consider this equity release product as a means of short term borrowing or bridging finance, depending on requirements.
In addition to this good news, Equity Release Supermarket have an exclusive offer from Prudential until 31st December 2009.
We are able to offer clients applying for the Prudential’s Increasing Cash Reserve plan a free valuation & £300 cashback on completion.
So all’s not so gloomy in the equity release market as some would suggest.
If you require further information on these topics please contact Mark Gregory on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk
Tags: Add new tag, Bridging finance, equity release, equity release schemes, home reversion, increasing cash reserve, lifetime mortgages, Prudential
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