Equity Release Latest News

Posts Tagged ‘Just Retirement’

Equity Release Schemes - the main types of lifetime mortgages

Wednesday, July 28th, 2010

Would you like to have a secure and enjoyable retirement?

X

If your answer is yes, then an increasingly effective option for the over 55’s is using equity release schemes.

We all have different financial needs & the more recently developed equity release schemes are designed to meet these requirements. These schemes are incorporated within the lifetime mortgage schemes and reversion plan product range.

From this selection the roll-up lifetime mortgage scheme is preferred by the majority of people.

A lifetime mortgage scheme is specially designed for homeowners who are entering retirement and want to release equity from their home as a secured loan. Under this equity release scheme, the repayment takes place on death or the client moving into long term acre.

Once you have opted for this scheme, you can continue living in the same residence for the rest of your life, even if the equity release balance become more than the value of the house. This is due to the inclusion, at no extra cost, of the no negative equity guarantee. This ensures that no debt, over & above the property value can be passed onto the beneficiaries.

Reassurance is therefore given to the children that they cannot incur debt by the actions of their parents.

This rule is a condition of all lenders that are members of the equity release trade body - SHIP (Safe Home Income Plans) who provide consumer protection in the equity release marketplace.

X

In Summary

A lifetime mortgage scheme can divided into the following types.

  • Roll-up lifetime mortgage
  • Fixed payment lifetime mortgage
  • Interest-only lifetime mortgage

X

Roll-up lifetime mortgage - Under this kind of scheme, you do not have to pay any interest or repayments for rest of your life. The interests will be compunded yearly onto your actual loan amount and it will be paid when the home is sold on death or moving into long term care.

X

Fixed repayment lifetime mortgage - In this scheme, there is no interest added to the actual amount but you have to payback a fixed amount when your home is sold. The scheme remains the same even if you sell your home after six months or 25 years, hence it is always important you receive independent equity release advice. This equity release is currently offered by Just Retirement.

The maximum charge that can be secured is 75% of the property value. The value of the overall facility is determined by several factors including your ge, sex, property value & your health & lifestyle situation. Click here to request further details on this unique equity release scheme.

X

Interest-only lifetime mortgage - People who do not want the build up & compounding of interest can choose to make monthly repayments of interest only. Using this method, no interest is added onto your main loan as any interest generated is repaid back on a monthly basis.

Before choosing a type of lifetime mortgage, you must consider your post-retirement income and what your needs will be.

X

To discuss any of the above issues please contact Mark Gregory on 0800 783 9652 or visit the Equity Release Supermarket website at http://www.equityreleasesupermarket.co.uk

Tags: , , , , , , , , ,
Posted in Equity Release | No Comments »

Are Mortgages Available in Retirement & What Income Is Acceptable To Lenders?

Wednesday, June 30th, 2010

It is becoming more common for people reaching state retirement age to still have a mortgage running into retirement.

Even more so, there is a growing demand for extra mortgage lending once they are in retirement.

Here we discuss what retirement mortgage options are available, acceptable income sources & where to look for independent advice on these matters.

X

There can be many reasons for having a mortgage beyond state retirement age; namely poor performing low cost endowments, previous unemployment or even long term health issues.

A mortgage that runs into retirement can have major issues with both affordability & term to its repayment date. Most lenders will require repayment on a mortgage by age 75.

We will now look at ensuring all available income is being claimed. Once researched, we can then discuss which of these are eligible for inclusion in mortgage affordability calculations.

X

So what options are available on reaching retirement itself?

Well this will depend on affordability & how the financial management of the mortgage itself can continue. The main issue with regards to affordability of an interest only mortgage at retirement is how much retirement provision has been made & maximising any other available sources of income.

X

What Type of Retirement Incomes Should I be Receiving?

Having reached state retirement age the state pension will become available. However, the level of this is dependent upon national insurance contributions paid over one’s working life. The current basic state pension is £97.65pw & on its own would not be sufficient to support an interest only mortgage payment alone. State Earnings Related Pension Scheme (SERPS) & any entitlement to the graduated state pension can possibly boost the state pension somewhat, but not substantially.

State pensions are a source of income that can be utilised towards a mortgage in retirement.

X

Company pension scheme members can benefit greatly with additional pension income that could be index-linked yearly & be calculated dependent upon the number of year’s service.

There is also evidence that personal pension plans can also boosting retirement income. Increasing importance is being placed in this area on seeking independent financial advice. Due to falling annuity rates it is more important to shop around & optimise your pension fund. Annuity providers can now enhance your pension income if poor health issues exist.

Both company & personal pensions are a source of income that can be utilised towards a mortgage in retirement.

X

With the recent economic downturn we have unfortunately seen the reduction in bank & building society interest rates. This has affected investors, once reliant on good interest payments, which would supplement their lifestyle. Again ensure you shop around to obtain a higher interest with your savings is more important than ever. Tax payers should make use of their annual cash ISA allowance of £5100 & non-taxpayers should ensure that Inland Revenue form ‘R85′ is completed in order they can obtain their interest paid gross.

Savings interest can be a source of income that can be utilised towards a mortgage in retirement.

X

It is also important to check whether any means tested benefits are available from the Department of Work & Pensions.  Dependent upon age there may be eligibility for certain benefits such as pension credit & savings pension credit.

Income levels below £132.60pw for a single person & £202.40pw (2010-2011) jointly could allow a claim for pension credit to be made. Also, check any entitlement to council tax benefit availability, which even though it cannot help mortgage payments directly, it can lower the monthly outgoings.

If there are disability issues then depending on the condition, disability living allowance (DLA), attendance or even carers allowance may be available.

Lenders have different rules on means tested benefits - to see which qualify for a mortgage in retirement contact Equity Release Supermarket on 0800 783 9652

X

Maintaining employment through or into retirement does obviously alleviate some of the financial issues. However, experience has shown that there are difficulties in gaining employment.

Nevertheless, it is increasingly apparent that people are now looking to continue working into retirement & provide extra cash to support retirement lifestyle. If part time work can be found then it can not only assist the budget, but also the soul. People in retirement are feeling & looking younger & with more activity in retirement their average life expectancy is rising as social constraints are removed.

Employment income will only help people with existing mortgages going into retirement, but not anyone trying to obtain a mortgage in retirement. Lenders will only accept employment income if a new mortgage is to be repaid before state retirement age.

X

Secondary investment properties can provide a form of rental income which can be used towards paying a mortgage in retirement. However, if any existing buy to let mortgage is in operation this will need to be declared & considered as part of the application.

As long as a tenancy agreement is in existence then this will be considered by the lender.

X

Although not a specific means of retirement income, equity release schemes can also be considered a means of retirement support. The flexibility of drawdown equity release schemes now incorporates the use of drawdown facilities which are essential in supplementing a flexible lifestyle.

These drawdown equity release schemes provide an initial tax free capital lump sum, with an additional reserve facility that can be gradually withdrawn over future years.

Equity release lenders such as Just Retirement permit additional withdrawals in small amounts of £2,000 a time, which helps retirement planning & provides financial security for the future.

Another method of providing income from equity release is through a Home Income Plan. These equity release plans involve a combination of two products; a Home Reversion scheme & a lifetime annuity. The home reversion company purchases a percentage of the property in return for a tax free cash lump sum. The lump sum can then used to purchase the annuity which can then generate the lifetime pension income required.

Both these equity release schemes will not assist in obtaining a mortgage in retirement. However, in their own right they can provide alternative capital or income in retirement with no monthly payments.

X

As you can see there are various income sources which mortgage lenders can consider.

With recent restriction on lending criteria, it is more important than ever to obtain independent financial advice on this specialist area of retirement mortgage finance.

X

For further information & advice on mortgages in retirement, please click here for details of interest only mortgages currently available.

Alternatively please contact Mark Gregory on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

X

Tags: , , , , , , , , , , ,
Posted in Topics | No Comments »

Equity Release Early Repayment Charges – The Truth

Tuesday, May 4th, 2010

Anyone considering taking out equity release has many choices to make.

xxx

One of the biggest & most expensive if not advised correctly could be on early repayment of an equity release scheme.

However, before we delve into the main differences between current equity release schemes we briefly look at why early repayment charges exist & how they can arise.

xxx

Primarily, equity release is designed to run for the rest of your life.

xxx

There is no fixed term & the scheme will continue to run until the second person has died or moved into care.

At that point the property is usually sold, with the equity release provider being repaid first from the proceeds & any remaining balance is passed into their estate.

xxx

With the earliest age of starting one of these schemes being 55, the total term could well be in excess of 30 years. For this reason lenders hedge their bets in order to recover any potential early repayment which may cost them significantly.

xx

Obviously life expectancy for everyone differs.

xxx

The Financial Services Authority (FSA) use average life expectancy data in order to provide the basis of a lenders key facts illustration (quote).

It is with this same information that lenders will also formulate their early repayment charge structure.

We can relate such charges with a conventional mortgage, whereby upon early repayment within a specified term the borrower will incur an early repayment charge.

xxx

So, upon what circumstances would an early repayment charge exist?

xxx

This could be for a number of reasons: -

xxx

1.       Sale of property

2.       Inheritance

3.       Death

4.       Moving into long term care

xxx

However, not all the aforementioned would incur a penalty upon early repayment.

Equity release providers would not invoke a penalty on death or moving into long term care. Additionally, where some lenders invoke a charge for a set period of time, once this term has expired there would be no penalty thereafter.

However, there would potentially be a penalty if the property was sold during the lifetime of the owner for example if an inheritance was received or downsizing occurred & the scheme was repaid as a consequence.

xxx

In addition to the early repayment charge the lender could also levy an administration fee which can vary from zero to £300.

xxx

How do lenders calculate the early repayment charge & how much can it be?

xxx

The answer to this varies significantly & this can be evidence with the following simplified table: -

xxx

LENDER

TERM

BASIS

MAXIMUM CHARGE

Aviva

Remainder of the plan term

Charge linked to performance of gilts.

Maximum 25% initial advance

Hodge Lifetime

10 years

Percentage penalty based number of years

5%

Just Retirement

Remainder of the plan term

Depends on FTSE UK 15 year gilt yield

Maximum 20% of total advances

LV=

10 years

Percentage penalty based number of years

5% yrs 1 to 5, 3% yrs 6 to 10

xxx

As you can see, all equity release schemes have the inclusion early repayment charges & if you are considering early repayment it maybe a case of damage limitation or manipulation of repayment date that could avoid potential penalties.

From experience, this aspect of equity release penalties I will cover in a separate article to follow & can provide advice on methods of alleviating these penalties from lender to lender.

xxx

This will also include topics such as: -

  • Options on downsizing
  • Gilt rates & where to find current gilt yields
  • Information on repayment to existing equity release borrowers who are looking for additional funds or achieve a lower interest rate
  • Possible avoidance of early repayment charges - lender by lender

xxx

If you have any questions or require further information on the subject of equity release early repayment charges, please email mark@equityreleasesupermarket.co.uk or contact mark on freephone 0800 783 9652.

xxx

Tags: , , , , , , , , , ,
Posted in Topics | No Comments »

Stonehaven Suspends New Equity Release Lending

Thursday, March 11th, 2010

Stonehaven, the innovative equity release lender that sourced its funding from Santander is the latest provider to withdraw from the lifetime mortgage market.

Stonehaven have now become one of many finance houses to pull back from the sector & whom say the move is hopefully only temporary & may return to the market when funding improves.

After the shock withdrawal of Prudential at the end of 2009, Stonehaven was one of only a number of remaining providers including Just Retirement, Aviva & LV= who expressed commitment to the sector.

Georgina Smith, sales and marketing director at Stonehaven, said it has been forced to suspend lending after banking giant Santander, decided it no longer wanted to fund the equity release mortgages.

Georgina stated “We are in discussion with a number of potential lenders and we do hope to start lending again in the near future. We believe in equity release as a product,”

Stonehaven’s existing lifetime mortgage customers will not be affected with continued good servicing & they have pledged to meet all the existing terms and conditions

Stonehaven have placed deadlines on existing business applications based on KFIs generated before 10th March 2010.

New applications, supported by relevant Key Facts Illustration must be received by close of business on Wednesday 7th April 2010. Applications must include a cheque to cover the valuation fee.

Thereafter, offers made by Stonehaven are normally valid for a period 3 months; however they are extending this deadline to 6 months from the valuation date

We look forward to their return.

Mark Gregory CeMap CeRER

0800 783 9652

mark@equityreleasesupermarket.co.uk

Tags: , , , , , ,
Posted in News | No Comments »

Just Retirement Become The First Company To Reduce Equity Release Interest Rates In 2010

Monday, January 4th, 2010

With immediate effect Just Retirement has reduced their equity release interest rates from 6.79% to 6.59%.

This news arrives in conjunction with the departure of Prudential from the equity release market at the end of 2009 & is a bold move readdressing the negative moves on interest rates at the back end of last year

The interest rate reduction applies across all age ranges & as a consequence Just Retirement now becomes one of the lowest drawdown equity release schemes in the market.

In addition to this rate reduction, Equity Release Supermarket can also obtain a generous £450 cashback for the client on completion of the plan.
This certainly assists in reducing the overall set up costs of the plan.

For further information or quotation on the Just Retirement Roll-Up Lifetime Mortgage, please contact Mark Gregory on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

Tags: , , , , , , ,
Posted in News | No Comments »

Just Retirement Post Impressive Equity Release sales Statistics…

Friday, October 16th, 2009

Not all the news in the equity release market is negative at present.

 

One of the major equity release providers - Just Retirement has just announced record total sales for the three months upto September. Of this, they have stated that the sales of their equity release schemes have seen average advances increasing by over 50%.

 

Results for new business upto the three months to 30 September have shown total group new business increase by 16.4% to £213.5 million from £183.5 million over the equivalent period in 2008.

 

Comprised within this, Just Retirement’s equity release mortgage advances rose by 51.4%, from £33.1 million to £50.1 million.

These statistics have been helped by their competitive product approach & a reduction of competition within the equity release market.

 

Fresh sales of retirement annuities were also up by 8.7% to £163.5 million from £150.4 million in 2008.

 

The chief executive of Just Retirement, Mike Fuller said the results showed the resilience of the company’s economic model.

He stated that the first quarter had seen a further change in the markets with lower, but still present volatility in capital. Our ability to manage these changes and to generate sales growth is a credit to the group. In addition, I am pleased to state that this growth is consistent with our commitment to profitability and capital strength,’ he said.

 

Demand is subdued in equity release market due to the concern of property valuations; however the reduced competition has enabled Just Retirement to improve its market share.

Tags: , , , , , ,
Posted in News | No Comments »
 
Categories
Archives
Ask us a question