Equity Release Latest News

Posts Tagged ‘Lifetime Mortgage Plans’

Are there Advantages in Swapping Your Equity Release Lender?

Thursday, June 7th, 2012

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

 

Reasons for switching plans

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

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

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

 

Consider your options first

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

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

 

Potential savings of remortgaging

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

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

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

 

How enhanced equity release schemes can help

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

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

 

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

 

Home Reversion Can Still Play a Part in the Whole Equity Release Scheme of Things

Saturday, April 7th, 2012

Home reversion schemes have literally had their nose pushed out of the equity release market upon entering the year 2012. There has been a significant rise in the popularity of lifetime mortgage plans; including drawdown equity release schemes, enhanced equity release schemes & interest only lifetime mortgages.

Figures produced by SHIP (Safe Home Income Plans) show that home reversion plans now only account for 2% of the whole equity release sales. Drawdown lifetime mortgages popularity has captured 62% of applications & conventional lump sum equity release sales amount to 36%.

It is clearly evident to see the sincere lack of home reversion applications. Here we look at the mis-conceptions surrounding home reversion schemes & why they must still be considered in the overall equity release scheme of things!

 

First let’s look at the home reversion plan basics..

The home reversion scheme requires the property owner to sell part or all of their property in return for a tax free lump sum. The lump sum offered by the reversion company will always be at a discount to the percentage sold. The reason for this is that the applicants can remain living in the property for the rest of their lives, rent free. Significantly, it could be some time before the home reversion lender receives their money.

No interest element is attached to home reversion schemes. Unlike lifetime mortgages, home reversion offers guarantees as to the percentage of the property that will pass to the beneficiaries at the end of the day. This stems from the initial decision made as to how much of the property’s title is transferred to the lender. For example, if 55% of the property is sold in exchange for a lump sum, then this will still guarantee 45% of the eventual sale proceeds will pass to the beneficiaries. This is a major advantage of home reversion schemes over lifetime mortgages & provides peace of mind.

 

So why the lethargy surrounding home reversion plans?

Perhaps one of the major stigmas attached is the fact that you will not own your property 100%. The reversion provider will co-own the property with you, thus having a greater say in its maintenance & future planning of the home. They will have the right to inspect the house at regular intervals to ensure it is maintained adequately, thus protecting their security. Any major home improvements will also need their permissions in case you were thinking of extensions or knocking down walls!

Another consideration would be upon moving home or wanting to sell. At this point an equity release calculation would need to be undertaken to establish how much equity you own based on current value upon transfer across to the new abode. Therefore independent valuations would need to be conducted to ascertain current market value. This could prove difficult in today’s market with a lack of sales & depressed housing market.

The one danger of home reversion plans is upon early death. Home reversion would prove expensive should you die or move into care in the earlier years of inception. Effectively, you have given up a large portion of your home based on average life expectancy. If you fail to reach this date, then home reversion could prove a poor decision. On the flip side, if longevity is in your family genes, then home reversion could be a great decision. Oh the virtues of a crystal ball!

Nevertheless, this aspect of the housing doldrums could actually have a positive accent as to why a home reversion plan could be more advantageous than a lifetime mortgage scheme.  By taking out a home reversion scheme in anticipation that property values will remain static could prove beneficial. Afterall you are guaranteed that at the end of the day some equity will remain as you have a percentage of the property value guaranteed.

Compare this to lifetime mortgage schemes where the roll-up of interest compounds yearly & will continue escalating until the plan expires. In this situation, should property values remain static, then with a continuously rising mortgage balance & static house prices, will lead to the eventual erosion of the equity. This could be so much so, that NO equity remains at the end of the day with a lifetime mortgage.

 

So why should you consider a home reversion scheme?

As you can see the home reversion plan offers a sense of assurance which is not possible with many other equity release schemes. With the progress in medical science, the human body is capable of living much longer. Age therefore plays a major role in this equity release plan with a minimum starting age of 65. Indeed, the older one gets before taking out a home reversion scheme the better the terms that will be offered by the lender. The resultant effect of this is the older the homeowner, the more is paid as a capital lump sum.

 

Some of the negative issues surrounding home reversion schemes have been addressed by the providers – Bridgewater, New Life Mortgages & Hodge Lifetime. Particularly Bridgewater have considered many of these issues & allayed such fears by building in a series of plan options. Similar to drawdown lifetime mortgages, Bridgewater offer a flexible equity release plan which allows you to sell less than 100% of the home & still provide the guarantee of future withdrawals in the future.

 

Another home reversion plan flexible feature could be a ‘secured escalating release’ option which allows you to release a lump sum of cash now, together with a future income over a number of years. This is achieved with the use of annuities.

Finally, some home reversion plans could also offer protection on early death, so always make the necessary enquiries before entering into a long term financial commitment.

 

Home reversion redemption

The home reversion company will eventually receive their money by selling the property when the occupier has died or moved into long term care. Additionally, this type of home equity scheme offers the property owner the ability to change properties. This is a requirement of SHIP (Safe Home Income Plan).

Always take the assistance of an independent financial advisor so that they can help estimate the value of your property and help you decide on the scheme best suited to your requirements. Equity release is very beneficial for retired individuals who do not have a steady flow of income or require a capital lump sum for lifestyle improvements. One of the products that could succeed with these bequests could be the home reversion scheme as it offers stability, guarantees for your children and allows you to enjoy a worry free, rent free retirement.

 

For home reversion advice contact the specialists at Equity Release Supermarket on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

Need To Learn More About Equity Release Schemes?

Tuesday, October 18th, 2011

An increase in the standard of living & more recently inflation levels has caused a shortfall in pension provision. This is now affecting all those people who are on the verge of, or now in retirement. So for those retirees who are on fixed incomes, how can they allay their fears of personal budget shortfalls?

Well consider equity release schemes as an effective solution to this problem. If you are looking for some more information, this guide will help you understand the lifetime mortgage schemes available.

 

What is an equity release scheme?

Equity release schemes allow you to release equity tied up within your home. These schemes are very popular amongst individuals who are entering, or now into the retirement phase of life. Thus, retirees can therefore overcome any shortfall in their income by utilising the tied up tax free cash within the value of their home. Equity release schemes provide pensioners with a steady flow of income thereby helping them to maintain and improve their quality of life. Additionally, in recognition of the demand for irregular tax free cash, drawdown equity release schemes can now provide flexibility.

 

Equity release is used to cover financial products that release home equity. However, they need not require any monthly payments & therefore do not affect retirement budget. It is very important to keep in mind that equity release schemes can only be considered for people who are above 55 years of age. For home reversion schemes this minimum age is increased to age 65 in lieu of the manner these schemes operate.

 

Lifetime mortgage plans are becoming increasingly popular amongst retired individuals. They provide a lump sum amount based on a combination of the age of the youngest homeowner & the property value.

The younger this age is, the lower the loan-to-value.

In contrast for those more elderly can release a percentage of the property upto 54%.

 

A few other benefits of SHIP (Safe Home Income Plans) equity release schemes are:

  • Improved standard of living
  • Portable mortgage to another property
  • A fixed rate of interest for life
  • No monthly payment or instalments required
  • No negative equity guarantee

 

Equity release is an ideal option when it comes to securing your future. If you find the process confusing, it is highly important to consult an equity release advisor such as Equity Release Supermarket. With access to market leading deals & special interest rates they can research the whole of the equity release market to find the best equity release deal available.

 

If you require advice on which equity release is suitable for you, contact the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

Want To Secure Your Retired Life? Opt For Equity Release Schemes

Friday, September 10th, 2010

Equity release schemes are specially designed for homeowners who are above 55 years and own at least one home which must be their main residence.

If you are retired and facing financial problems then equity release schemes could be an answer to your situation. By opting for an equity release plan, you can gain a lump sum amount of money against your property.

These lifetime mortgage plans operate similar to a conventional mortgage. You borrow money secured against your property, however the main difference is that you have no monthly payments. Therefore, the interest that is not repaid is instead added to the balance on a yearly basis & compounds for the rest of the equity release term. This would be on the death of the last survivor or having to move into care.

 

The Market Today

Due to varying requirements, several equity release schemes are currently available  in the market. These include lifetime mortgages and home reversion schemes. Lifetime mortgages are further divided into several categories such as:

  • Roll up lifetime mortgages
  • Fixed lifetime mortgages
  • Interest only lifetime mortgages
  • Drawdown lifetime mortgages

 

What benefits are offered by fixed lifetime mortgages?

Unlike other equity release schemes, fixed lifetime mortgages offer a lump sum of money or regular income without any interest. Under this scheme, a pre-fixed amount has to be paid whenever your property is sold. Once you have opted for this scheme then you can stay in your home for the rest of your life. It also offers no negative equity guarantee to the applicants.

 

One of the best things about this scheme is that you do not have to sell any ownership which can benefit you or your family at the time of selling the home. This means that you can leave some amount of money for your beneficiaries. With the help of the remaining value in the property, you can also arrange a loan in the future.

If you cannot deal with the complications involved in equity release schemes then request th services of an independent financial consultant such as Equity Release Supermarket.

 

For advice or further information on the right scheme for you please contact Mark Gregory on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

 
Ask us a question

captcha