Posts Tagged ‘Lifetime Mortgage Schemes’
Wednesday, October 14th, 2015
The equity release marketplace in 2015 has been undergoing a period of growth and innovation which has been long overdue. There are major factors influencing this potential golden generation of competitive equity release plans. Helping matters has been a new big brand household name – Legal & General who are aiming to take a large share of equity release business, but not necessarily in the conventional manner.
Realising the lifetime mortgage market needs a sea change in order to reach the heady predictions made, Legal & General are almost starting with a blank canvas & fresh approach to how equity release UK plans are marketed & advised. These ideas I’m sure will soon be rolled-out to the equity release broker community, who need to awaken to the concept of change, not much of which has really been seen over the past few years.
Personally, equity release brokers & lenders need a complete overhaul of its thinking & messages it needs to portray to the consumer to build confidence. Conventionality needs to be erased & brought into the 21st century using the latest of technology & wider distribution. This shouldn’t be just by one or two brokers strangling the marketplace, effectively restricting the entry of new lenders/funders, but an across the board approach by everyone (brokers & providers) working together.
Furthermore, for growth, new advisers are needed to be brought in from outside the industry & trained to meet the rigorous measures imposed by the Equity Release Council to ensure safe route to market for the consumer. There is a shortage of quality equity release advisers which needs immediately addressing, otherwise how can the market grow?
Legal and General Home Finance ‘Sea Change’
Let’s analyse what Legal and General Home Finance have achieved since entering the equity release arena by acquiring NewLife Mortgages in early 2015. They have provided a series of plans which have effectively matched the best crop of products in the market at entry point. Features such as the 10% voluntary repayment option, lowest interest rate, high loan-to-value products & inheritance protection facility have competed significantly well against its peers, such as Aviva Equity Release.
Understandably Legal and General had to start somewhere & their efforts so far are commendable. With product research underway & their own analysis of how the market should look moving forward, we welcome a fresh voice & innovative product development. With electronic applications & valuation instructions to commence in the New Year, these are exciting times for the industry, but not before time. Branding themselves as Legal & General Home Finance indicates their proposition will be more diverse than just traditional equity release plans.
Areas where development is needed is greater flexibility for all pre & post retirement homeowners and remedying the issues for the over 55’s sensibly borrowing into retirement which MMR has stunted. We have seen how the Marsden Retirement Mortgage has filled a niche in post lending advice & this gap between equity release schemes & residential mortgages is a void that needs consideration. Equity release plans in their current state, albeit the most flexible ever, will not meet the future needs & demands for all retirees. New ideas and new forms of retirement mortgages are needed, but maybe one’s that somehow interact with lifetime mortgages, switching between as the homeowner’s future circumstances dictate.
Can Legal & General Exert Influence?
There is a vision for the expected growth in post-retirement lending, which some market analysts have projected could reach £5billion by 2020! This is still a mere drop in the ocean compared to the residential mortgage market of over £200 billion, yet there is still almost £1 trillion in untapped equity remaining in the over 55’s property portfolio’s. Is the figure even realistic? Not in its current format & lenders thought process. This is why Legal & General’s introduction could be what the market needs.
We are aware of the history of equity release schemes, resulting in the lack of confidence with many retirees & press alike. However with the efforts from Nigel Waterson from the Equity Release Council & the voice of important members of the equity release sector such as Andrea Rosario, the market is starting to answer back. In essence, the external adverse publicity maybe due to lack of knowledge of equity release and of how the newer breed of lifetime mortgage schemes work in practice & how it’s strictly regulated by the FCA. But this is where the equity release industry has plotted its own downfall. Lenders themselves should stand up more & be accountable, especially when adverse publicity arises, as it tends to be the market correspondents alone who respond.
Frustration ensues when column inches and comments about equity release are misconstrued. But that will happen when the market is so inhibited by a few brokers who have their own interests at heart. We already have an ‘equity release club’ in the industry, but designed for brokers for equity release referral purposes. Equity release brokers themselves should form their own ‘club’, thus joining forces and work out they can ALL assist the growth in the equity release sector. A new era of consumer openness and transparency needs to develop so there is a clear voice representing the industry, with a collective approach from ALL, not just the monopoly of a few.
A Sea-Change of attitude, products, innovation and lenders is what’s required for equity release & retirement lending as a whole, to progress. At least one of these requirements seems to have been met, with the household name of Legal and General becoming a new lifetime mortgage provider. The next 12 months may define the future of this industry. These could be exciting times for all those involved from brokers through to lenders, but not forgetting the true beneficiaries to all this – homeowners over the age of 55 who genuinely need a mortgage vehicle to enhance their retirement!
For further information on the range of Legal & General equity release schemes, please contact Mark Gregory – firstname.lastname@example.org or call 07966 889597.
Wednesday, March 27th, 2013
Equity release schemes have risen in the popularity stakes over the past 12 months. With regular articles in the tabloids, and increasing government awareness, lifetime mortgages have certainly raised the bar. But how does equity release actually work in the whole scheme of things, and why has it become such topical subject matter for those looking for a comfortable lifestyle in retirement?
Equity release workings
Primarily equity release is available to home owners where the youngest person on the deeds is at least aged 55. Equity release works by allowing eligible people to raise tax free cash from the equity tied up in their home. The amount that can be released is based on an age-related ascending percentage of the value of the home. In other words, the older you are, the more you can raise!
For example a single person in good health, aged 65, with a property value of £250,000 could raise a maximum of 30% of the property value. This would mean a maximum equity release of upto £75,000 with Aviva.
Even better, is the fact there are now impaired life schemes that offer ‘enhanced’ rates to people who are not as fit and healthy as they used to be and these schemes increase the percentage that can be drawn.
Therefore, if the same person was a smoker with high blood pressure, having diabetes & a history of heart attacks could now release upto £115,500 on the Partnership enhanced lifetime mortgage scheme.
Popular uses for equity release
The money raised from any equity release scheme can be used for any legal purpose from clearing credit card balances and existing mortgages, to helping children or grandchildren with deposits to climb onto the property ladder. However, many would be treating themselves to some lifestyle indulgences such as a new car, world cruise or home improvements.
Today’s equity release schemes
The modern format of Equity Release started in the mid 1990s with Hodge Lifetime (part of Julian Hodge Bank), Norwich Union (now Aviva) & Northern Rock (now Papilio UK) with a simple roll up lifetime mortgage.
Today there are three basic equity release schemes:-
1) Roll up Lifetime Mortgage
This type of scheme has a few variations but basically the borrower takes an initial tax free lump sum, makes no monthly payments and the accrued interest is added to the loan and compounds annually.
The main variation to this is the “drawdown lifetime mortgage“ scheme. This is where only the immediately required amount is drawn down and a reserve cash facility is then offered with the remainder. No interest is accrued on this drawdown facility until it is taken in the future. The advantage here by taking it in smaller amounts is that interest is compounded at a much slower rate, than if it had be taken all at once.
Another variation of a roll up plan is offered through Hodge Lifetime on a roll-up basis. Hodge’s flexible repayment plan has an option to repay up to 10% of the original amount borrowed annually without any early repayment charges. Hodge also offer a unique ‘downsizing protection’ option whereby after five years, if the property is then sold and the owner moves & downsizes house, then no early repayment charges apply. A great solution for many who cannot sell now, but may do so in the future.
2) Interest Only Lifetime Mortgage Plans
There are two lenders currently offering this type of interest only scheme – Stonehaven and more2Life. Both schemes are fairly simple whereby a lump sum is withdrawn and the monthly interest is paid in order to maintain the balance outstanding level throughout the term.
This method has proved appealing to parents who are keen to minimise any inheritance reduction for their children. In recent times, since the withdrawal of the Halifax Retirement Home Plan lifetime interest only mortgages have become increasingly popular. Both these Equity Release Interest Only schemes have the added safety feature that should the monthly payments become too much (one applicant dying and their pension income reducing) then it can revert to a roll up equity release plan, where no payments are required thereafter.
3) The Home Reversion Plan
This is now the least popular type of equity release mortgage. Nevertheless, it can prove to be the best advice in certain scenarios. The workings are that the homeowner(s) must have a minimum age of 65. They have the option of selling part, or all of their property to the reversion provider and then lives in that property, usually rent free, for the rest of their life. In truth, this is usually only appropriate when there are no beneficiaries to the estate, or they wish to leave a guaranteed percentage of the final value of the house to their children.
Home reversion schemes only account for less than 5% of the market these days. The market has seen a few withdrawals from the market by lenders such as Aviva and Retirement Plus. The three remaining home reversion providers are Hodge Lifetime, New Life & Bridgewater.
About the author
The author of this article is Barry Adnams, who is a senior equity release adviser at Equity Release Supermarket.
Barry is aware of what a monumental decision taking equity release can be. He is a traditional adviser that would always advocate a home meeting with family involvement. Barry offers an initial cost free ‘face to face’ appointment and likes to include as many family members as possible to be present to discuss whether taking equity release is the right option, or not.
If you want to benefit from the experience Barry has to offer and understand how equity release works further, then please contact Barry Adnams at Equity Release Supermarket, on 07989 281108 for a free initial consultation. Alternatively please email email@example.com.
Friday, February 15th, 2013
Are you one of those lifetime mortgage borrowers who were originally with Northern Rock but, since March 2012, have seen the ownership of your mortgage transferred to Papilio UK Equity Release Mortgages Ltd, a subsidiary of J P Morgan?
If so, do you realise that you are probably paying interest at more than 1.3% higher than rates charged by some other lifetime mortgage lenders? And Papilio UK Equity Release no longer allows you to take further loans from the equity in your home, an option Northern Rock originally considered!
If so, you could make considerable savings by the simple process of remortgaging to another regulated lifetime mortgage lender. With equity release schemes now in the prime of their life, now has never been a better time anyway to consider an equity release remortgage.
For example, assuming you remortgaged an equity release balance of £50,000 onto a fixed rate of 5.60% instead of the 6.99% currently charged by Papilio UK, after 10 years you could save yourselves, and your beneficiaries approximately £12,000 in interest charges.
Competitiveness & Flexibility of New Plans
Depending upon the value of your home, many new lenders will allow you access to further loans either immediately, or by providing a cash reserve to draw upon at your discretion. Drawdown lifetime mortgages now account for the majority of equity release schemes taken out and provide best advice for those retirees that only need a smaller upfront lump sum, but may require additional cash in the future.
Modern day lifetime mortgage schemes have surpassed the rigid plans of old. Since Northern Rock (aka Papilio Equity Release) withdrew providing equity release mortgages the market has seen diversification unseen before. With the advent of interest only lifetime mortgage schemes, we have experience of people actually switching from old roll-up lifetime mortgage plans. Where they feel the balance has reached a point whereby they no longer want it to increase any further, they can switch to an interest only lifetime mortgage. This option may never have been available in the past.
A free initial comparison offer
Should you have a Papilio UK equity release mortgage then you will undoubtedly be paying over the odds on your interest rate. Many people contact us who hold an existing Northern Rock mortgage and ask for the Papilio UK equity release mortgages ltd telephone number to contact them. Equity Release Supermarket has advisers that are experienced in analysing whether it would be in one’s interest to switch equity release schemes.
As acknowledged specialists, Equity Release Supermarket has given objective advice to increasing numbers of applicants seeking to remortgage from Papilio UK and we have guided them painlessly through the remortgage process.
The switch analysis will take into account the set up costs of the proposed new equity release mortgage. These costs can be lower than anticipated, especially as J P Morgan/Papilio equity release have indicated in the past that they will waive early repayment charges.
Allied to the current practice of many lenders offering free valuations and paying “cashbacks” of upto £1000, then equity release companies such as Aviva can offer a new safe haven for your mortgage. By providing a smooth transition in the equity release application process you can seamlessly transfer you Papilio (Northern Rock) equity release plan to a more competitive rate benefitting yourself & beneficiaries in the long run. Aviva are currently offering rates to Equity Release Supermarket customers starting at 5.57% annual.
If you want to join those who have successfully made the transition from Papilio UK then please do contact Mike Vicary of Equity Release Supermarket, on 07795 195302 for a free initial consultation.
Sunday, February 10th, 2013
With lifetime mortgage schemes becoming increasingly commonplace and new borrowers on the increase, we look at how existing equity release customers could still benefit by reviewing and possibly remortgaging their existing plans.
Today, the equity release market has expanded to include a variety of different products. At the same time, interest rates today also tend to be more favourable to those a few years back. In light of this, those with existing lifetime mortgage schemes need to weigh-up the pros and cons of shopping around and possibly swapping or switching lifetime mortgage schemes.
Older lifetime mortgage schemes from the likes of Norwich Union, Northern Rock, Mortgage Express and Portman Building Society could have equity release interest rates of 8% and upwards if taken out in the halcyon days. However, times and products have all changed, and for those who thought their equity release was a ‘one-off’ event, could never have been more mistaken.
Like any conventional mortgage, equity release plans can also be moved to a new provider should the terms be more favourable. There could be a number of reasons to remortgage an older equity release scheme: –
- Lower interest rate
- Further borrowings
- Swap to a more flexible plan
Looking at these individually, we can explain the circumstances why many more people are now remortgaging their old lifetime mortgage plans.
Lower Interest Rate
The major factor to the expense of lifetime mortgages is the interest rate. Due to the annual compounding effect of the interest, then by cropping 1-2% off the current interest rate can literally save £1000’s over the remainder of the planholders life. This would be most beneficial for the children who will end up with more net equity available upon the death or their parents moving into long term care.
With interest rates from Aviva now as low as 5.57%, by conducting a lifetime remortgage even from an old Aviva capital release plan, would be possible & cost effective. With older lifetime mortgage rates being as high as 8%, the amount that could be saved in interest would be enormous over a long enough period of time.
It may have been many years since the original tranche of tax free cash was taken and as we know, money these days doesn’t go that far. Therefore, existing lifetime mortgage policyholders may have found this money they took out years ago has dwindled away and are maybe considering their next steps again.
Don’t worry because you have two options – return to your current lender for a lifetime mortgage further advance, or failing that, consider a completely new lifetime mortgage company, if their terms are favourable.
For instance, if your health has taken a turn for the worse then consider an enhanced lifetime mortgage scheme from the likes of Aviva, Partnership or more2life. Having ailments such as high blood pressure, diabetes, heart trouble or even being a smoker can influence a lifetime mortgage terms and conditions. If any of these symptoms exist, then the aforementioned lenders can offer a greater lumps sum than normal; exceptional should you now require maximum fund availability.
Swap to a more flexible plan
Lifetime mortgage plans of old were pretty inflexible, being a matter of taking a one-off lump sum and then sitting back thinking ‘job done’. Today’s equity release schemes have been designed with flexibility in mind.
Whereas previously only a single lump was on offer, nowadays with the advent of drawdown lifetime mortgage schemes, you can take a smaller initial amount & leave the surplus in reserve for later. This course of action has its benefits as you will only be charged interest on the capital withdrawn, not on the funds left in the reserve facility. A drawdown lifetime mortgage therefore can provide a cash reserve facility for additional borrowings required in the future. This would prevent you from having the expense of moving schemes again in the future.
A more recent development in the field of lifetime mortgages has been the ability to repay the interest which has not been a function that has previously been available. The interest only lifetime mortgage has seen a boom in sales recently now that retirees can protect their children’s inheritance by making monthly repayments of interest. Therefore, even if you have been on a roll-up scheme, but feel ‘enough is enough’ with the balance reaching its peak to feel comfortable with, you could switch to an interest only lifetime mortgage plan & consolidate the balance.
Which lifetime mortgage to swap to
Lifetime mortgage schemes essentially allow you to release some of the equity tied up in your home. The main types of lifetime mortgage schemes are the drawdown lifetime mortgage, roll-up, enhanced and the interest only lifetime mortgage. Lifetime mortgages are loans which need to be repaid once the property is sold.
Clearly, when it comes to equity release schemes, the lower the interest rate on the loan the more you save over the longer term. If you already have an existing equity release loan on your property, switching to a scheme with better interest rates may save you money. However, switching to an equity release scheme with a lower and better interest rate may not necessarily mean that you end up saving money.
It is important to find out whether your existing equity release lender has any early repayment charges in place. If you are liable to pay any early repayment penalties, these may cancel out any saving you make by switching. To find out whether switching to a scheme with better interest rates really saves you money, it is important to consider any early repayment charges in your calculations.
Equity release schemes have come a long way since they were first introduced to the market. Today, a much wider variety of products with various bells and whistles can be found. Switching to a more current plan may therefore be beneficial not just from the point of view of interest rates but for flexibility and new features as well.
For a free assessment of whether a lifetime remortgage could be beneficial then contact Equity Release Supermarket. With experienced lifetime mortgage advisers attuned to the complexities of swapping plans, they can analyse whether it would be in your best interests, or not to change equity release plans.
Call us on freephone 0800 678 5159 today for you free lifetime remortgage assessment or email firstname.lastname@example.org
Sunday, January 13th, 2013
A common question that the over 55’s are asking these days is whether equity release schemes are flexible enough to accept repayments of interest and/or capital. With an increasing financially savvy population, particularly those approaching their retirement, this poses an interesting debate.
Typically, equity release plans have been associated with the roll-up lifetime mortgage principle, whereby NO monthly payments are necessary. For many retirees this is a daunting prospect given the fact that with the compounding of interest, the inheritance they would leave behind could be severely reduced, if not eliminated.
Equity release innovation needed
Equity release providers have therefore been posed themselves the question about how to develop this sector that has historically been devoured of innovation. This lends us back to the original scenario regarding the switched nature of the over 55’s, and how they are now demanding more equity release plans to meet their changing needs.
The baby boomer age group has historically grown up on a life of credit lines such as their residential mortgage, personal loans, hire purchase and credit/store cards. For them, the continuation of a mortgage in retirement is not a serious concern providing adequate pension income is received to fulfil their monthly commitments.
Some of these people will have ended up with a mortgage leading into retirement potentially affected by endowment shortfalls or pension fund under performance. Whichever way they have an outstanding mortgage at retirement, there needs to an option available that can address this common problem.
Halifax tried and failed
Certain equity release companies have researched this and taken note, particularly given the popularity that the now defunct Halifax Retirement Home Plan. Until August 2011, this Halifax equity release plan offered the over 60’s a mortgage based interest only scheme that would run for the rest of their lives. The void this product has left since being pulled from the market has been enormous and left an opportunity for another interest only provider to fill.
Equity release mortgages have now come into their own. Where once they were categorised as a vehicle to enhance lifestyle, they have now become an instrument of necessity, for many who wish to address their retirement shortcomings. These lifetime mortgages can, with product development, provide the ideal solution to an interest only mortgage situation that will only become an even greater issue in years to come.
Changes have started
Today the equity release market has opened up and a variety of new plans are now available. 2012 has seen new products come to market that are pushing the boundaries of how the equity release concept can be expanded and accommodate more people into the fold.
Therefore, to answer to the question – ‘Do Equity Release Providers Accept Repayments of Interest and/or Capital‘, the answer is categorically ‘YES’.
The next article – ‘Which Equity Release Companies Accept Payments of Interest &/or Capital‘ will discuss the three current equity release providers that will accept repayment of interest and/or capital. Here we can look in greater depth at them: –
Hodge Lifetime – Lump Sum Lifetime Mortgage & the Flexible Lifetime Mortgage
Stonehaven – Interest Select Plans – Including Interest Select Lite, Plus, Select & Max
more2life – Interest Choice Plan
To discuss these products further call the team on 0800 678 5159 or click here to read the next article on this subject.
Tuesday, September 18th, 2012
When it comes to financial planning, it is essential to explore all your options carefully, but even more important is to understand the full implications of your financial decisions today. Equity release proves to be a good option for many people, and if you’re considering a home equity release as an option, it is necessary to fully understand it.
Therefore, decisions made now could be influential in the future should your circumstances have to change. One of these situations would be if you wish to move house in the future. This could be for several reasons: –
- Downsizing to a smaller property to raise cash to assist with financial affairs
- Moving to a property for mobility reasons e.g. to a bungalow or sheltered accommodation
- Move house to live nearer to the children to help with child minding or health care issues
A quick search online can help you find lots of information about equity release. Many equity release brokers have websites with ‘frequently asked questions’ (faq’s) sections that provide basic information about equity release mortgages. Here you can understand the two main types of equity release schemes – a lifetime mortgage and the home reversion plans. These all help the customer understand the potential risks and benefits of equity release plans and therefore form the basis of discussion with the family.
One of the common questions that people have when it comes to equity release mortgages is whether it is possible to move home once you have a lifetime mortgage or even a home reversion plan. The simple answer is yes, as long as the lender approves of the new property and the build criteria meets their acceptable lending policy.
All companies that Equity Release Supermarket deal with are members of the Equity Release Council (formerly the trade body called Safe Home Income Plan or SHIP for short). It is a condition of membership that the scheme is an approved equity release plan, which allows the applicant to transfer the mortgage to a different property.
With home reversion plans, moving is generally more complicated as the ownership of the existing home lies with both the lender and the original homeowner. Moving may involve changing the percentage ownership in the new property. Also, in case of downsizing, the home reversion lender may keep any profit made on the existing house. There are several factors to be considered, and the feasibility of a move will depend on the particular property.
While transferring an equity release lifetime mortgage is simpler, it involves additional costs, as fresh paperwork will need to be drawn up for the new property. Most lenders will require a new application which will involve all the same associated fees; namely valuation fee, application charge, solicitor’s fees and any advice fee charged by your equity release adviser.
There are further considerations when transferring lifetime mortgages which are affected by how much cash was borrowed on the original plan. The reason is that if someone is downsizing, they may need to pay off some of the existing balance on moving to a lower value house. When calculating the maximum amount that can be borrowed on the new valued property, this figure may not be high enough to pay off the balance from the former property.
Therefore, to bring the transfer in line with the lower valued property, a capital sum may need to be paid off the balance. The good news is that this would come from the equity raised by downsizing anyway and there is no penalty upon taking this course of action
Usually, there are no restrictions on moving home if the equity release is redeemed. However, you must be aware of the possible early repayment charges if the lifetime mortgage plan is paid off when moving house. Many providers charge an early repayment penalty, typically if the deal is cancelled within five years, or particular government gilts have fallen since the signing of the contract. Considering the high costs of cancellation, not enough equity may be left over to invest in a new property, so moving is generally a viable option for those who wish to transfer the equity release deal rather than cancel it altogether.
Nevertheless, to establish the exact position of your existing equity release mortgage obtain a current redemption statement which your equity release consultant can request on your behalf, with an appropriate client authority. From there an equity release calculation can be made to ascertain how much can be borrowed and the necessary recommendations can be made from there.
If you are looking at applying for equity release, or have an existing equity release scheme & considering moving home then contact Equity Release Supermarket team now on 0800 678 5159.
Alternatively, you can email the Equity Release Team – email@example.com
Sunday, July 8th, 2012
Equity release schemes have become increasingly safer over the past few years with inheritance protection options becoming more available. It is becoming apparent that equity release plans are now evolving further and diversifying. In today’s market a number of different providers have entered the arena with a variety of different equity release schemes. Although equity release plans prove to be a great option for many people, it is important to understand the concept & implications of equity release before going ahead with it.
You’re possibly wondering – is equity release a good idea?
If so then you need to understand the main reason for people being anti-equity release, which is the effect it has on their beneficiary’s inheritance. You therefore need to gather more information on equity release mortgages and the role they have to play in the retirement planning process.
One of the most common concerns that people have with equity release schemes is whether it will affect the amount of inheritance they leave behind. An equity release mortgage allows you to release some of the equity that is built up on your home, thus devaluing the property initially by the same capital amount. Over time however, this amount significantly increases as compounded interest gathers momentum, thus reducing the value of the estate. This essentially means that you’re using up some of the equity of the home, and leaving a devalued property behind.
There are different types of equity release schemes, and the two most common types are home reversion and lifetime mortgage schemes. A lifetime mortgage is a loan taken against the value of the property, which is repaid only when the owner has died and the house can be sold. A home reversion plan is the process of selling a part of the house to a reversion company, the proportional value of which is recovered once the owner has died. By selling a small part of the home, you can ensure that you leave something behind. This is one of the main advantages of home reversion plans over lifetime mortgage schemes, However, lifetime mortgages have come a long way in design & functionality over the past couple of years.
As equity release schemes have evolved they have endeavoured to become less risky. One of the characteristics of new equity release plans is that they come with a no negative equity guarantee. This means that whatever is left over after your debt is repaid goes to your beneficiaries, but if your debt is larger than the sale value of the property, the negative equity is cancelled out, and does not get carried over to your family. This is particularly relieving to those who want to release the equity on their home but are concerned about its repercussions on those they leave behind. Of all schemes this would be beneficial for would be the roll-up lifetime mortgage scheme whereby the borrower has taken the maximum advance possible.
Modern lifetime mortgages also have a new security option built into them which is called the ‘inheritance protection guarantee’. Equity release providers such as Aviva, Stonehaven, more2life all offer this safety feature available. By selecting a percentage of the property value you wish to protect, allows a fixed percentage of the property value to remain on the eventual sale of the property. The higher the percentage inheritance guarantee selected, reduces the maximum loan amount available from inception of the plan.
Equity release schemes have their advantages and disadvantages. While they may not work for some, they may be the perfect option for many others. As far as protecting your loved ones goes, modern equity release plans provide both a no-negative equity guarantee and an inheritance protection guarantee so as not to affect your family. However, always bear in mind taking out the equity from your house automatically reduces the value of the property you do leave behind.
Therefore, ensure you speak to a qualified equity release adviser who can explain both the pros and cons of equity release. Equity Release Supermarket provide a free initial consultation to discuss all issues around all aspects of inheritance protection including interest only lifetime mortgages.
Call the team today on 0800 678 5159 or email firstname.lastname@example.org
Monday, May 21st, 2012
With interest rates being so low, and investments so sluggish, many people who had retired on a nest egg are starting to struggle. The crisis seems far from over so it might be time to consider other options for “topping up” those savings and the income that they create with a home equity release scheme.
Most home equity release plans come in many forms but the most common one now is the lifetime mortgage. This style of equity release mortgage is only available to those over the age of 55, as they include special features exclusively designed for elderly and retired people. This more vulnerable age group now has the protection of the FSA (Financial Services Authority) & the trade body currently undergoing reformation which is SHIP (Safe Home Income Plans).
Changing attitudes & beliefs
These property equity release plans are designed to be secured on properties which have had most or the entire existing mortgage paid off. Equity release is essentially a re-mortgage, but with special consideration taken into what stage of life the homeowner is in. The statistics show that retirees are now living longer and have a renewed vigour & enthusiasm that has rekindled that sense of adventure from years gone by.
Why? The whole idea and acceptance that we are only here once; so ‘let’s make the most of it’ attitude.
Home equity release schemes are a great way of topping-up a retirement pension, as they can be arranged to either provide an additional amount of “income”, by slowly releasing the equity from a home in a controlled manner. Otherwise, they can provide a lump sum of cash which can go top-up an emergency fund, or to provide capital that can be used for a lifestyle purposes such as home improvements, a new car or holidays.
New lending approach from equity release companies
The benefits of today’s range of home equity release schemes are that they provide excellent value for money, given that equity release interest rates are the most competitive ever. Interest rates are now available from the likes of AVIVA starting from just 5.57% dependent upon age, property value & equity release scheme taken.
This new approach to equity release lending takes more account of how potentially profitable a plan is to them. We have already seen this to some degree with LV= who operate a tiered interest rate structure dependent upon age. Basically, the older the youngest applicant is, the higher the interest rate becomes. The principle behind this is, the younger one is, the longer their life expectancy should be. Consequently, the longer the equity release plan runs for the greater the final balance which results in a greater profit margin for the lender.
Makes business sense, or does this? Only time will tell, however from the initial feedback and rates being made available from the Aviva trial program indicates that considerable reductions in interest rates can be made, even with the offer of the free valuation and upto £1000 cashback!
What effect does this have on the children?
For those looking for the lowest interest rate on a home equity release mortgage a lower interest rate will save £1000’s over the long term. This will reduce the financial burdening of compound interest from day-to-day with the mortgage arranged so that the additional cost of interest charged is taken from the equity in the home. This means that the burden is shifted to the inheritance estate, or to when the home is sold when the policy holders are in care or downgrade their home. In each of these cases, it is likely that the market will be more buoyant and the home will have more value anyway as hopefully property values will have risen over the duration of the home equity loan period.
With savings taking such a beating due to low interest rates and pensions being punished so hard by this crisis, many retired people are struggling with their finances. Sometimes products like home equity release schemes can help and provide some extra comfort and peace of mind. They can top-up the incomes provided through annuities or drawdown pensions, and are usually available on terms which are more flexible and costs effective than those taken out in years gone by.
Equity release is an important decision. However, with the help & support of specialists in the field of lifetime mortgage and home reversions plans such as Equity Release Supermarket we can find the best equity release deal for you.
No matter your location in the UK or Northern Ireland we have equity release schemes covering these locations. So either pick up the phone & call 0800 678 5159 & speak to one of the equity release team or click here to find your local equity release adviser.
These are lifetime mortgages and home reversion plans. To understand their features and risks, ask for a personalised illustration.
Friday, May 4th, 2012
There are many reasons why you should sit down & review your existing equity release mortgage. Like any financial undertaking, products do evolve and change, hopefully for the better over the years, & equity release schemes are no different.
Here we look at the reasons for reviewing an older equity release mortgage, understanding the benefits & how to go about ascertaining whether you can remortgage your existing equity release scheme, or possibly staying put with your current provider.
Reasons for considering an analysis of your existing equity release plan
Let’s first have a look at the factors for consideration in the transfer, switch or remortgage of your current plan: –
- Could it be because your existing scheme has now exhausted its maximum lending limits with your current equity release provider?
- Maybe you now require additional tax free cash due to change in circumstances or a financial emergency has arisen.
- Simply because you require a more competitive equity release deal than at present as you are concerned about the effect the roll-up & the compounding of interest that is affecting your equity release balance.
- Finally, there could be better equity release plans available in today’s marketplace that were not available many years ago and you wish to take advantage of this to save your children’s inheritance over the longer term.
What has changed since you took out your original plan?
Dependent upon when your original plan was taken out, many lenders are now offering better, more flexible and more secure plans. The main influence though will be the fact that interest rates have dropped so significantly. Having experience of advising on the older Norwich Union equity release plans, I have evidenced the fact that around 10 years ago their rates were in excess of 8%! How times have changed.
Not only that, but my team of equity release advisers have similar experience of the older schemes which is invaluable in the decision making process & analytics of whether to transfer your existing lifetime mortgage or not. Having worked for the likes of Norwich Union equity release, Prudential, NatWest, Key Retirement Solutions & Aviva, we have the experience & knowledge to conduct a full analysis of the equity release pros and cons relating to a potential remortgage situation
How low have equity release interest rates fallen?
The fact is, if you already have an equity release plan, now is as good a time as any to re-evaluate it and shop around. Although not as low as conventional mortgage rates, equity release interest rates have fallen recently, but mainly due to competition in the equity release market. With their aggressive stance presently Aviva have become the darlings of the lifetime mortgage market with their lowest interest rate of just 5.92%. But it doesn’t just stop there. With a free valuation thrown in & £500 cashback this represents the deal of the century!
When considering a remortgage, interest rate alone is not the factor that determines your decision. The costs involved in setting up the plan are essential & these should be minimised in order to make the transition ads costs effective as possible. Therefore, the current Aviva Flexi drawdown lifetime mortgage plan is possibly the one plan that would be a viable proposition to switch over to.
What other factors must be considered other than interest rate?
It is important to make sure that any new potential equity release scheme is flexible and can be modified whenever your circumstances change. Equity release schemes must meet immediate needs, but equally, it must also be able to adapt to the future. Many new equity release schemes are much more flexible than their previous counterparts. For instance, drawdown lifetime mortgage schemes are now the most popular form of equity release mortgage currently available. This is opposed to the mainly lump sum mortgages that were available in the past, which were inflexible, could only be reviewed every 5 years & you had to budget on this basis accordingly.
When reviewing clients existing equity release mortgages, I may find several better and more suitable products on the equity release market today. However, it is not simply a case of switching lenders. Many existing equity release schemes may have clauses that make it quite binding in the long term and may incur additional charges such as an early repayment charge. This factor could be the sole reason whether to switch equity release lenders or not and deter offsetting any savings made from switching to a new plan.
It is important to consider several factors while comparing the existing equity release plan to a new one. Current interest rates, the current value of the property and the amount that needs to be borrowed. A switchover can take up to 60 days, so it becomes important to take into account interest rates over 60 days, setting up costs and the current redemption figure to work out the amount that can actually be borrowed.
What action should I take now?…
To review your existing equity release mortgage, you will need to consult an independent equity release adviser who can provide impartial, unbiased and experienced advice on different options that are available. A careful and detailed comparison needs to be made, considering various costs that will be incurred during a switchover, including setting up costs, application fees, solicitors’ fees and advice fees.
From significantly lower interest rates, to more flexible terms, switching to a new plan may have several advantages for yourself…and your beneficiaries. As a company who is remortgaged many older equity release mortgages we can speak and practice from experience.
For a free equity release analysis of your existing lifetime mortgage, contact the Equity Release Supermarket team on 0800 678 5159 or complete the online contact form today.
Friday, April 20th, 2012
News today in the equity release sector, is that Stonehaven’s range of equity release schemes are now available in mainland Scotland.
Stonehaven have been providing equity release mortgages in England and Wales since August 2006. However, due to strong demand for its range of interest only lifetime mortgages entitled ‘Interest Select’ plans, they have now incorporated the Scottish legal process into their equity release application. Therefore, with previous limited availability in Scotland for interest only lifetime mortgages, this should come as a great relief for many over 55′s in Scotland needing financial support for their retirement.
Why Has the Stonehaven Interest Select Plan Become So Popular?
Opinion is split whenever deciding to take a release of equity from a retiree’s property. Gone are the days when a one-off tax free lump sum was the only option. With the increasing flexibility in the market such as the drawdown lifetime mortgage & new enhanced equity release schemes, lenders are looking more towards ‘niche’ equity release plans.
Having captured the interest only mortgage market for the over 55′s, Stonehaven who were originally funded by Santander have come, gone, & are now back with there revised range of Interest Select Options & Lump Sum Plans. With healthy lending for 2012 & with the backing of a large mutual enhanced annuities provider, Stonehaven are now broadening their horizons & diversifying into Scotland.
People over the age of 55 are looking at different means of releasing equity from their property. Not only that, there are different financial attitudes towards their property & ultimate inheritance. This has increased awareness of the impact that roll-up equity release schemes have had on people’s inheritance on schemes previously taken out. Due to the compounding effect of the interest on roll-up schemes, many retirees have turned up their noses to conventional equity release mortgages.
This is where Stonehaven as an equity release company has benefitted. Possibly due somewhat to the demise of the Halifax Retirement Home Plan, Equity Release Supermarket advisers have seen a significant rise in enquiries for an interest only lifetime mortgage. There is a strong demand for an interest only mortgage for the over 55′s, and this signifies the fact that a majority of pensioners still have income to support a retirement mortgage. This age group has many advantages to prospective mortgage lenders, however for reasons discussed later in this article, they are significantly overlooked.
Why have Mortgages for Pensioners been Overlooked?
With a large proportion of equity in their properties, hence low loan-to-values, usually a good credit history & repayment record, the over 55′s are favourable for a mortgage where interest only repayment is only required. The Stonehaven range of Interest Select Plans have given this situation much thought, not only to the positive aspects, but also to the negatives in particular if someone encounters financial difficulties during the term of their plan. They have a specific ‘safety net’ in place that has the option that upon missing 3 monthly payments, or the planholder opts not to make anymore monthly payments, the plan can converted over to a roll-up lifetime mortgage. This removes any concern over incurring a poor credit record & eliminates any risk of repossession.
In addition the Protected Equity guarantee is available which can ensure that your beneficiaries receive a percentage of the final sale value of the property. Peace of mind for sure.
The Interest Only Mortgage Ticking ‘Timebomb’
Previous articles have discussed the FSA (Financial Services Authority) crackdown on mortgage lenders offering interest only deals. Correctly, this has made pre-retirement applications for interest only mortgages more stringent & more capital & repayment mortgages are now taken as a result.
However, this sweeping clampdown has also impacted on the post-retirement mortgage market. It seems the old adage ‘tarred with the same brush’ has been applied to the whole demographic mortgage population. It shouldn’t, as a different set of rules & principles apply to mortgages in retirement. Retirement mortgages should be made more available on an interest only or capital & repayment basis. There should be more understanding from the powers that be that the needs of pensioners are significantly different than those pre-retirement.
Retirees do not necessarily need, or want the eventual repayment of capital. Considering the FSA are regulating & accepting the principle of roll-up equity release schemes, then why the reluctance for interest only mortgages in retirement?
Exceptions should be made & this sector of the mortgage market be subject to a further review.
Nevertheless, one company who has received FSA & SHIP (Safe Home Income Plan) approval for its interest only retirement mortgage is Stonehaven. With foresight of circumstances to come & which were conceived over a decade ago, Stonehaven are currently, & will be, reeping the benefits.
Endowment shortfalls are now becoming more evident & with Aviva only expecting 1% of its low cost endowment plans to meet their targets in 2012, then we can see why mortgages into retirement are going to become a common occurrence. In addition for many reasons people are approaching retirement with a mortgage and no form of repayment. With lenders such as Santander, Woolwich, Halifax & Nationwide not extending terms for those reaching the end of their interest only mortgage terms, a solution for their plight needs to be found.
Well, this is where Stonehaven see’s how their interest only lifetime mortgage can resolve such issues. Dependent on the size of the mortgage & property valuation, Stonehaven maybe be able to assist. By using the Stonehaven equity release calculator, one can ascertain the maximum amount they could lend & hopefully assist in remortgaging from the previous lender. This would be the ideal situation, but not always the best. Alternatives should be considered such as downsizing, using savings or getting assistance from family & friends, however this may not be in the best interests of the mortgagors & family ties may over rule such as decision.
If Stonehaven can raise sufficient equity on your property to repay the mortgage, it would mean transferring onto a lifetime mortgage product which then eliminates any concerns over repayment in the future. In fact repayment is only required upon 2nd death or moving into long term care. The only obligation during the term is to maintain interest only payments which will remain EXACTLY the same for life due to the lifetime fixed interest rate which currently start from 6.08% (6.40% typical APR).
Therefore, someone borrowing £25,000 on the Stonehaven Interest Select Lite plan would find their monthly payments at just £119.96pm fixed for life!
To discuss your interest only lifetime mortgage options & alternatives as to whether the Stonehaven equity release plans are suitable to meet your requirements, contact your local independent adviser at Equity Release Supermarket by calling freephone 0800 678 5159.
Additionally, visit the Equity Release Supermarket website & read the dedicated Stonehaven Interest Select page detailing the product features & current rates available. Here you can request a Stonehaven quote & gain a greater understanding of all Stonehaven’s schemes.