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Planning to opt for equity release schemes?

Tuesday, October 5th, 2010

Equity release schemes can be considered a blessing for individuals in their retirement. Like any other scheme, it is important that you consider certain factors before arriving at a decision. Given are some important factors to take into account:

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Regulation

Bear in mind that all equity release schemes are regulated and monitored by the Financial Services Authority (FSA). Additionally, all equity release advisers must themselves be authorised by the Financial  Services Authority. The adviser must have passed the industry equity release examinations by the relevant body; be it Chartered Insurance Institute (CII) or the Personal Finance Society (PFS).

A trade body set up within the industry to provide self regulation is SHIP (Safe Home Income Plans). To become a member of SHIP the equity release company must have certain features within the plan features.  These include: -

  • a no negative equity guarantee
  • the ability to repay the scheme at any time (however it can be subject to early repayment charges)
  • The freedom to move property & transfer the scheme at the same time

Non negative equity guarantee

The feature is included at no extra cost & ensures that the equity release plan has added protection for the plan holder. The guarantee ensures that the debt never exceeds the overall value of the property. Moreover, any of your outstanding debt will not be transferred to your next of kin after the sale of the property.This provides peace of mind in that no debt can be levied on your beneficiaries.

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Moving to a new property

All lenders whom are SHIP members must allow you to change your residence after taking out an equity release plan. Therefore, contact Equity Release Supermarket to ensure any recommended lender meets this criteria.

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Joint plan

You may have to take out a joint equity release plan if you are living with your partner. This decision will depend on which lender you intend to proceed to application with. If the house is in the sole name of a couple, & they are married, then lenders such as Aviva & LV= will insist that the application & the property is put into joint names. This would involve additional costs at the land registry. However, Just Retirement won’t insist on this basis of application as they will accept the party excluded on the deeds to remain so & merely sign a waiver of occupancy form. This will state that if the person on the deeds died, then they would waive their rights behind that of the equity release. This would ensure the the lender received their funds from the sale of the property within an allotted timescale.

The debt will only be reclaimed only after the death of you both or both moving into long term care. At this point the executors of the estate will be responsible for selling the property & the repayment of the equity release scheme.

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Set-up charges

There may be various charges involved in setting up equity release schemes. Some of the costs are as follows: -

  • Legal fees
  • Fees for the building survey
  • Fees for redemption of any existing loan
  • Advice fee

It is recommended that you find out any hidden costs before taking a decision. Consider these given points and arrive at a decision accordingly.There  can be a large difference between one equity release adviser & another.

For instance, Equity Release Supermarket’s advice fee is a flat £595. You can be sold exactly the same plan by certain larger equity release brokerage’s who charge over £795 & even charge for the administration between themselves & the solicitor.

Always shop around & look out for any hidden fees such as these which can make the whole process much more expensive.

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For a detailed breakdown of Equity Release Supermarket’s charges & how much you can save in charges, please contact Mark on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

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Equity release – an alternative means to generate funds

Monday, September 20th, 2010

Equity release schemes offer optional loans to homeowners who wish to use their property as a source of income generation after their retirement. It is a type of flexible mortgage that offers tax free cash to homeowners secured against the current market value of their home.

Equity release schemes are available in two formats – home reversion or lifetime mortgage. If you are retired, over 55 years of age and own a property with a good market value, lifetime mortgage equity release scheme could be the ideal option for you.

On the other hand, a home reversion equity release scheme could be attractive for different reasons. It is only appropriate for homeowners above 70 years of age & is the only scheme where you can guarantee a specific inheritance for your beneficiaries. This can be useful if you have a specific attitude that you wish that at least some of your residual estate will pass to someone after your death.

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With equity release schemes, you can either get the loan amount as a lump sum or in the form of monthly payment. Equity release schemes are fully regulated mortgages and as such come under the scrutiny of the Financial Services Authority (FSA). This ensures that you have full protection & recourse should inappropriate advice be given.

In addition to the protection offered by the FSA, you also will require the services of an equity release qualified solicitor. Upon processing your equity release application, your solicitor will be required to sign a SHIP (Safe Home Income Plans) certificate. This will confirm that he/she has discussed your requirements & noted that you are happy & fully aware of the equity release scheme & its implications.

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What if the value of the property falls?

If the value of your home drops, this will also affect the remaining equity in your property & have the knock on effect of reducing the amount your beneficiaries receive. The final equity release balance will be repaid once the property is sold after the homeowner passes away or moves into care. Nevertheless, you do have the assurance of the ‘no negative equity guarantee‘. This ensures that at final repayment, should the equity release balance be higher than that of the property value, the lender will receive no more than the property value.

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All equity release companies have to provide a Key Facts Illustration (quote) to confirm the set up & associated costs including surveyor charges, legal charges, application fees and redemption charges. This document should always be discussed with a qualified equity release adviser who can explain the features & benefits of the scheme.

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If you wish to request an equity release quote, contact Equity Release Supermarket on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

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Look at equity release schemes to secure your future

Saturday, September 11th, 2010

Over the last few years, there has been a rise in the number of people opting for equity release. The main reason for this is that these schemes provide a financial boost for those who have retired. This income is usually paid by either a tax free lump sum or regular income & can be used for any purpose. But while equity release schemes can be beneficial, there are a few things that they can affect.

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The can have an impact on benefits – These benefits are state income such as pension savings credit, council tax benefits and pension credit which can all be affected by equity release schemes. In fact, drawing too much equity can result in a reduction of benefits. However, you can avoid this by having a certified equity release adviser such as Equity Release Supermarket run through the calculations regarding specific details.

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Compounded interest – Starting an equity release scheme when you are 55 and living a long fruitful life could result in lack of equity in the property later on. This is because interest is added to the amount, which unlike a conventional mortgage is paid off. Therefore, with the interest rolling up will lead to an ever increasing repayment on eventual sale of the property. The good news is that this can be avoided through the No Negative Equity guarantee which must be prevalent in order for the scheme to be a member of the trade body -  Safe Home Income Plans (SHIP). They insist that any equity release scheme provider MUST ensure the amount owed is never more than the home value.

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A large lump sum – Most people prefer to take a large lump sum at outset of the plan. But you should be aware that the larger the initial amount, the more interest that will accrue in the long run. Fortunately, this can also be avoided if you consider a drawdown facility in the equity release schemes. This will enable you to take the equity release in smaller amounts as & when required. The benefit of this is that only as much as is required for the first 12 months need be taken. Consequently, less interest will be charged leaving a greater amount of equity for the future. This would not only benefit the plan holders as they will have more equity left in the property to potentially withdraw in the future, but also a greater inheritance for the beneficiaries.

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Following these three points can make equity release schemes much better for homeowners who are short of income or have lump sum capital requirements.

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If you have any questions on how equity release can affect means tested benefits or how drawdown equity release can benefit you please contact Mark on 0800 783 9652.

Alternatively, please email mark@equityreleasesupermarket.co.uk.

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Reap the benefits of equity release schemes

Wednesday, August 11th, 2010

After retirement, life can be quite difficult as you may not be able to spend with the same comfort and ease as you did during your working life.

Thus, you need to look for a source that can offer financial protection to you during your old age. Equity release schemes help the elderly to spend a luxurious and comfortable life after their retirement.

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Some facts about equity release schemes

Stability

Mortgage equity release schemes allow homeowners to unlock the equity that they have built in their homes. Homeowners can opt for a lump sum or monthly payment option, depending on their requirements.

One can even get a combination of both. The best part about equity release schemes is that the homeowner can continue to stay in their property.

Additionally, all schemes that Equity Release Supermarket recommend have the ‘no negative equity‘ guarantee built in at no extra cost. These schemes must have this built within if they are to be allowed to be members of SHIP (Safe Home Income Plans).

The no negative equity guarantee ensures that the beneficiaries cannot be left with any debt over & above the valuation of the property. Therefore, should the equity release balance be higher then the sale of the property, then only this value can be retained by the equity release company.

This can be very reassuring from the beneficiaries point of view.

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Value of the property

There are certain factors that influence the decision of lenders. The size and value of the property are important factors that lenders consider when offering equity release loans. If your property is in a good and well-maintained condition, lenders are more to make an equity release offer in return.

However, there maybe instances when following valuation, certain conditions could be placed upon within the equity release offer document.

These would usually be classed as essential repairs & the following could be main examples: -

  • Damp & timber issues
  • Electrical sub-standards
  • Roof
  • Wall ties

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Repayment

The amount that equity release companies offer is repaid by selling the property after the borrower passes away or moves into long term care. The amount recovered after selling the property is used to repay the equity release debt including any interest that is built up. If the amount recovered is more than the value of property, a share of the amount is given to the relatives of the borrower in accordance with their Will.

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If you are above 55, retired and looking for a solution to generate income, equity release is certainly one of the best options to consider.

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For further information on issues regarding property valuations & whether equity release could be made available, please contact Mark on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk

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Equity Release Schemes – the main types of lifetime mortgages

Wednesday, July 28th, 2010

Would you like to have a secure and enjoyable retirement?

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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.

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In Summary

A lifetime mortgage scheme can divided into the following types.

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

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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.

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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.

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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.

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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

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