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Can I Move Home with Equity Release?

Wednesday, February 26th, 2014

Moving Home With Equity ReleaseOne of the most common questions we get asked as equity release advisers is whether a lifetime mortgage is ‘flexible’ enough to meet any future change in circumstances?

 

Having reached retirement, experience has taught us all that life can be full of surprises and quite rightly this question is always high on the agenda.

 

This article has been written using my 10 years equity release experience & how I have helped guide my clients towards their ultimate goals, but at the same time alleviating any inhibitions surrounding equity release and moving home in the future.

 

The most common apprehensions regarding flexibility and moving or buying a new home can be summarised as follows:

  1. Can I move home if I have already taken out an equity release plan?
  2. Can I use equity release to purchase a new property
  3. How much can I raise on a new home using maximum equity release schemes?
  4. Can I transfer my existing equity release scheme to a new home?
  5. Can I still take out equity release if I downsize?
  6. If moving house, is it worthwhile transferring, or taking out a new plan?

 

So how does an equity release adviser dispel the fears and help their clients overcome the concerns that a release of equity mustn’t feel like a noose around their neck?

 

Considerations on Moving Home from an Equity Release Advisers Point of View

When we consider the question of a possible future house move, we can divide this into three very different scenarios; each one deserving separate consideration in its own right: –

  1. The first equity release scenario captures the proposition of using a lifetime mortgage, or home reversion plan to help fund the purchase of a new house
  2. The 2nd situation analyses the advice & legal process required when purchasing or moving home, utilising an existing equity release plan.
  3. Lastly, we explain the advisers perspective on what options are  available to a client with their existing equity release mortgage, upon moving home

 

Scenario 1 – Can I use Equity Release to help fund a house purchase?

An increasing number of enquiries seem to be coming in from people who are looking to move home, and this can be for various reasons. Some are looking to move nearer to their family for support, others are looking to downsize to repay loans and mortgages. Still others simply want to buy that bungalow they had always dreamed of for when they retired.

 

In the majority of cases, the best way to use equity release schemes to help fund a house purchase is to transact them simultaneously. This means involving an equity release application to be used as part of the legal process to buy. Consider this theory as exactly the same principle as using a conventional residential mortgage to help buy a new property.

 

In essence, by taking equity release at the same time as house purchase will save money by not duplicating the legal work, should a release of equity be needed at a later date. The rationale is that only one set of legals are required should equity release & the purchase be transacted simultaneously. However, if a release of equity is taken post purchase, then two set of legal costs are incurred; at the time of the house purchase, but then again later when equity release is done in isolation.

 

The rules are fairly straightforward, whether you use a lifetime mortgage or a home reversion plan for this purpose. A given percentage of the value of the proposed purchase property would be made available, depending on the age of the youngest applicant, and some or this entire figure would be sent to the conveyancer on the day of purchase to enable completion to take place.

 

Case Study:

Mr & Mrs Townley are aged 65 and looking to buy a property nearer to their daughter at a cost of £200,000. Their own home has been sold for £180,000 and, bearing in mind the additional costs involved, they feel they would need a further £30,000 to complete the purchase.

Following research, their lifetime mortgage adviser has recommended the Aviva Lifestyle Flexible Option where they could release upto 25% of the value of their new property. This potentially could provide them with a maximum release of £50,000.

They decided that they only want £30,000 of this for now but, as they don’t know what the future may hold, they ask for a cash reserve facility to be set up so that they could access the other £20,000 in the future, just in case they need it later.

 

Scenario 2 – Can I move home AFTER releasing equity on my home?

This is a different question altogether, but is definitely another one that comes up most of the time. Most people want to know before they enter into an equity release agreement, what would happen if they moved home in the future? This could be downsizing when one partner is left on their own, or moving into sheltered accommodation, if health dictates it becomes necessary.

 

First of all it is important to acknowledge that any lender that is a member of the Equity Release Council (which recently replaced SHIP) will allow the transfer of an equity release plan to a new, suitable property. Portability is an important facet of all equity release schemes.

 

Important considerations for anyone releasing equity include what they think MAY happen, or which is MOST LIKELY, as none of us know what’s around the corner.

 

If downsizing is the most likely outcome, then it should be very easy to find a lender that will allow this with the facility to move the equity release plan at the same time. A valuation would be carried out on the new property and the maximum configured equity release would be calculated. Having access to a lifetime mortgage calculator would be an advantage.

 

If the amount currently owed, is in excess of the maximum amount available for release on the new property, then the excess would need to be repaid from the profit made through selling and buying the cheaper property.

Of course some people want to have the flexibility of repaying the loan in full if they downsize later on and this is where some care is needed from outset to ensure this is possible.

 

As lenders become more attuned to what is important to equity release customers we are seeing some innovative thinking and I for one hope that this is a trend that will continue to grow over the coming years.

 

Scenario 3 – What should I do with an existing equity release if I want to downsize or purchase new?

This scenario is a continuation of the previous section, albeit taking into account in greater detail the options available & what should be done with an old equity release plan. It would be amiss of any adviser to automatically assume it would be in the client’s best interest to port an old lifetime mortgage or home reversion plan to the new property.

 

This is a key opportunity for an overall review of the older plan to establish its competitiveness in today’s equity release environment. From my experience of working at Norwich Union Equity Release (latterly Aviva), I am aware of older legacy equity release plans that in today’s world are outdated and uncompetitive.

 

My Experience of Norwich Union’s Legacy Equity Release Plans

The forerunner of all of Aviva’s equity release plans was called the Capital Access Plan. The Norwich Union Capital Access Plan had an interest rate, not charged against the balance, but calculated against the property value escalating over time. People with these plans who have seen a large increase in property value, will also had seen a proportionate increase in their equity release balance.

 

Another legacy plan which is no longer available is the Norwich Union Index-Linked Cash Release Plan. This a scheme which offered a maximum equity release lump sum from age 55, but with an interest rate linked to Retail Price Index (RPI). This Index Linked Cash Release Plan had a minimum interest rate of 4.89%, rising to a maximum rate of 10.14%. The calculated rate was dependent upon on the annual change in RPI which was then added to the minimum rate of 4.89%. Hence, this scheme did not provide as much certainty as today’s lifetime mortgage fixed rates.

 

From thereon in, Norwich Union or Aviva Lifetime Mortgage schemes had interest rates over 8%pa and potential early repayment charges of 100% of the original balance borrowed. Its schemes such as these that need assessing as to whether they should continue, or if favourable, could be repaid upon sale & a new plan taken upon simultaneous purchase of the new property. With rates today from Aviva as low as 5.68% annual, it could make sound financial sense to consider a new scheme which could save many £1,000’s over time by switching.

 

Free Initial Consultation

It is therefore essential for an experienced independent equity release adviser to undertake a full review of the entire situation & provide an impartial recommendation as to what is best advice moving forward. This will involve requesting an upto redemption statement from the existing lender, analysing the existing scheme & importantly assessing all the features including potential early repayment charges.

 

Equity Release schemes that were taken out some time ago are usually not as competitive, or flexible as plans around today, given the period of low interest rates incumbent over the last 2-3 years.

 

I would advise ANYONE thinking of moving to take advice as it may well be cheaper to change lender than staying with your current one and transferring your plan to the new property. The only way of finding this out is to take advice from an Independent Equity Release Adviser that is able to research the WHOLE of the market. By conducting a switch plans analysis, Equity Release Supermarket can address whether it would be worthwhile, or not, to switch equity release plans when moving home.

 

 

Examples of lenders already attuned to the option of downsizing – Hodge Lifetime

At the moment if anyone is thinking of downsizing in the future and repaying their equity release plan in full, then serious consideration should be given to a new plan such as the Hodge Lifetime Flexible Mortgage Plan.

 

This plan allows the borrower to repay the whole amount WITHOUT PENALTY if they decide to move home & downsize, as long as this is at least 5 years after inception of the plan.

 

Alongside this downsizing protection option is the fact that, if something unforeseen should happen and you need to move and repay during the first 5 years then the Hodge Lifetime penalty for doing so would be capped at 5% of the initial release in year 1, 4% in year 2, 3% in year 3, 2% in year 4 and then 1% in year 5. Significantly, the Hodge Lifetime penalty is more favourable than many of the gilt linked product related early repayment charges.

 

I believe this gives an added degree of flexibility for equity release consumers, and I hope it’s an indication that lenders are changing the way they change tact & begin providing greater flexibility as the need to move home in the future increases.

 

The fact remains that it is possible to move home and it’s imperative that you get the right advice when considering equity release initially AND when thinking of a house move as well.

 

Summary

It is probably one of the most important decisions you will make financially, as the decision you make now will not only impact on your future, but also your children & grandchildren’s future.

 

These are the reasons why we at Equity Release Supermarket always offer a free, no obligation, initial consultation which can be in the comfort of your own home or over the telephone, whichever is preferable.

This initial consultation gives us the chance to ask our clients about their objectives as well as their future plans, so that we can tailor any Equity Release scheme we recommend to each individual set of circumstances.

 

For your FREE, NO OBLIGATION, initial consultation (whether it’s your first time or if you want to review your current scheme) please call Mark on 07966 889597 or e-mail mark@equityreleasesupermarket.co.uk

 

Drawdown Lifetime Mortgages Offer the Key to Buying a New Static Caravan or Motorhome

Sunday, December 15th, 2013

Buying a Static Caravan with a lifetime mortgageOne the great advantages of Equity Release or Lifetime Mortgages is the ability to raise extra cash to enjoy in your retirement. Although a recent study showed that up to 42% of Lifetime Mortgages are taken out to pay off loans and mortgages, almost 30% are being used to enjoy holidays.

 

Equity Release Experience Counts

As an equity release specialist, I personally have had clients who have spent money raised to visit family and friends in the Far East, usually travelling in comfort as 1st class passengers on their long-haul flights. Some have taken the occasional Mediterranean cruise or a trip with the family to Florida. All these expenditures may seem extravagant. However, as a more down to earth extravagance has been the number of clients who have raised money to spend on something a little more permanent and closer to home – a Static Caravan.

 

The issues with purchasing a static caravan

Before anyone purchases a static caravan they must undertake research as to the implications & costs involved. With the cost of caravans and site fees often approaching £3,000 per annum, they have until now been out of the reach of many potential buyers, but things are changing.

Many people who own or looking to purchase a static caravan tend to be of retirement age & it’s now dawning on many who previously couldn’t afford, that they now have a financial opportunity to purchase the caravan of their dreams.

 

Case Study

I can refer to one particular couple, who until retirement had been able to afford to stay at a particular holiday site on the East Coast. With a reduced income and a smaller than expected pension they realised that they would no longer be able to do this. They missed being with their son and his wife and their grandchildren on what had been a regular holiday, an increasingly rare time when all the family was together.

 

A finance meeting with all the family took place to discuss how they were to fund the purchase of the static caravan, which was to cost, including fees a little over £25,000. Following a review of their current financial situation and understanding their objectives, I was able to make an equity release recommendation. To enable them to fund the purchase of the static caravan, it was decided that a drawdown lifetime mortgage would suit them best. This would allow them to borrow the initial £25,000 lump sum required and by creating a cash reserve, it would additionally provide access to more cash in the future to pay for annual maintenance and site fees.

 

The family who were present & involved by request at the meeting were all in agreement. During the meeting I would understand the lifestyle benefits the drawdown lifetime mortgage advice would create. For instance, he grandchildren would be able to stay for extended holidays, which pleased everyone and their children could see the advantage to themselves of sharing a place at the coast to get away for a few days. (free of charge of course!)

 

The on-going and future benefits were interesting. Not only did they spend more and more time at the caravan, away from the stresses of town life, but they found they increased their circle of friends, joining in social events arranged at the park and in the locality. This is something that many forget about the virtues of equity release schemes; how equity release can change one’s life.

 

They also had the opportunity to holiday with friends and former work colleagues which added to the sense of being part of a community, and they also found there was an element of camaraderie amongst owners as each owner kept a watchful eye on their neighbours caravan and there was always someone willing to inform them about the area and it’s facilities. Such as, where to get the ‘best cup of tea’.

 

In a similar situation, one item on their ‘bucket list’ for clients in the Peterborough area was to continue to take regular holidays in retirement. With the increased cost of holiday insurance due to health reasons and the problem of putting their two ageing dogs into kennels, holidaying abroad was becoming too expensive and impractical so they decided to buy a motor home and travel,  as and when they wanted.  They too were able to do so by taking a release of equity from their home to fund the purchase of their own static caravan.

 

Summary

In essence, equity release schemes come in various guises. Both lifetime mortgage and home reversion plans are designed to ultimately provide the tax free cash to effect life changing events. This can be for both lifestyle changes and life changing purposes.

 

As an Equity Release Supermarket adviser, I feel privileged to be able to offer this service to people over the age of 55.

Should you have an interest in purchasing a mobile home or static caravan and need assistance or advice then please contact Equity Release Supermarket on 0800 678 5159 or email admin@equityreleasesupermarket.co.uk

 

The Many (Sometimes Unusual) Reasons to Release Equity from Your Home

Monday, October 14th, 2013

Unusual reasons to release equityDuring my 10 years as a Lifetime Mortgage specialist I have come across a plethora of reasons to make genuine use of equity release schemes. There are the most obvious and popular reasons such as remortgaging and debt repayment; but there are also some that aren’t so obvious.

 

Equity Release Case Study #1

One that springs to mind is a case whereby I helped an individual back in 2007. This was a 74 year old male who lived in South Cheshire. The situation was terribly sad, but not without hope and possible happiness on the horizon.

 

His only child had been his son, who had unfortunately died a few years previous in a car crash. To compound matters further he had sadly lost his wife within the last 6 months of our meeting. Their greatest pleasure when they were together, was to go on cruises around the Mediterranean and Caribbean which they could fund from their regular income.

 

Following on from these unfortunate events, he re-evaluated his retirement plans with a positive outlook. He therefore decided that his life would now be split between 6 months at home and 6 months cruising, and it was now just a case of being able to finance his revised situation.

 

He decided he would like to raise a total of £150,000 by releasing equity after calculating that figure would cover his costs for the next 10 years.

 

I therefore arranged a flexible drawdown lifetime mortgage, with just an initial £15,000 and a large enough cash reserve facility that he could then draw upon, as and when required. This suited him perfectly and for a couple of years at least, I got postcards from around the world. The drawdown lifetime mortgage plan was his ideal plan and met his requirements not only now, but also into the future when further cruises and retirement expenses would be required.

 

That’s what we, at Equity Release Supermarket call an aspirational equity release case. That is one that helps someone to attain their goals in life and we are only too happy to help advise on such cases.

 

The other side of the coin is a needs based equity release case. This is where there is an urgent need to raise equity in order to stave off potential severe financial repercussions such as mortgage repayment, insolvency or even bankruptcy.

 

Equity Release Case Study #2

From my experience, such a case was with a 68 year old lady in North Derbyshire who had accumulated personal loans and credit card debts amounting to over £80,000. The strange part was that these were from gambling regularly on the Canadian Lottery of all things. Her family had contacted us to see if we could help which indeed we could. However, in order not to fall into a similar trap, I advised the family to remove or better still destroy her credit cards.

 

In circumstances like this, equity release schemes can act as an almost immediate relief from stress and worry and several times over the years I have had a letter from the client’s family. This provided me with personal satisfaction as they were thanking me for my considerate actions and telling me how not only does the client feel and look better, but I may have also added another few years to his life expectancy.

 

Being an lifetime mortgage adviser can sometimes transform people’s lives for the better and is one of the many reasons that I feel so passionately about the equity release marketplace I work in.

 

These are just two case studies whereby I have been able to assist retirees with their financial issues in retirement. Have it be known they are two relatively extreme cases, but I use them to show the diversity of reasons for using lifetime mortgages.

 

The reason I have been exclusively involved with equity release schemes for the last 8 or 9 years and intend to stay so until I retire, is because of the instant reaction to either attain the wherewithal to achieve ones goals, or to remove the stress and strains of financial problems in retirement.

 

About the author

Barry Adnams is the author of this article. Barry is one of the most experienced equity release advisers at Equity Release Supermarket, having previously worked as an adviser & manager at NatWest/Royal Bank of Scotland Equity Release.

 

Having worked with RBS Equity Release in 2005, Barry has much experience in dealing with retirees financial situations and is fully aware as to the importance that a release of equity can be. Barry endeavours to meet all his clients face-to-face, if not only for a cup of tea!  Dealing with his many clients this way enables Barry to discuss both the pros and cons of equity release and is always open to family members being present at such meetings.

 

If you wish to discuss anything in relation to Barry’s articles or any general questions about lifetime mortgage or home reversion plans, then please contact Barry Adnams at Equity Release Supermarket, on 07989 281108 for a free initial consultation.

 

Alternatively, Barry can be contacted by email at barry@equityreleasesupermarket.co.uk.

 

To evidence the quality of Barry’s advice & feedback from his clients please check his testimonials on the Feefo link on the homepage (bottom right corner).

 

How Long Does the Equity Release Application Process Take?

Sunday, October 7th, 2012

The equity release market is currently at its peak with a record number of applications. For those aged over 55 and are considering releasing equity, here we review how the equity release application process works, how long it takes and the involvement required.

 

The equity release sales process is now the most streamlined since the product was originally conceived. Increased competition in the marketplace from new providers has resulted in equity release companies looking at ways to steal an advantage. As better interest rates for customers are now also on offer and today’s equity release plans are much more flexible than those available until a few years ago, never has there been a better time to consider a release of equity for the over 55’s.

 

Timescales

An equity release application usually takes somewhere between 6 to 8 weeks for a lifetime mortgage scheme and 10 to 12 weeks for a home reversion plan, assuming the title on the house is clear. The actual amount of time your equity release process takes, also depends largely on how efficient and experienced your solicitor is. Applying for equity release involves legal paper work, which needs to be handled by a solicitor and solicitors with expertise in equity release plans can help to avoid any potential delays in your application.

 

The First Steps

The whole process starts with completion of an application form which must come in conjunction with financial advice as NO equity release provider will accept an application without it. At this stage any fees required which would be clearly stated in the Key Facts Illustration (KFI) would need to be paid. Normally this would include the valuation fee made payable to the lender. Some equity release brokers do charge an advice fee on application; however Equity Release Supermarket would only charge their advice fee upon completion, so beware of paying unnecessary upfront fees.

 

Valuation

On completion of the application form, it is then submitted to the equity release provider who will instruct a local surveyor to complete a basic valuation on the property. The role of this surveyor is to complete a report which will advise the current market value based on a relatively quick sale. The surveyor’s role will be to assess the local proximity to the property and establish similar properties and the price they had sold for within the last 3-6 months. Additionally, the surveyor will ascertain whether any essential repairs will be needed should the property have material defects that could affect the long term structure or re-saleability of the property.

 

Legalities

At the same time as application submission, for speed of completion it is wise for the legal process to get underway. Unless a client specifically requests to use their own family solicitor, we would recommend an equity release solicitor from ERSA (Equity release Solicitors Alliance). One of the former members of ERSA is Goldsmith Williams, whose organisation offers a fixed fee agreement with Equity Release Supermarket clients of £395 +VAT & disbursements. Additionally, these solicitors will provide a ‘no completion, no fee’ agreement with our clients which should be considered for any future lifetime mortgage or home reversion application.

 

The solicitor’s role

Two sets of solicitors must be in place to carry out the whole process. Under Equity Release Council (formerly SHIP) rules different solicitors must be employed on behalf of the client and the lender. Once instructed by the client or broker, the solicitor acting on behalf of the client will send out an initial questionnaire requesting further information. This will include a request for information on whether any mortgage exists currently, the owners to the title, any restrictions, further tenants or major improvements that have been carried out with respective planning permissions. This questionnaire also provides the permission for the prospective solicitor to act on their behalf.

 

What about existing mortgages or secured loans?

Should any existing charges by way of mortgages or secured loans be present on the title deeds then they must be removed prior to, or upon completion. Any mortgage will usually be settled by the proceeds from the equity release scheme at funds release stage. However, another role of the solicitor will be to establish exactly how much will be required on the proposed completion date. This will be achieved by requesting a redemption statement from the mortgagee, who will provide the current balance and the daily accrual rate of interest being added during the interim period to completion date.

 

Provider requirements

For an application to proceed through to completion, the lender will carry out certain checks to meet money laundering and the consumer credit act requirements. This will be proof of ID including passport, driving licence or government backed evidence such as your annual state pension letter or Inland Revenue tax code notification. Should none of these be available most lenders will also require a birth and/or marriage certificate as satisfactory proof of who you are. Additionally, proof of address will be required, so a recent utility bill or bank statement will be necessary.

 

Equity release and adverse credit

Some lenders will carry out credit checks. You may ask why this would be necessary as NO monthly payments are usually required with a lifetime mortgage scheme. The lenders view is that if someone has been negligent with previous credit payments, then there may be a tendency to not look after their property, thus affecting the lenders security.

 

Nevertheless, there would have to be severe credit problems for a lender to decline an equity release application due to adverse credit. Most lenders will accept previously missed payments, defaults and even CCJ’s (County Court Judgements) on their credit file, unless they are significantly large. Even then, most lenders such as Stonehaven will accept the application as long as the applicant has been forthcoming with an explanation as to why the CCJ’s had been applied. Undischarged bankrupts would usually be unsuccessful with any equity release borrowings.

 

Latter stages

Upon successful valuation and title checks, the solicitor acting on behalf of the client will set the completion date. Once your equity release scheme has gone through, you can receive the money by having it paid directly into your nominated bank account, or if you wish to save the telegraphic transfer fee (approximately £30), you can receive the funds in the form of a cheque. Depending on the particular scheme, money can be borrowed either as a one-off capital lump sum or by taking ad hoc withdrawals from a cash reserve set up from the outset.

 

An equity release plan can be a great way to turn the equity tied up within your estate into something tangible and usable. But like any large loan, it has its own risks. Therefore, before you decide to release equity from your home, make sure you speak to your solicitor or independent financial adviser first.

 

Companies such as Equity Release Supermarket provide the ‘complete equity release service’ whereby we provide guidance to clients from the start to finish of the application process. If you have any questions with regards to the equity release application process please call 0800 678 5159 where a qualified adviser can discuss your requirements.

 

Interesting Equity Release Plans For You To Consider

Wednesday, October 19th, 2011

The ever increasing price rises are a concern for everyone. Inflation today has been quoted at 5.4% & therefore pressure is being exerted on mortgage & equity release interest rates. People who have retired and have a limited pension are in a worse situation than in the past. Their pension does not allow them to fulfil even their basic needs, let alone luxuries. In this hard and fast world, pensioners often feel secluded and uncared for.

 

However, all is not doom & gloom for those with properties & equity tied up within them. Mortgages haven’t tended to be the focus for the retired. Their credit history tends to err on caution rather than frivolous in nature. Yet credit trends are changing with the acceptance of new credit lines & leniency towards the children’s inheritance. So more emphasis is being placed on the release of equity from lifetime mortgage schemes.

 

If you have not heard about equity release, then we will help you to understand all about it. Equity release schemes allow you to generate extra money over and above your pension. If you are one whose money is in limited supply, equity release schemes could be the answer for you. If you own property, you can apply for any type of equity release scheme. Your property enables you to release tax free cash which can be taken in stage payments or as a one off lump sum.  This additional cash helps you to live your life properly and with all the luxuries you have become used to.  More common reasons for equity release UK plans are home improvements, new car, holidays, gifting to the children or to help with the purchase of a new property.

 

There are many plans you can apply for, but drawdown equity release schemes are now the most popular. These roll-up equity release schemes offer an overall cash facility from which you can take money from as & when required. By opting for this formula you will only pay interest on cash actually taken & not the funds still held by the equity release company in their reserves.

 

Increasing popular are the interest only lifetime mortgage plans provided by companies such as Stonehaven equity release. Helped by the previous popularity of the Halifax Retirement Home Plan, interest only lifetime mortgages have increased awareness of interest paying mortgages in retirement.

 

Equity release has been in existence for a long time now, but still not everyone knows about it. The equity release trade body SHIP (Safe Home Income Plans) has led a sole crusade in raising awareness by pushing for consumer protection. Thanks to SHIP, today’s equity release schemes can be trusted & applied for without concern.

 

If you need advice on whether equity release or interest only lifetime mortgages are for you then please contact Equity Release Supermarket on 0800 678 5159 or visit the EquityReleaseSupermarket website.

 

 
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