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Posts Tagged ‘Retirement Mortgage’

Revealed – How the Bank of Mum & Dad use Equity Release to Fund 1st Time Buyers

Saturday, July 5th, 2014

Bank of Mum & Dad

 

It has recently come to my attention, having watched my own daughter attempt to buy her 1st property, how difficult it has become for 1st time buyers to fulfil their dreams of becoming a homeowner.

 

It also occurred to me that EQUITY RELEASE could in fact play a significant role in assisting the “Bank of Mum and Dad” and others in providing funds to enable these dreams to come true.

 

First some FACTS:

  • The average age for 1st time buyers is now 29
  • 2/3rds of 1st time buyers now turn to the Bank of Mum and Dad (BoMAD) for help
  • 30 years ago 12% of income was needed for a deposit on a property. Today this is staggering 82%!
  • The cost of an average house in the UK is 10 times bigger than the average salary rising to 14 times in London
  • In all but 2 regions in the UK, prices are 7 or more times the average salary for that area (Office of National Statistics)
  • More than 3.3 million 20-34 year olds were still living with their parents in 2013

 

Although these figures clearly indicate it is becoming almost impossible for 1st time buyers to get on the property ladder, help could be at hand – YES, from the “Bank of Mum and Dad”

 

Parents are an obvious first point of call. However with rising living costs, low interest rates and diminishing savings pots, it has become increasingly more difficult for mum and dad to find surplus funds to gift to their children, grandchildren or loved ones, to assist in fulfilling the dream of property ownership.

 

However, there could be a way to take an early inheritance from parents now in order to benefit 1st time buyers when the money is needed the most!

 

A special type of retirement mortgage commonly known as Equity Release could potentially unlock cash tied up in a parent’s property. This can enable mum & dad to generate sufficient funds to gift as a deposit on a property purchase for their loved ones.

 

What is equity release?

Equity release schemes are available in two formats – home reversion & the more popular lifetime mortgage. Both of these equity release schemes enable people who own their main residence to release a percentage of its value in return for a tax-free cash lump sum. These two types of equity release mortgages then run for the rest of your life & only repaid once upon death or moving into long term care.

 

The equity release scheme known as a lifetime mortgage has proven the most popular due to its flexibility. This has been strengthened this year with providers such as Hodge Lifetime & Aviva both providing an option to repay upto 10% of the original capital borrowed each year. Therefore, control over its final balance, or even repayment of the whole scheme over the longer term could represent a serious possibility, for either parents to pay, or the children themselves!

 

Lifetime mortgages are available to those aged 55+, with a minimum property value of £60,000. The amount that can be borrowed is not always based on affordability, but on factors such as age & property value. Effectively, the older you are, the greater amount of equity you can release.

 

Following a release of the equity, the lifetime mortgage company places a first legal charge on the property. This is exactly the same as any conventional mortgage and 100% legal ownership is still retained by the client providing peace of mind.

 

Typically, someone age 60 could release equity of between 18-25.5% of the value of the property, dependent on the lender concerned. These equity release funds can be spent on anything you like, however a sensible & cautious approach is always advised. Therefore, parents looking to assist their children onto the property ladder, a lifetime mortgage could prove an effective mortgage vehicle to achieve this goal.

 

Which equity release schemes can help 1st time buyers?

Equity release schemes have become a lot more flexible and innovative these days. You can choose to make NO repayments and have the interest added to the loan which is known as a roll-up lifetime mortgage. The amount borrowed plus any interest accrued is repaid upon sale of the property. This would happen on death (last death if joint plan) or having to go into long term permanent care. Thought must be given here should there be more than one beneficiary. With an increasing balance & possibly reducing net equity figure, consideration must be afforded to any remaining beneficiaries as to what they may potentially receive at the end of the day?

 

However, there are new repayment versions of equity release schemes that have proven even more popular with parents looking to securely gift money to their children to help with a property purchase.

 

Interest only lifetime mortgages from Stonehaven & more2life will allow the repayment of just the interest only element. By repaying interest charged each month prevents the loan from increasing and thus remains level for the rest of the mortgagor’s life. This is a great idea when there is more than one child involved. The problem has always been how to separate the gift now, from the overall inheritance at the end of the day if more than one child is involved?

 

The solution is having an interest only lifetime mortgage. By knowing in advance what the balance will be, this loan amount can be deducted from that child’s share of the inheritance at the end of the day. This would be even fairer for the other siblings, should that child also pay the monthly premiums on behalf of the Bank of Mum & Dad!

 

NEW -Voluntary partial repayment plans

Equity Release Supermarket now has access to specialist equity release schemes where there is the option to repay up to 10% of the original capital released each year without any early repayment charges. These equity release schemes through Aviva & Hodge Lifetime have proved popular for those not just looking to repay the interest, but also the opportunity to repay the equity release scheme in full over approximately 16-17 years. These voluntary partial repayment equity release schemes are proving to be the next generation of the equity release market.

 

How is the Bank of Mum & Dad protected?

All the equity release schemes we recommend are members of the Equity Release Council, which means that there are certain guarantees built into them for consumer protection. As a minimum the Equity Release Council will ensure the following guarantees are included:-

  • The schemes are portable and can be transferred to another qualifying property should you wish to move in the future
  • There is a no-negative equity guarantee which means a debt cannot be left to your estate even if the value of the property becomes less than the balance of the loan outstanding
  • You can live in your house for as long as you wish and with a lifetime mortgage you retain full ownership
  • They can be repaid at any time, subject to potential early repayment charges

 

Benefits of using Equity Release

Contrary to directly gifting your property to your children, by using equity release to gift instead, would avoid any Capital Gains Tax as the main residence is retained by the client. There could still be a potential Inheritance Tax liability, but only if the client died within 7 years of the gift.

 

The lifetime mortgage would be a deductible liability against the client’s estate, reducing the value being taxed and although interest would have to be paid on the loan; this could still prove beneficial to both the client and those receiving the gift. Always consult a tax expert on these matters in conjunction with your independent equity release adviser.

 

Of course let’s not forget the best part of this!

 

The potential to fulfil the dreams of our loved ones in an age where quite frankly, property purchase is almost becoming nothing more than just a dream for some. The joys of parenthood!

 

Next Steps…

I would be delighted to offer a FREE initial consultation to discuss any of the above matters relating to how equity release can help your children step onto the property ladder.

 

Please call me on 07788 605620 or 0203 7517228 or email cathy@equityreleasesupermarket.co.uk

Hodge Lifetime Launch New Innovative Retirement Mortgage Plan

Wednesday, July 31st, 2013

Equity Release Supermarket can today announce the launch of  the new Hodge Lifetime Retirement Mortgage Plan.

 

Only available through a selected number of intermediaries, the plan aims to provide a solution to the crisis surrounding the repayment of interest only mortgages.

 

Many articles have been written highlighting the plight of 2.6 million interest only mortgage holders who have no repayment strategy in place at the end of their mortgage term. Today marks the equity release industries response to this crisis.

 

On 1st August 2013, Hodge is launching its alternative interest only lifetime mortgage solution called the Hodge Lifetime Retirement Mortgage Plan.

 

Reasons for the Hodge’s launch

Hodge Lifetime has identified the growing crisis in people approaching retirement with interest only mortgages and no exit strategy. There have been many reasons for this situation such as poorly performing endowments, pension plans, ISA’s or simply that no repayment plan was ever in force.

 

The question for interest only mortgagors is how are they ever going to repay the mortgage balance?

 

Equity Release Supermarket is experiencing an increasing number of enquiries by people looking for an emergency repayment route from their existing mortgage provider. Where once lenders were willing to extend the mortgage term, under new FCA guidelines there is now a reluctance to extend the mortgage term, leaving repayment as the only option.

 

The options available to repay this debt include downsizing property, remortgage to an equity release scheme, transfer to another interest only mortgage, or cash in any available investments. Each of these can present their own set of problems.

 

For those looking to downsize is the ability to sell the property within the timescales provided by the mortgage lender. Equity release schemes may present limitations as to how much they can lend as they are based on a loan-to-value ratio. Depending on age, a conventional mortgage may not be available as they will not usually lend beyond age 75. Investments may not be available if used for income, or even present at all.

 

How The Hodge Retirement Mortgage Plan Can Help

Hodge Lifetime is launching a mortgage product to compare to the Halifax Retirement Home Plan which proved immensely popular until its withdrawal in August 2011.

 

Similar in concept, it enables people between the ages of 55-70 to remortgage their properties for any purpose. The amount borrowed is based on income multiples rather than a loan-to value ratio, as with equity release schemes.

 

Monthly payments of interest are then made to the lender until age 80, effectively maintaining a level mortgage balance. At that point a decision can be made as to whether you wish to continue with the payments for life, or cease & allow the interest to roll-up thereafter. The latter option would result in the mortgage balance thereafter increasing for the duration of the term.

 

The Hodge Lifetime Retirement Mortgage is eventually repaid upon death, or sale of the property.

 

By using affordability as the basis for lending criteria means people on good retirement incomes can borrow upto 50% of the property value with Hodge, subject to income. Compare this to the current interest only lifetime mortgage lender – Stonehaven, who would only lend a maximum of 19% at age 55.

 

Therefore, on a property valuation of £250,000 the difference between the two schemes is a significant £77,500.

 

Features of the Hodge Lifetime Plan

  • Flexible Repayment – Hodge will allow 10% capital repayment each year upto year 6 with no penalty
  • Fixed Early Repayment Charge (ERC) – over the first 5 years the penalty decreases from 5% down to 1% of the capital repaid. No ERC exists after year 6.
  • Fixed Interest Rate – 4.75% for 5 years, renewable thereafter (5.1% APR)
  • Minimum Loan – £20,000; Maximum Loan – £500,000
  • Eligible Income – basic state pension, pension schemes, annuity payments, SERPS or S2P
  • No Negative equity Guarantee – ensures the loan can never be greater than the property value
  • Location – available in England, Wales & mainland Scotland

 

This a lifetime mortgage. To understand the features & risks please ask for a personalised illustration.

Your home maybe repossessed if you do not maintain repayments on a mortgage secured on your home.

 

For further details, or to request a quote on the Hodge Lifetime Retirement Mortgage Plan please call the equity release team on freephone 0800 678 5469 or email mark@equityreleasesupermarket.co.uk

 

Equity Release Becomes the New Inter Generational Equity Vehicle

Wednesday, July 17th, 2013

With changing attitudes towards inheritance planning, and generational gifting becoming increasing common practice, we look at why equity release is being more widely used as the retirement vehicle of choice.

Having advised on equity release schemes for the past 14 years, we’ve witnessed firsthand the sea change in perceptions over how much of an inheritance parents are now wishing to leave their children.

 

Couple this with the growing acceptance of retirement equity release schemes by the over 55’s, we are now seeing real evidence through equity release enquiries the lengths parents are actually prepared to go to for their children.

 

Why a shift towards equity release?

In the early days of lifetime mortgage & home reversion plans, people were looking towards a release of equity mainly for lifestyle purposes; a new car, holiday or extra income. Today’s economic environment throws a different light on the real purposes for releasing equity – necessity (mainly debt consolidation) and generational gifting.

 

Equity release schemes are now providing a vehicle of choice for many that were once looking towards the retirement mortgage market when they reached state pension age. With schemes such as the Halifax Retirement Home Plan now being made redundant & mortgagees reigning in their lending criteria on the much maligned interest only mortgage, it has left little scope for retirees to find a route into secured lending.

 

How can equity release schemes assist?

Basically anyone over the age of 55, with a main residence valued above £70,000 could become eligible for an equity release mortgage. Further criteria does apply, such as any existing mortgage, property type etc, however in principle age & valuation are the main eligibility factors.

 

To ascertain your maximum release, tools such as our equity release calculator are available on the Equity Release Supermarket website. Based on the age of the youngest applicant & the current sale value of your home, the equity release calculation will prove of assistance as to whether you can raise sufficient funds to meet your financial objectives.

 

For those with an outstanding mortgage leading upto, or actually in retirement, equity release schemes have become a get out of jail card. Having a mortgage at retirement is not a crime, however the ability to repay it has become a problem for many as lenders are beginning to tighten their belts on mortgages into retirement. We have instances of clients anticipating renewal of their mortgage at retirement, only to see panic set in when their lender refuses to extend & then rub salt in the wound by demanding repayment. This would ultimately result in either a remortgage, which is becoming increasingly difficult, or sale of the property to downsize. Neither offer stress free options!

 

Bearing in mind these mortgages were actually set up with a final repayment end date, one cannot always expect in today’s economic environment the banks to be that sympathetic in such instances. However, some leniency would be welcomed, or maybe that’s just wishful thinking.

 

Equity release functionality

We have therefore seen how people are entering retirement still tied down with a mortgage. However, there are also an increasing number with unsecured debts, predominantly credit cards which people have trouble shifting once their income drops entering retirement. Perhaps realisation that there income has fallen hasn’t yet set in, which coupled with household spending continuing apace, sees the error of their ways without re-addressing the fundamental principle of ‘budgeting’.

 

The ‘equity release safety net‘ is becoming a credible solution for many in such situations. By taking a lifetime mortgage scheme, whether on a roll-up basis or more commonly an interest only lifetime mortgage, the debts can be consolidated into a secured loan fixed for the rest of their life. Depending on affordability once the debts were cleared, and attitude towards children’s inheritance, would determine whether the interest only, or roll-up version is selected.

 

Choosing roll-up means NO monthly payments. This has a benefit in leaving a household budget with a greater disposable income, particularly if all debts have been repaid. The negative aspect of roll-up is that the balance will increase over time therefore eroding, all or some of the kid’s inheritance. There are other factors that could affect the size of the inheritance, the main one being how much property values could increase by over their lifetime. Everyone has their own opinion on that.

 

Selecting an interest only lifetime mortgage engages an element of future discipline in that regular payments need to be maintained. However, there are significant advantages. These are that as the interest is being paid monthly, the debt will remain level for the duration. This has the added benefit that if house prices do increase, there could be an even larger inheritance to leave, even after you have taken a release of equity for yourself. With interest rates on these schemes starting at 5.59% (6.0% APR) and fixed for life, interest only lifetime mortgages now offer a credible equity release solution for many that were starting to despair at their lack of options.

 

Equity release gifting acts as a form of ‘early inheritance’

Finally, we touch on the growing realisation that children seem to have of accessing their inheritance now, rather than later. With difficulty for first time buyers in the current property market, the younger generation have turned to the bank of mum & dad for the answer to getting on the property ladder – using equity release.

 

This has been the biggest change in attitude we have seen in the 14 years of equity release schemes.

 

It has been two-fold: –

  1. the acceptance of parents to gift an inheritance now rather than later
  2. that the stigma of having to leave an inheritance when they die has gone

 

Increasingly, parents are taking equity out of their properties to gift to their children, mainly to invest in another property, occasionally for business or divorce purposes. It maybe all too easy for the children to say they would like their inheritance now, which is all well & fine if this is being taken out of their parents house & re-invested into their first property. Couple this with the governments help to buy scheme & providing 20% deposits leaves some children not having to strain themselves too much financially these days, judging by the many options available.

 

A great idea or not?

Some may say so; others may feel that the younger generation gets it too easy these days. Mortgages of old were also hard to come by & you had to save over a long period of time to find your deposit. Your lender even had to be the bank you held your account with!

It just seems the ‘I want it now’ attitude has arrived & the old fashioned ways of striving to find the deposit seem to have disappeared.

 

Whatever the consensus of opinion is, equity release is here to stay and finding such helpful scenarios of inter-generational gifting to become an advantage is certainly to be welcomed.

 

To discuss the topical areas within this article, or find out more about equity release and its uses, please contact the Equity Release Supermarket team on Freephone 0800 678 5159.

 

If you prefer to discuss in confidence, please send your email to mark@equityreleasesupermarket.co.uk

 

New Life Mortgages Buck the Trend & Launch a New 25 Year Interest Only Retirement Mortgage for the over 65’s

Wednesday, October 10th, 2012

The tabloids are currently awash with articles proclaiming the death knell for the interest only mortgage. We only heard a few days ago the Nationwide are just one of the high street mortgage lenders in declaring themselves out of the interest only mortgage market.

 

But are these lenders missing a trick?

 

There is a potentially huge retirement mortgage market out there; a society that has grown up on a life of managing debt. They have paid off their mortgage, loans and credit cards during their lives which has created a culture of good financial management and has enabled them to build a significant volume of equity in their property.

 

Lenders need to understand more about the needs and demands of our retired population: –

  • Pensioners have fixed incomes which will usually be incremented each year
  • Most have a good credit history with track record to prove this
  • The older population tend to manage credit better & have not harnessed the ‘buy now, pay later’ mentality of today’s younger generation
  • They cannot be made redundant, nor lose income due to sickness or injury

 

We know in business, where one dares to tread another will be quick to follow and New Life Mortgages have done just that with their newly launched Over 65’s Retirement Mortgage.

 

Who are New Life Mortgages?

New Life Mortgages have been offering equity release schemes since 2003 and their innovative ideas were behind the first ever buy-to-let equity release plan and 2nd home lifetime mortgage schemes.

 

Having been assessing the market for their latest launch, New Life has evidenced the potential behind the vacuum left by the withdrawal of products such as the Halifax Retirement Home Plan in 2011.

 

The 65+ Retirement Mortgage

The newlife mortgages 65+ mortgage is aimed at homeowners with a minimum age of 65 who are looking to raise a tax free lump sum secured against their property and who wish to remain in situ for the foreseeable future. The important aspect of this plan is the term – there is no upper age limit and the applicants can take it out over a 25 year term, possibly longer with lender approval.

 

Available on an interest only or capital & repayment basis, the 65+ mortgage has an interest rate of 5.74% variable. Therefore, applying for a £50,000 mortgage on interest only basis would cost £239pm.

 

Early repayment charges (ERC’s) are favourable also which isn’t the norm on most equity release or interest only lifetime mortgage schemes. With a penalty of 3% in the first year only and none thereafter, the 65+ mortgage could certainly could suit those who are unable to sell their properties in the short term but still need cash funds.

 

How much will New Life Lend?

Standard mortgage lending criteria applies and affordability needs to be evidenced to determine how much can be borrowed. A common sense approach, and & possibly one that most lenders in the current environment could benefit from.

 

The formula for calculating maximum borrowings  are based on income of 4x the first income plus 2.5x the second, or simply 3.75x joint income, whichever provides the highest release for the client. Even still the loan must prove affordable when viewed in conjunction with other household expenditures. Usual credit checks are made and references requested if necessary.

 

The overall maximum amount that New Life Mortgages will lend is £350,000, although again this can be reviewed subject to individual criteria. One caveat though is that the maximum amount that can be borrowed is 50% of the property value & there must be £150,000 equity remaining after the mortgage is granted. Therefore, the over 65’s mortgage may not fit all criteria; however it is hopefully a move in the right direction for pensioner mortgages.

 

Finally

The 65+ mortgage is available on a purchase or remortgage basis. If remortgaging then New Life Mortgages are currently offering a FREE legal fees package on every application.

 

If you wish to check eligibility or request a quote on the New Life Mortgages 65+ Mortgage please call the Equity Release Supermarket team on 0800 678 5159.

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

Wednesday, June 30th, 2010

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

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

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

 

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

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

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

 

 

So what options are available on reaching retirement itself?

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

 

 

What Type of Retirement Incomes Should I be Receiving?

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

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

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

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

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

 

 

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

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

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

 

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

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

Lenders have different rules on means tested benefits – to see which qualify for a mortgage in retirement contact Equity Release Supermarket on 0800 678 5159

 

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

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

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

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

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

 

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

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

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

 

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

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

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

 

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

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

Alternatively please contact Mark Gregory on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

 

Has Halifax’s Retirement Home Plan Seriously Been Overlooked As An Equity Release Alternative?

Friday, December 11th, 2009

At a time when the equity release market is downsizing with the withdrawal of many lenders, alternative funding sources need to be recognised to help widen the options available. It is in the generic mortgage market that some unique & flexible mortgage products can be sourced that offer an alternative to the traditional roll-up lifetime mortgage; it is one of these that I write about.

 

Upon gathering client details & ascertaining a generous disposable income, sometimes it can be evidenced that monthly payments can be afforded into retirement. However, there is a common misconception that someone in retirement cannot have a mortgage.

 

This is incorrect.

 

Providing income multiples can justify the borrowing requirements, then research can be sought that would provide recommendations of suitable mortgage products. However, providers that can lend into retirement have varying criteria with regards to age & the term permitted & here advice & a knowledge of the market comes into the domain of an experienced independent financial adviser.

 

The options available would be dependent on budget, but also on attitudes as to how much inheritance is to be left at the end of the day. Should it be imperative that the maximum inheritance remain, then a capital & repayment mortgage should be advised. Conversely, if this is not a major issue then an interest only mortgage can be recommended which will maintain the balance at the same level throughout the term of the mortgage.

 

Some of the major lenders such as Abbey & Alliance & Leicester do have a maximum age of 75, by which time the mortgage must be repaid. A few will lend to age 85 such as Leeds Building Society which does give more time for the mortgage to run, however, this may only be suitable for capital & repayment mortgages, not interest only mortgages.

 

Therefore, should you be looking for equity release in retirement, have surplus monthly disposable income, wish to ensure an inheritance for your beneficiaries & want the mortgage on an open-ended basis then look no further than the Halifax. It may come as a surprise that such a product may be available with a mainstream lender, however it has become more evident how this product can fulfill in-retirement needs.

 

The Halifax Retirement Home Plan can release cash over a maximum 40 year term, which for someone already near to, or actually in retirement, should be sufficient! They will only permit this product upto 75% of the property value, however this is not usually not an issue due to the amount of equity in retirees properties. Finally, dependent on whether a mortgage currently exists, we can also obtain for you a free valuation & free legal fees.

 

They will also allow the product to use the mainstream Halifax interest rates such as their 2 year base rate tracker at 2.79%, which for a £50,000 interest only mortgage would equate to a payment of only £116 per month. Obviously, consideration must be given to future potential changes that may affect the mortgage, such as the death a mortgagor which would reduce the household income & in turn affordability of the mortgage. However, this can be catered for with a life insurance policy which would repay the mortgage should either party die.

 

Alternatively, it should be borne in mind that if the level of borrowing is kept to within current equity release lending limits, then if one party did die, the surviving party could repay the mortgage with an equity release plan. This would resolve any affordability issues, as no monthly payments would be required thereafter.

 

Having completed several of these products recently, I can vouch for the speed of transacting this deal – 4 weeks, which compared to an equity release application is quicker too. Therefore, rather than just assuming equity release is the only solution, ensure you receive advice from an independent financial adviser – which Equity Release Supermarket can provide.

 

For further information & eligibility for the Halifax Retirement Home Plan please contact Mark Gregory on 0800 678 5159 or alternatively email mark@equityreleasesupermarket.co.uk

 

 

 
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