Posts Tagged ‘SHIP’
Sunday, January 15th, 2012
The current financial climate is quite simply awful for many people. Particularly, the retired & elderly are really struggling to make ends meet. Many retired people who left their work before the crisis hit have had to watch in horror as a lot of the value they had expected to retire on has been wiped away by stockmarkets & low interest rates with the banks & building societies. Sometimes, what is left in the pension isn’t enough, and their reaction is that they should sell their house in order to ensure a comfortable retirement.
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However, with equity release plans, this might not necessarily be required. Instead of selling the family home, why not release equity to cover the short term finances. We maybe only talking a small sum to tie you over until prospects improve. Therefore, for the sake of selling in a depressed property market, bide your time & think carefully about your options available. Equity release schemes can play an important role here.
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Equity release schemes are form of mortgage that enables people over age 55 to release locked up equity in their main residence. The typical and most commonly thought of equity release schemes are actually called lifetime mortgages. Lifetime mortgages are available to those over 55, and have specific characteristics which reflect this unique stage in life.
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Equity release schemes are like normal mortgages in that they are associated money & a property. However, where most mortgages are used to purchase the property over an extended period of time, equity release mortgages are new mortgages placed on properties which already have or virtually paid off the mortgage. The result is that while the property now has some debt associated with it, the value that is unlocked can be used for large scale projects or purchases, supplement pensions or more commonly home improvements.
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The other difference between an equity release lifetime mortgage and a normal mortgage is that with an equity release mortgage the assumption is that the balance will be paid off when the person who holds the plan sells the asset or as a part of the inheritance estate. This is why the over 55 age restriction on equity release schemes is so important. These financial products are designed to run for the rest of one’s life, so there is no call upon the repayment of the capital until death or moving into long term care.
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Many retired people watched the drop in markets sweep billions from the values of the pension funds, and therefore pushing significant financial pressure inwardly. It is easy to see how the equity release mortgage would be an excellent option for retired people who are struggling either for income or a capital lump sum. Where they were potentially considering having to sell the family home or go back to work, many retired people can supplement their pensions with the value withdrawn via an equity release scheme.
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As lifetime mortgage & home reversion plans are now members of SHIP, you always have the option of repaying the scheme during your lifetime. However, be wary of potential early repayment charges which some gilt related schemes can significantly impose. One way providers can recover their costs is through these means.
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Often people think that equity release is tantamount to putting debts on to the next generation. What is important to keep in mind that with lifetime mortgages the ownership of the property stays in the hands of the plan owner, just like a regular mortgage. In fact, usually the biggest difference between a normal mortgage and an equity release mortgage is that the terms of the equity release plan are more favourable as they consider the age of the owner of the plan, and factor that into the calculations.
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This means that those who inherit the property may also inherit the debt, but they now have the option to decide if they want to keep the property with a normal mortgage, or sell the asset and recover the rest of the equity. These are options which can be passed onward in an estate, making it easier for the family to make decisions which are appropriate for them.
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Selling one’s house is an emotive issue & needs to be discussed with those closest to you. Next step would be to discuss whether equity release schemes are a viable option & this is where Equity Release Supermarket can use their considerable experience & knowledge to help.
For an impartial & free initial consultation call Mark on 0800 678 5159 who can offer words of advice. Alternatively,in confidence email mark@equityreleasesupermarket with any questions you may have.
Tags: equity release, equity release mortgage, equity release schemes, Equity Release Supermarket, Financial adviser, FSA, home reversion, lifetime mortgage, lifetime mortgage schemes, lifetime mortgages, SHIP
Posted in Advice, Equity Release, News | No Comments »
Wednesday, December 21st, 2011
What is an interest only lifetime mortgage? Well there are many reasons to look into interest only lifetime mortgages in order to meet the financial challenges in our current economic climate.
An interest only mortgage should always be considered before a roll-up equity release or home reversion plan. If you are looking towards protecting your inheritance & wish to pass the full estate to your beneficiaries then an only interest mortgage will do as it says on the tin. By borrowing a fixed amount & repayment of just the interest element will mean that the balance will remain exactly the same.
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Example of an Interest Only Lifetime Mortgage
The interest only lifetime mortgage is an especially useful product for those over 55, as there are specialist equity release style interest only lifetime mortgages available. Often these plans provide historically attractive interest rates and features that assist those in retirement to plan their financial futures. Consider Stonehaven equity release, who offer several forms of their Interest Select Plan which is effectively a non-verification lifetime mortgage. With this plan you can effectively borrow a percentage of the value of the property & you can chose how much of the interest to pay – starting from £25pm upto the full interest payment.
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What Purposes can it be used for?
Many people who are looking to consolidate debts will find the Stonehaven Interest Select style of interest only lifetime mortgage to be an attractive option for getting all debts under one single interest only payment. This kind of debt consolidation means that the actual total amount borrowed and paid monthly is thereby reduced & hopefully under control. Additionally, the lower interest payments are likely to be less than payments made over many other debts due to the considerably lower interest rates charged by credit card companies & alike.
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Overall, this makes the payment of debts easier, as Stonehaven will automatically take payment by direct debit, and easy to plan as the total amount is taken monthly. The fixed interest rate option on an interest only mortgage is a very attractive offer. This means that regardless of the Bank of England manipulating conventional interest rates, the Stonehaven interest select plan will always remain exactly the same. For this reason and these features, is why the Stonehaven Interest Select and Stonehaven Interest Select lite (has lowest fixed interest rate at 6.13%) are so popular. More details about these plans can be found on the Equity Release Supermarket website.
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Are Alternative Equity release Schemes Available?
There are alternative options available for those looking for equity release schemes, including other options for interest only lifetime mortgages. These could depend upon location such as Scotland & certain counties within England where we have access to specialist lenders. It is therefore important to discuss what is right for you with an accredited independent equity release advisor who has access to the whole of the equity release & interest only mortgage market.
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Another place to research equity release schemes and interest only lifetime mortgages is the Safe Home Income Plans (SHIP) website, which acts as a consumer safety watchdog for elderly financial products. The Stonehaven equity release products are all registered with SHIP, so these products also come with this important peace of mind. They also have the protection of being regulated by the Financial Services Authority (FSA) thereby coming under the auspices of their compensation scheme.
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There are many reasons for those over 55 years of age to consider equity release. Many often wonder what is an interest only mortgage? They also wonder what the best options are for their specific needs and situation. While a financial advisor is best placed to help, researching SHIP qualified products like the Stonehaven Interest Select interest only lifetime mortgages often help get started.
The Equity Release Supermarket website is also a useful place to start learning about the ‘ins and outs’ of equity release. There is a lot to learn, so be sure to speak to one of our specialist financial advisers as early as possible and often to be clear about the direction your enquiry is heading.
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Call our Freephone number 0800 678 5159 for further details on Interest Only Lifetime Mortgage Plans.
Alternatively, follow this link to request a Stonehaven equity release quote.
Tags: equity release, FSA, interest only lifetime mortgage, interest only mortgage, lifetime mortgages, SHIP, Stonehaven, Stonehaven equity release, Stonehaven interest select
Posted in Interest Only Lifetime Mortgage, Stonehaven Interest Select | No Comments »
Tuesday, November 15th, 2011
Since its withdrawal in August 2011, the Halifax Retirement Home Plan has certainly left a void in the post retirement mortgage market. What options remain for pensioner mortgages?
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Pensioners, who were proposing to use the Halifax Retirement Home Plan at a future date, unaware of its impending withdrawal, have now had their retirement plans severely disrupted.
Enquiries are still being received from retirees looking for a pensioner mortgage which can be used for a variety of lifestyle solutions.
With options from moving house, to holidays, gifting to children & home improvements, there has been a significant reduction in the interest only mortgage options available.
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So why was the Halifax Retirement Home Plan Withdrawn?
Enormous demand for the Halifax Retirement Home Plan apparently consigned the product to its own demise. Success is not usually associated with dramatic failure, but it seems the Halifax Retirement Home Plan was in this case, a victim of its own success.
Given the volume of applications Halifax was receiving, even a lender the size of Halifax was struggling with such popularity. Towards its latter days the Halifax back office systems were choking, solicitors being incorrectly instructed & timescales reaching unacceptable levels, so much so that Halifax have actually compensated clients due to administrative errors.
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Reasons for the Halifax Retirement Home Plan’s Popularity
Since the products inception in July 1984, the Retirement Home Plan lay hidden in Halifax’s mortgage book for many years.
However, certain intermediaries specialising in equity release, subsequently understood the product had a role to play in providing best advice & offered an alternative to roll-up equity release schemes.
Not everyone is suited to a lifetime equity release scheme where the interest rolls up & compounds annually for the rest of their lives. Roll-up schemes to some pensioners can prove off extremely off-putting, with the balance approximately doubling every 10-11 years. The resultant effect & the impact of the compounding of interest will be that their beneficiaries will receive a significantly lower or completely eroded inheritance.
Therefore, for retirees who did not want this scenario, the interest only lifetime mortgage proved an excellent alternative. Obviously supported by a good secure disposable income, the Halifax monthly mortgage payments could be fulfilled, with the resultant effect of keeping the mortgage balance exactly the same for the remainder of the mortgage term.
However, the doomsday scenario did eventually arrive & the Halifax Retirement Home Plan was pulled on 17th August 2011 at very short notice.
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Regulation & the FSA Effect
With the FSA (Financial Services Authority) now imposing stricter regulation on interest only mortgages, this has impacted on the whole post retirement mortgage market.
Regulation here should be reviewed & consideration given to the plight of pensioners.
Over 60’s looking for finance have fixed income for life.
They are already drawing their state, private & occupational pensions.
They are therefore in receipt of a guaranteed income for life.
They can’t be made redundant, be off work due to sickness or take maternity leave!
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Additionally & historically the retired generation of today have a different attitude to credit & tend to err on the side of caution. They have benefitted from house price booms of the last decades & consequently on the whole have a great deal of equityto release in their properties.
From a lenders perspective you can’t get much better security than this?
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So why are the over 60’s being penalised?
After discussions with various lenders their defence has supposedly been the fragility of repayment. Considering monthly mortgage payments are paid by direct debit & pensions & retirement incomes are paid directly into the bank account, this doesn’t seem to hold true?
The distinction should be therefore be made between the people pre retirement & those post retirement with regards to interest only mortgages.
The FSA has understandably clamped down on first time buyers & mid life mortgagors taking out interest only mortgages with NO repayment vehicles. However, this has been to the detriment of pensioners whose cause has been undermined.
So for now we have to accept the level of caution in the mortgage market. However, moving forward consultation & consideration should be given to this corner of the mortgage market as it can have additional benefits to a fragile economy. The reason being is that pensioners releasing equity in retirement do so mainly for lifestyle reasons:-
- home improvements
- deposits for the children
- holidays
- new car/caravan
All these expenditures for one reason or another will help boost both the local & national economy.
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What Interest Only Pensioner Mortgages Are Currently Available?
The aforementioned issues have arisen with the tightening of interest only criteria. Lenders will now insist on most mortgages expiring by age 75 & this will usually have to be on capital & repayment basis. More often than not this will result in the monthly cost being prohibitive, as paying off a mortgage of £50,000 over a short term of say 10 years can be out of most people’s affordability levels!
Nevertheless, a specialist equity release lender has analysed the situation better than most & hence we unveil the Stonehaven Interest Select Plan.
Offering SHIP security & choice as to the size of the monthly contribution, Stonehaven have covered all bases. This interest only lifetime mortgage provides lifetime fixed interest rates starting from just 6.13% thereby offering affordability now & into the future. With pension incomes rising over the years, but the monthly mortgage payments guaranteed to remain the same, the Stonehaven interest only equity release plan provides protection from future increases in interest rates.
However, it doesn’t end there because if financial difficulties do arise then there is always the option to switch it over to a roll-up equity release plan with Stonehaven. No further payments are then required & dependent upon whether the switch was planned ahead or not, will determine whether an extra 0.2% is added to the rate.
Stonehaven are members of SHIP & regulated by the FSA.
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Rumour has it that niche lenders are now starting to look into pensioner mortgages & eyeing business opportunities, so there does seem to be light at the end of the retirement rainbow!
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If you wish to make an enquiry on the Stonehaven Interest Select call the Equity Release Supermarket team on Freephone 0800 678 5159 or email mark@equityreleasesupermarket.co.uk
Tags: equity release, interest only lifetime mortgage, interest only mortgage, lifetime mortgages, SHIP
Posted in Interest Only Lifetime Mortgage | No Comments »
Tuesday, October 18th, 2011
An increase in the standard of living & more recently inflation levels has caused a shortfall in pension provision. This is now affecting all those people who are on the verge of, or now in retirement. So for those retirees who are on fixed incomes, how can they allay their fears of personal budget shortfalls?
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Well consider equity release schemes as an effective solution to this problem. If you are looking for some more information, this guide will help you understand the lifetime mortgage schemes available.
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What is an equity release scheme?
Equity release schemes allow you to release equity tied up within your home. These schemes are very popular amongst individuals who are entering, or now into the retirement phase of life. Thus, retirees can therefore overcome any shortfall in their income by utilising the tied up tax free cash within the value of their home. Equity release schemes provide pensioners with a steady flow of income thereby helping them to maintain and improve their quality of life. Additionally, in recognition of the demand for irregular tax free cash, drawdown equity release schemes can now provide flexibility.
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Equity release is used to cover financial products that release home equity. However, they need not require any monthly payments & therefore do not affect retirement budget. It is very important to keep in mind that equity release schemes can only be considered for people who are above 55 years of age. For home reversion schemes this minimum age is increased to age 65 in lieu of the manner these schemes operate.
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Lifetime mortgage plans are becoming increasingly popular amongst retired individuals. They provide a lump sum amount based on a combination of the age of the youngest homeowner & the property value.
The younger this age is, the lower the loan-to-value.
In contrast for those more elderly can release a percentage of the property upto 54%.
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A few other benefits of SHIP (Safe Home Income Plans) equity release schemes are:
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- Improved standard of living
- Portable mortgage to another property
- A fixed rate of interest for life
- No monthly payment or instalments required
- No negative equity guarantee
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Equity release is an ideal option when it comes to securing your future. If you find the process confusing, it is highly important to consult an equity release advisor such as Equity Release Supermarket. With access to market leading deals & special interest rates they can research the whole of the equity release market to find the best equity release deal available.
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If you require advice on which equity release is suitable for you, contact the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk
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Tags: drawdown equity release, equity release, Equity Release Adviser, equity release schemes, Equity Release Supermarket, home reversion schemes, No negative equity guarantee, Roll up lifetime mortgage, SHIP
Posted in Equity Release, Interest Only Lifetime Mortgage | No Comments »
Tuesday, June 7th, 2011
Equity release schemes have become extremely popular amongst retired individuals due to their myriad of benefits. The most notable benefit of these form of lifetime mortgage is that you do not have to move out of your home to get equity from your property & you have no monthly mortgage payments to make. Similar to any other financial scheme, it is important to consider your needs and requirements before you arrive at a decision.
Mentioned below are some important factors that you need to understand before selecting an equity release scheme.
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No negative equity guarantee
Most equity release schemes have a no negative equity guarantee provided free of charge & automatically incorporated into any SHIP equity release plan. A no negative equity guarantee will ensure that your outstanding debt will never exceed the overall value of your property. At the same time, any outstanding debt will not be transferred to your family after you pass away. Therefore, your beneficiaries can be safe in the knowledage that by you taking equity now, will not make you pay for it later.
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Moving to a new property
It should be noted that moving to a new property is permitted by the equity release provider you choose to go with. However, as long as the property you are moving to is of standard construction & if leasehold has a lease still in excess of 75 years then it should still be possible to transfer your scheme. Because of this reason, it is recommended to look for a reutable equity release scheme that caters to your specific needs.Again, all equity release schemes that are members of SHIP (Safe Home Income Plans) must have this facility to transfer the mortgage built within the terms.
If you are looking to downsize, then a repayment maybe required to bring the amount riased in line with the equity release providers loan to value. This amount would usually come from the equity that has been raised by downsizing so there would be no need for alarm. Additionally, as you are making some form of repayment, then NO early repayment charge would be applied by the lifetime mortgage provider.
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Criteria
It should be noted that you will need to meet the equity release companies criteria to become eligible for equity release schemes. For starters, you need to be at least 55 years of age & own your own home. At the same time, the market value of your home should be at least £60,000, although some equity lenders do impose higher valuations so check beforehand. Ensuring you meet these criterion’s will help if you are planning to opt for one of best equity release plans.
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However, help is always on hand. Therefore to establish whether equity release is the correct path for you to follow then speak to the specialists at Equity Release Supermarket. Call freephone 0800 678 5159 or email mark@equityreleasesupermarket.co.uk
Tags: equity release, equity release schemes, lifetime mortgage schemes, lifetime mortgages, No negative equity guarantee, SHIP
Posted in Equity Release | No Comments »
Tuesday, April 19th, 2011
Upon researching whether equity release is a suitable option, you may be finding most of the information available in the press or on the internet focuses on the main types of plans available which are Roll-Up Lifetime Mortgages.
There is in fact another type of plan which is less commonly understood and these are called Home Reversion plans.
I think it’s important to consider these plans in more depth. Increasingly home reversions are become more appropriate for those considering taking an equity release plan, particularly if those looking for a simple plan giving a high degree of certainty.
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A home reversion plan involves transferring ownership of all or part of your property to the provider in exchange for a tax free cash lump sum (or you can choose regular payments). Your property is independently valued and from this the provider will work out how much they will pay you for the percentage of the property being sold.
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The amount you’re paid wont be as much as the market value of the property. This is simply because you will be living there rent free for the rest of your life (or until moving out permanently into long term care). As a “rule of thumb” the older you are the more the home reversion provider will pay you for the share sold, that’s because your life expectancy is less. You are still responsible for paying all your bills, insurance and maintaining the property. At the end of the plan the property is sold and if you’ve retained part of it, your share of the proceeds will be paid to your estate.
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When considering a home reversion company, it’s important to choose a provider who is a member of the trade body Safe Home Income Plans. SHIP members offer a guarantee to their customers, the main benefits of this are that you’re allowed to remain in your property for life (provided the property remains your main residence) and you have the right to move plan to another suitable property without any financial penalty. Plus of course you have the safeguard of independent legal advice.
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Home reversions are also regulated by the Financial Services Authority (FSA) which oversees how providers and advisers must deal with you. And finally, because home reversions involve the sale of property a third level of extra consumer protection is given by UK property law, which governs the relationship with the provider and their obligations towards you.
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So what type of people are home reversion schemes most suitable for?
Well it really boils down to your thoughts and concerns. As a guide a reversion might be more appropriate for someone who falls into some or all of the following categories:
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- Customers who want to specifically avoid debt – a home reversion plan is not a mortgage & cannot therefore be repossessed
- Those concerned house prices won’t keep going up – the risk of falling house prices is passed to the provider
- People in good heath and confident that they may live for many more years to come (for example there may be a history of longevity in the family) – generally the longer you live the better value a reversion becomes
- Anyone wanting to the peace of mind of knowing that if they need to in the future, they can access the maximum cash from their remaining equity – some providers will guarantee to always release further funds until 100% of the property is sold
- Clients wanting to guarantee an inheritance for their estate – for example if only 25% of the property is sold, the estate will inherit 75% of its value after costs
- Those wanting to release more cash from their property than they can by using a lifetime mortgage
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Naturally home reversion plans are not for everyone. Generally you will only be eligible to take a reversion plan if you are 65 or older. Ideally, to get the better rates you would need to be over age 70.
As reversions are a long term commitment they should not be considered if you intend to repay the money released at some stage in the future (for example if you’re expecting an inheritance).
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If you are in poor health or expect to have below average life expectancy then you may not get full value from a reversion either. However, we do have access to products now that do offer an impaired life (poor health) facility & therefore can provide an extra lump sum for this reason.
For those unfamiliar with how a reversion works there is understandably a little concern about giving up all or part ownership of your property.
The reality is that the terms and conditions of a reversion (ie the “small print”) are similar to that of equity release and your right to privacy and freedom to live in your own home are not affected.
Usually with a home reversion you are granted a lease for life to live in the property for as long as you wish to. And this important legal arrangement is recorded by HM Land Registry much the same as a leasehold flat or house is. So although you may have sold all or part of the property to the provider it still very much remains your home.
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The decision to release equity from your home using a home reversion plan or a lifetime mortgage is an important one and you will need specialist advice from a Financial Adviser in order to do so. They can talk to you about whether equity release is right for you and if it is what sort of product best suits your particular needs.
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To obtain further information on Home Reversion schemes, please contact an Equity Release Supermarket adviser on 0800 783 9652 or email mark@equityreleasesupermarket.co.uk
Tags: equity release, Equity Release Adviser, FSA, home reversion, home reversion plans, home reversion schemes, impaired life, inheritance protection, lifetime lease, lifetime mortgages, lifetime tenancy, SHIP
Posted in Advice, Equity Release | No Comments »
Tuesday, March 8th, 2011
On Thursday 3rd March 2011, the equity release market saw another welcome lender return with Stonehaven relaunching their Lump Sum & Interest Select plans.
Having been absent for over a year whilst new funders were sourced, Stonehaven have now streamlined & simplified their product range.
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One product in particular will answer a common question –
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“Can I have an interest only equity release plan where I can repay the interest?”
Well the answer is now categorically – ‘YES’
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Before discussing the Stonehaven Interest Select option in greater detail, let’s have a look at the two products launched.
Stonehaven now have two propositions available to customers: -
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1. Lump Sum Only Option
2. Interest Only Equity Release
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The lump sum option does as it says on the tin; namely two lump sum options which offer different loan to values. Stonehaven are not launching at the maximum release end of the market, but aiming competitively with lower interest rates.
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Lump Sum Lite has the lowest interest rate at market leading 6.13%.
Plans start at 55 & this product will release 11% of the property value at this age.
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The Lump Sum plan has a higher interest rate of 6.24%, with a higher release of 14% at age 55.
Both plans have no drawdown facility, but a simplified single lump sum option from the outset.
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Next we come to the Interest Select products.
These innovative plans allow you to choose how much of the interest charged you would like to repay each month, and also how long you wish to pay this for. You could pay off the whole interest, or if you have a specific budget just pay off part of the interest with the remainder rolling up onto the original capital borrowed.
In effect it can be classed as an interest only lifetime mortgage for pensioners.
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Traditional equity release may not be suitable for everyone, especially due to roll-up of interest & the reduction this will make to potential beneficiaries.
Therefore, particularly suitable for people with good disposable incomes & used to servicing & managing debt throughout their working lives, these people can now control how much inheritance they leave behind by these new equity release schemes.
Primarily, it can be regarded as a half way house between a conventional mortgages and roll-up equity release. The scheme is an interest only eqity release & has all SHIP safeguards and protection offered by the FSA.
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However, a major feature of the Interest Select plan is the ability to be converted over to a full roll up scheme at a later date. This could be when one party to the mortgage dies or financial circumstances dictate that no more monthly payments wish to be made.
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Simplification on the new Interest Select means that when conversion arises, the new rate on the equity release plan will only be 0.2% higher than on the previous Interest Select. However, better still, should the roll-over date be previously set, then roll-over will be at the SAME interest rate as the original interest only element.
With interest rates starting at 6.13% which are currently the lowest in the market, a particularly attractive proposition can be found here for those interest rate tarts!
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TIP – Should one be able to afford the minimum monthly contribution of £25pm for the minimum roll-over period of 12 months, then one can easily achieve a roll-up equity release plan with a 6.13% monthly interest rate thereafter!
Surely, a tip not to be passed by?
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There have been four Interest Select plans launched which surely indicates which way Stonehaven feels the market potential lies.
These range from the Interest Select Lite at just 6.13% & releasing 11% at age 55, upto Interest Select Max with an interest rate of 7.57%, but releasing a higher 19% at age 55.
An example of borrowing £40,000 on the Stonehaven Interest Select Lite at 6.13% would result in monthly payments of £205pm.
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Qualification Criteria for Both Schemes
All Stonehaven equity release products are available to people aged 55 and over, living in a main residence in England and Wales & must have a minimum property valuation of £70,000. The minimum release has been reduced to £10,000.
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Additional Features
No Negative Equity guarantee
There is the guarantee that when the property is sold on death or long term care, the proceeds payable to Stonehaven can never be greater than the property value itself. This guarantees there can be no excess debt passed to the beneficiaries.
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Protected Equity
A valuable inheritance protection feature applicable to the lump sum plans. There is the facility to choose to protect a percentage of the final sale value of the property. Point to note is that the no negative equity guarantee and the amount that Stonehaven will lend are based on the value of the unprotected portion of the property.
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Thus, another chapter unfolds in the equity release storyline; providing greater diversity in the whole of market lifetime mortgage product range. A welcome read & a promising sign of further things to come for the industry.
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If you have any questions, or wish to obtain advice on the Stonehaven range of products please contact the Equity Release Supermarket team on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk
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Tags: equity release, Equity Release Adviser, equity release schemes, Halifax Retirement Home Plan, inheritance protection, interest only mortgage, lifetime mortgage schemes, lifetime mortgages, SHIP, Stonehaven, Stonehaven interest select
Posted in Equity Release, News | No Comments »
Wednesday, March 2nd, 2011
With the main concern over equity release schemes being the inheritance passed down to beneficiaries, here we discuss the pro’s & con’s of these lifetime roll-up mortgages.
Firstly, we look at the effect on beneficiaries & the sources of these areas of concern. This then leads us onto the equity release calculator with facts & figures showing how these schemes fair for the beneficiaries at the end of the day.
Ok, we’ve have all heard the saying; bad news travels faster than good news & this is synonymous with term ‘equity release’.
Although equity release plans originate back to 1965, the damaging news about them generally dates back to the late 1980′s when ‘home income plans‘ were initially launched.
Linked to an annuity or investment bond & an interest only mortgage, these plans were destined to fail, relying heavily on investment performance in a period of falling property values & rapidly rising interest rates.
The mid 90′s then introduced the much derided shared appreciation mortgages (SAM’s), the focus of most causes for campaigns against equity release including the Trevor MacDonald Tonight programme.
Is it any wonder reputation was soured?
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So what has the equity release industry done about it?
At the time of the SAM’s debacle, SHIP (Safe Home Income Plans) was launched.
Formed from its originators – Ecclesiastical Life, Hodge, Home & Capital Trust and GE Life all members agreed to abide by a strict code of conduct, which still exists to this day.
Soon, new lenders entered the market with household names such as Norwich Union & Northern Rock introducing the first roll-up schemes & bringing a significant boost & trust to the industry.
Although the volume of applications began to blossom around 2003 with 25,000 loans completed, a lack of regulation still overshadowed the equity release sector. The market was still somewhat blighted by its previous misdemeanours.
Thankfully, partial regulation was soon imposed on the industry with lifetime mortgages coming under the auspices of the Financial Services Authority on 31st October 2004. Home reversions joined lifetime mortgage schemes soon after & by 2007 full regulation & confidence was brought back to the sector.
Therefore, the market has evolved & strived to restore pride; a far cry from the negative perceptions of decades previous.
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So what does this all mean for today’s beneficiaries?
The main ‘clean up act’ came with the introduction of SHIP & its rules imposed on the members. The ‘no negative equity guarantee‘ affords the greatest level of protection this industry can offer.
Safe in the knowledge that any amount borrowed by their parents can never escalate to more than the eventual sale price of the property, beneficiaries are at least guaranteed no debt can ever be passed onto themselves.
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A crumb of comfort maybe, but peace of mind for the parents.
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An equity release adviser should always encourage involvement of the heirs to the estate. With their input & assurance, feelings can then be vented either for or against equity release being taken as for many elderly people this is a major financial proposition.
Again qualified advisers should play an important role in explaining the pro’s & cons of lifetime mortgages & convey these issues to all parties concerned.
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What else does the equity release sector afford by way of protection?
Interest rates for home equity release schemes, albeit not the lowest ever, are still historically low. One positive feature of these schemes is the lifetime fixed rate on all loans now.
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So what is the benefit of this?
If you borrowed an amount of capital, with a fixed interest rate for life it enables you to calculate the exact future balance.
This is building further reassurance for potential mortgage applicants.
A client will always be made aware that the equity release balance escalates over the lifetime of the scheme; this is the nature of these plans & should never be entered into unless this has been clearly explained. The effect of the interest compounding annually, approximately doubles the balance every 10-11 years, depending on interest rate charged by the equity release companies.
Sounds daunting? Well, let’s now look at the sums as promised:
One of the lowest interest rates around at present would be the Aviva Lifetime Lump Sum plan, which at the time of writing this article has a fixed lifetime interest rate of 6.65% (6.9% APR) annual.
A male, aged 65 borrowing a lump sum of £25,000 on the Aviva Lifestyle lump sum at a fixed interest rate of 6.65% would know exactly what the future balance will be, even before taking out the equity release scheme. The Key Facts Illustration provided by the equity release adviser will confirm these figures & also the costs & additional features involved.
For instance, given the aforementioned figures at the end of 10 years the mortgage balance would be £47,594 & after 20 years it would be £90,606.
This may seem expensive given only £25,000 was borrowed initially; however there are two factors that could still rule in favour of the a lifetime mortgage scheme.
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One common issue overlooked is the potential for property values to increase. If so, & with 100% ownership of the house still being retained, then the homeowner will fully benefit from any escalation in the house price. This will then offset some of the compounding effect of the interest & mitigate its effect on the estate somewhat. Again, we are looking here at the longer term & no guarantee can be given they will go up; nevertheless historical records show they have indeed.
Consequently, a rule of thumb is never to borrow anymore than required beyond the initial 12 months. Plans are now flexible enough & with drawdown equity release schemes introduced & now being the most popular roll up lifetime mortgage, then the funds can be drip fed over time as & when required.
Additionally, by taking a lower initial amount, results in less interest being charged, thus meaning more inheritance passed onto the beneficiaries.
The second factor affecting the balance accruing & is also the primary cause of roll-up & that is purely down to the fact that NO monthly payments are required. This helps retirees to have access to the some of the equity tied up in their property & at the same time having NO effect on their budget.
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Finally, equity release schemes do have an ever increasing part to play in the retirement planning for the over 55′s. Care must always be taken & should never rushed into without discussion & involvement of third parties. Advice should always be provided by an industry qualified equity release adviser.
Hopefully lessons have now been learned from the past & the industry can move forward, innovate & develop further over time. If so, & in the right circumstances equity release can provide for many, a comfortable & enjoyable retirement.
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If you require furthjer advice on equity release schemes, please call freephone 0800 783 9652 or email mark@equityreleasesupermarket.co.uk
Tags: drawdown equity release, equity release, Equity Release Adviser, Equity release calculator, home income plan, lifetime mortgage schemes, lifetime mortgages, SHIP
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Tuesday, December 14th, 2010
Do you need extra more money during your retirement?
If the answer is yes, then equity release can be an ideal solution. Today, many equity release companies exist who provide different mortgage schemes to homeowners who are above 55 years of age. By opting for these schemes, you can release equity or money against the value of your home. Before taking a final decision, it is important to consider few factors. These include:
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Flexibility – You have to check how flexible your equity release plan is. Choose the scheme which allows you to draw more money or allows you to sell the property, if required. There are lenders who also allow the applicant to make ad-hoc repayments off the balance (subject to early repayment charges)
Fees – The fees for purchasing equity release schemes depend on the provider. Consideration should be given to the plan whose fees are the lowest. Nevertheless, this shouldn’t be classed as the over riding factor. Special offers such as cashbacks, free valuations all help to keep the costs down. Check with Equity Release Supermarket to see what offers they can find you.
Interest rates – Similar to fees, the interest can vary on the basis of the scheme or mortgage chosen. Before choosing, it is recommended to compare the interest rates of different schemes. Rates currently can vary from as low as 6.59% up to 7.59% & this can have a massive effect on the final balance at the end of the day. Always check aswell that the interest rate being quoted is annual. Some equity release companies quote on a monthly & some annual basis. A monthly interest rate of 6.59% is actually higher than an annual interest rate of 6.59%, due to the quicker compounding effect of monthly v annual interest.
S.H.I.P (Safe Home Income Plans) – This is an organisation which was set up to protect the rights of consumers or purchasers of home equity schemes. Whichever scheme you choose, ensure that the lender is a member of this organisation. As a result of using a ship equity release company, means that the solicitor will have to sign a SHIP certificate to say that they have acted on the clients behalf & they understand what they are entering into. Additionally, being a member of SHIP means the scheme has to meet certain criteria – to be able to be repaid; to be able to move house & inlcude a no negative equity release guarantee.
Financial Services Authority (FSA) – The FSA is a regulatory body in the UK which takes care of the rules and regulations followed by the financial companies. Always choose a company which is registered with the FSA thus affording the protection the FSA provide.
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It is advisable to hire a qualified financial consultant before investing in any one of the equity release schemes currently available in the market.
Equity Release Supermarket have experienced advisers who can source the whole of the market to find the best equity release deal for you.
Call freephone 0800 783 9652 or email mark@equityreleasesupermarket to discuss your requirements further.
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Tags: equity release, equity release advisers, equity release schemes, Fees, FSA, interest rates, lifetime mortgage schemes, lifetime mortgages, SHIP
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Wednesday, December 1st, 2010
On a daily basis we get serious financial queries from people looking to alleviate their money woes in retirement. This could be due to a number of lifestyle issues,; perhaps due to a lack of pension provision over the years, divorce, business failure, the list is endless.
However, to all these scenarios equity release can potentially be a saviour in one way or another. This is why it is so important that advice from a qualified equity release adviser is sourced.
From an equity release advisers point of view it gives us most pleasure to see how life changing equity release schemes can be to clients & the benefits they bring.
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Equity release is specifically designed for homeowners who want to release capital against their homes. If you have a situation that requires a capital lump sum to resolve the cash flow problem, then equity release schemes may be the solution.
However, which is the right equity release depends upon your requirements & attitude towards your beneficiaries.
In general, all equity release schemes will provide some form of tax free lump sum, but it is the method of its withdrawal that will determine the most appropriate equity release scheme that is correct for you.
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Criteria to qualify for equity release
If you want to opt for equity release then the youngest age of the homeowners must be over 55 years of age. In addition to this, your main residence must be worth a minimum of £60,000 & if any secured debts are outstanding on the property, then they must be repaid at completion of the new equity release plan. Therefore, unless there are savings to cover the repayment of the mortgage, then sufficient funds need to be raised on the new equity release plan to redeem the existing mortgage.
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How much equity can you release?
The cash lump sum received depends on various factors. These include your age, the value and your health situation. The scheme you choose can also affect the amount of receivable money. The older the age of the applicant, the greater the potential equity release available. The higher releases are often found on home reversion schemes which is where you sell a percentage of the property to the home reversion company.
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Is the money tax-free?
Yes, the lump sum money which you will receive against your home will be tax-free as it is classed as a withdrawal of capital. However, what happens to these monies next will determine whether these equity release funds remain tax free.
Once, the tax free lump sum is received from the solicitor & placed into the clients bank account, then if you are a basic rate taxpayer or higher, then you will be taxed at source on the interest generated. If you are a non-taxpayer then remember to have Inland Revenue form R85 completed, which will allow the bank or building society to pay interest with NO tax deducted.
The fact the equity release cash lump sum is tax free on receipt means that the funds should go further long term & allows you to spend the cash in various ways. The list for this is endless but most popular prove to be debt consildation, home improvements, buying a new car or go on a holiday or pay off outstanding debts.
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Will you own the property?
If you have opted for a lifetime mortgage scheme, then the property will still be 100% yours, albeit the equity release company will have placed a legal charge on the property & lodged it with the land registry. This protects the provider in that when the property is eventually sold, they will have first bite of the cherry & recieve the original cpaital borrowed, plus compounded interest to that date.
In the case of home reversion plans, the whole or a part of your property will be owned by the lender. Therefore, dependent on how much of an equity release cash lump sum is required, will determine the percentage of the property that needs to be sold. This could be as little as 10% or even as much as 100% of the total property value. Obviously, if 100% of the property is sold then you will forfeit certain rights. These would include there being NO inheritance to pass onto any potential heirs, no equity to negotiate on if you want to upgrade to another property & you will require the home reversion company to approve any building work or changes to the property you require.
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Please think carefully before entering into any long term equity release mortgage arrangement. The equity release market is highly regulated by the financial services authority (FSA) with advise not only coming from an mortgage specialist such as Equity Release Supemarket, but also from a legal representative which will ultimately by your solicitor.
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To discuss your equity release options further & to request a free initial NO obligation financial planning service meeting, then contact the Supermarket team on 0800 783 9652 or email admin@equityreleasesupermarket.co.uk
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Tags: equity release, Equity Release Adviser, equity release schemes, home reversion, home reversion schemes, impaired life, lifetime mortgage schemes, lifetime mortgages, Roll up lifetime mortgage, SHIP
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