Posts Tagged ‘Stonehaven’
Friday, May 29th, 2015
Further evidence of the progress & changes within the equity release industry has been witnessed this week after Stonehaven rebranded its name to ‘Retirement Advantage’. With effect from 26th May 2015, all Stonehaven’s equity release plans will come under the umbrella of Retirement Advantage.
Who are Stonehaven?
Stonehaven equity release was formed in 2006 as a provider of not just traditional lump sum lifetime mortgages, but innovative interest only lifetime mortgages with a difference. Their concept of being able to service the interest, thus rendering a level lifetime mortgage balance outlived the more conventional mortgage products such as the Halifax Retirement Home Plan which was withdrawn in August 2011.
Stonehaven = Innovation
To date, the Stonehaven range of interest only lifetime mortgages have stood the test of time. It is only recently that new hybrid versions of the Stonehaven Interest Select plans have been developed & now introduced. These voluntary repayment plans from the likes of Hodge Lifetime, Aviva, Newlife & now following suit – Stonehaven, have revolutionised the way equity release is perceived. It is now just the general public & journalists who need to take note of the new wave of flexible lifetime mortgages that can be tailored to any client’s requirements.
Stonehaven’s Recent history
Stonehaven’s success resulted in the company being taken over by MGM in 2014 and slowly their products have been redesigned & renamed accordingly, with a simplification of their offering – Interest Select, Lump Sum & Voluntary Select. Each product now has two further options depending on the level of borrowing required (loan-to-value) & ultimately also affects the interest rate applied. Board level changes have since occurred and the people who were at the core of their initial operation and built their model around the wider distribution model of using mortgage intermediaries as a source of referral business, have since departed.
The New Retirement Arena
We now have a new era in retirement planning & finances. With the demographics of the UK changing, longevity & health factors all combining to make insurers change the way the retirement landscape is evolving. The recent annuity changes have impacted severely on annuity providers of which MGM Advantage has been a major player in this market. These annuity & life insurance companies have had to rethink how retirees will need to manage their finances and stretch them further into retirement. This is probably only the start of what is to come for the over 55’s in the new retirement arena as new products are developed to cater for their needs.
MGM and Stonehaven Together = Retirement Advantage
Bringing together two successful retirement companies should lead to a complement of retirement products that can provide retirement solutions. Both MGM Advantage’s annuity and Stonehaven’s lifetime mortgage products are therefore suited to this retirement solution goal. The new retirement brand of Retirement Advantage will further strengthen their retirement proposition with a new retirement account launching soon.
Retirement Advantage is therefore one of the first significant mergers we may see in the retirement arena as equity lenders & insurers vie for the ever more lucrative retirement space. Equity release and annuities are changing for the better, hopefully the sign of more innovative thinking ahead.
For details on Retirement Advantage product range visit our website here where all their lifetime mortgage deals are listed along with a quote request facility.
Alternatively, please call Mark Gregory on 07966 889597 or email firstname.lastname@example.org to discuss this further.
Monday, March 16th, 2015
When many equity release providers are competing directly in using their lifetime mortgage interest rates, Stonehaven have decided to compete in a different field by taking the bold step of moving away from Gilt-based early repayment charges (ERC’s) & introducing a fixed penalty basis covering the first eight years of the equity release loan.
With effect from 16th March 2015, Stonehaven will move its whole lump sum & interest only lifetime mortgage range of plans over to an 8 year fixed early repayment charge of 5% in the first 5 years, 3% in years 6-8 and none in the 9th year & thereafter.
Background to Equity Release Early Repayment Charges
Due to the nature of the product – ‘Lifetime’ Mortgage, the plans have been designed to run for the rest of the homeowners life. This can create uneasiness for some people taking out equity release schemes in retirement as they cannot always say with certainty what their future plans entail with regards to their property.
Equity release early repayment charges have historically been a mixture of fixed penalty, gilt based, Bank of England base rate related and even long term interest rates called SWAP rates. The majority of equity release schemes across the market today is predominantly linked to government gilts. This can be in the form of an individually selected gilt such as Aviva’s, which is based on the age of the youngest homeowner, or follow an index of gilts such as the FTSE UK Gilts 15 Year Yield Index with Just Retirement.
These gilt related penalties on paper can look extreme given that Aviva can charge upto 25% of the amount repaid dependent upon the gilts yield falling from inception. Additionally, companies such as Just Retirement & Pure Retirement can charge a maximum of 20% of the fall in the FTSE UK Gilts 15 Year Yield Index. Therefore, the nature of gilts leads to uncertainty of their future levels & consequently any prediction regards their future level is unknown & cannot therefore be relied upon for early repayment purposes.
Currently, only one equity release company offers the certainty of knowing exactly what the future penalty could potential be; this company is LV= (Liverpool Victoria). Charging 5% for the first 5 years of the amount repaid & then 3% in the next 5 years, they actually have no early repayment charges after 10 years. This have given them a niche position within the equity release marketplace.
Stonehaven’s Move to Fixed Equity Release Early Repayment Charges
However, LV= equity release now have fresh competition and this is the beauty of where the equity release industry is right now. Competition is driving this market forward and its with such innovations & product development that is going to extend the volume of lending in 2015, to beyond the £14 billion released in 2014.
Stonehaven have been considering this move previously, however with their takeover by MGM, its plans were put on hold. With a new team behind Stonehaven now, they have obviously decided the time is now right to introduce fixed penalty equity release plan to the market. It will be interesting to see how these new fixed ERC’s are perceived. Historically, applying fixed rate early repayment charges can come at a cost and this is usually borne in the equity release interest rate with an extra levy on it.
At present Stonehaven have not indicated any changes to their interest rates with the lowest currently being the Stonehaven Interest Select Lite plan at 5.46% monthly (5.87% representative APR). Therefore, the fixed penalty charges look to have been absorbed into the current equity release deals on record.
So for anyone considering the equity release & uncertain regards whether an equity release scheme will be required over the longer term, the new equity release early repayment charge from Stonehaven could be a viable option to consider. Providing fixed, transparent & easy to understand ERC’s with just 5% penalty in the first 5 years, 3% for the next two & zero after the end of the 8th year, Stonehaven have taken over LV=’s mantle of potentially the best early repayment charging system available in the equity release market today!
To learn more about Stonehaven’s range of products attracting the new 8 year fixed penalty, please contact the Equity Release Supermarket team on 0800 783 9652 or email email@example.com.
Sunday, January 25th, 2015
Having been advising on Equity Release since the halcyon days of Norwich Union, I have seen a continual, albeit gradual decrease in the level of equity release interest rates. The latest news has it that Aviva will be aggressively reducing their interest rates today – Monday 26th January 2015 to an unprecedented lowest rate ever, starting from just 5.13%!
So what are the factors behind this interest rate drop, given the rest of the equity release companies trail so far behind Aviva in competitiveness?
History of Equity Release Interest Rates
Equity release interest rates historically don’t tend to move that regularly, or by very much. It tends to be market forces that dictate how competitively they wish to be & where they wish to be positioned in the market. Going back the early days of equity release schemes, particularly plans from Northern Rock (now Papilio) and Norwich Union (now Aviva), their early interest rates were in excess of 8%. However, comparatively mainstream mortgage rates were also higher at that time and therefore equity release plans were not considered as expensive as they look today.
Time to Consider Interest Rate Diversification?
However, the difference between mainstream mortgage rates and equity release interest rates is the fact that equity release schemes historically have a fixed interest rate for life. Residential mortgages don’t & therefore can be re-appraised frequently which enables the best interest rate to be achieved each time.
Perhaps it’s time that equity release providers took time to consider this fixed lifetime interest rate offering? Afterall, the reason that traditional equity release schemes have a fixed rate is to act as a safety net due to the compounding effect of interest as no payments are normally necessary, or permitted. This also aides the protection of their insurance policy, which is the ‘no negative equity guarantee’.
How Can Equity Release Lenders Reduce Interest Rates Further?
New Voluntary Repayment Plans from the likes of Aviva, Stonehaven & Hodge Lifetime accept repayments of upto 10%pa with NO penalty and therefore if managed correctly cancel out the potential compounding effect of interest. Therefore, would it not make sense for these lifetime mortgage lenders to offer a reviewable interest rate every so many years? A reviewable interest rate could have a bearing on the nature of early repayment charges where so many equity release companies use the unpredictable nature of government gilts as their barometer. Retirees are looking for greater flexibility these days and a change in structure could certainly assist.
Catering to the New Silver Surfer Generation
More retirees are becoming financially savvy, particularly those arriving at retirement still owning interest only mortgages. This crop of mortgagors have experienced the variances in interest rates & the different types of rates available during their mortgage years. For instance, is it not time for a standard variable equity release interest rate, or a tracker equity release interest rate? Why not, if the interest or upto 10% of the original capital is to be repaid each year, then why is it necessary to have a lifetime fixed interest rate?
If the equity release market is set to expand it needs further innovation & development of its equity release schemes. Therefore, should the forecast for future interest rates be historically low, then it would make sense to consider the options of tracker, discounted or variable interest rates. Perhaps the future of the no negative equity guarantee can be questionable given this has an effect of increasing the interest rate by upto 0.5%?
Why not have the option of choosing whether to include the no negative equity guarantee, or not. With that would come the choice of two representative interest rates; one including the guarantee & a lower interest rate without it. These options could all help to reduce the future interest rates of equity release plans & help the market move forward & expand.
A strong case in question for the optional inclusion of the no negative equity guarantee would be where retirees are committed to making repayments & managing the future balance of their lifetime mortgage scheme. Clearly advice of the consequences of not including this guarantee should always be provided, but we shouldn’t be treating the majority of equity release consumers with kid gloves. Equity releasers can themselves make informed decisions based on the facts & advice provided. As long as the adviser is giving quality impartial equity release advice then why can’t the industry open up & start becoming more diverse in its thought process & product innovation!
New Aviva Flexible Lifetime Mortgage Interest Rate
As stated earlier Aviva are to significantly reduce their minimum interest rate on their Flexible Lifetime Mortgage Plan. Equity Release Supermarket is able to obtain a lower interest rate than mainstream equity release advisers. This is set to continue from 26th January 2015 with the reduction in the minimum interest rate as calculated by the Aviva flex tool calculation. The lowest equity release interest rate with Aviva is determined by personal criteria, such as age, property value & also health.
Consider the following equity release scenario: –
Mr & Mrs Chambers are aged 67 & 64 respectively & own a property valued at £250,000 which is unencumbered. Unfortunately, Mrs Chambers had cancer last year and they now realised how important it is for them to enjoy their retirement. They wish to go on a cruise, carry out home improvements and release approximately £30,000 with access to a future cash reserve facility.
After conducting research with Equity Release Supermarket they were recommended the Aviva Flexi Plan with an interest rate of just 5.13%pa (5.33% representative APR). This recommendation was borrowing £30,000 & having a further cash reserve facility of £33,000 for possible future use.
Aviva’s Lowest Ever Equity Release Interest Rate To-Date
This 5.13% enhanced lifetime mortgage rate is the lowest ever equity release interest rate that any home equity release company has made available in the history of equity release & presents many opportunities for retirees to consider their future finances: –
- Those people with interest only mortgages – where lenders are demanding repayment as the end term has been reached & they are not prepared to extend can benefit from these interest rate reductions. By switching onto the Aviva Flexi Lifetime Mortgage Plan they could consolidate onto a mortgage for life, at a low fixed interest rate, thus enabling them to budget accordingly knowing the interest to be charged in the future.
- Existing equity release customers – who are on interest rates that are over 6%pa should consider whether to remain with their existing lender or switch equity release plans. By taking a lower interest rate would mean less interest charged & hence either a lower future balance, or less interest payments to maintain control over the balance. There are factors to consider such as potential early repayment charges & set up costs, however this is a calculation your Equity Release Supermarket adviser can arrange & analyse for you.
- Anyone over the age of 55 – who has been contemplating taking a release of equity, but maybe waiting for the optimum interest rate or occasion to apply for it. With the various lifetime mortgage schemes available now including interest only, drawdown & voluntary repayment schemes, the equity release market has never been so competitive.
So why have Aviva aggressively reduced their interest rates?
Word has it there are new lenders set to enter the equity release marketplace. With new names entering the market such as L&G and Santander, plus More2life have new funding available, Aviva are sure to find new competitors in their space. Perhaps they are trying to gather as much momentum & market share as possible now before they come under pressure?
We have already seen unprecedented movements in equity release interest rates so early in 2015. More2life’s Enhanced Lifetime Mortgage & Interest Choice plans have seen rate reductions, followed by Stonehaven’s Interest Select range in response to keep their market position above More2life. Whatever equity release 2015 has to hold its going to be exciting time and one for any future lifetime mortgage customer can benefit from with the lowest equity release interest rates ever seen.
Should you wish to request an Aviva Flexible Lifetime Mortgage quote & find out how low your equity release interest rate could go, please contact Mark Gregory on Freephone 0800 783 9652 or email me at firstname.lastname@example.org
Further information on equity release –
Compare Equity Release Deals | Equity Release Calculator | Ask Mark A Question
Sunday, December 7th, 2014
Each year the equity release industry celebrates its achievements at the Merchants Taylors Hall with its version of the Equity Release Awards 2014. This year in particular, equity release schemes have been taken out in record amounts & have led to unprecedented growth. This has been for a number of reasons, but primarily the innovation of new equity release plans from the likes of Aviva, Hodge Lifetime & lately Stonehaven.
However, it is the Aviva Flexible Lifetime Mortgage Plan that here at Equity Release Supermarket has seen the greatest impact & has helped many of our clients achieve their retirement goals. It was therefore no surprise that Aviva won the category of Best Lifetime Mortgage provider in 2014. This followed a series of enhancements to their lifetime mortgage plans this year, coupled with the lowest equity release interest rates, currently starting as low as 5.63% (5.83% representative APR).
These successful changes include:
- Allowing clients to voluntarily repay up to 10% of the original capital borrowed each year, in up to 4 installments with a minimum of £500 a time.
- On joint life equity release cases they now allow the surviving partner to sell their home and repay the scheme without penalty as long as it’s within 3 years of the first person dying or entering long term care.
Thanks to these extra features, Aviva has increased their market share even further but despite winning their equity release award it would be wrong to view their product as the best on the market for everyone. In order to find the best equity release scheme for you it’s important to get independent, whole of market advice from a company like Equity Release Supermarket.
Equity Release Supermarket’s philosophy is to spend valuable time to find out exactly what you’re goals are so that we can recommend the most appropriate scheme based specifically on these requirements. So, once we’ve gathered sufficient information based on your current situation, identified no alternative solutions exist, it is only then that we would enter the realms of recommending equity release schemes.
But how do we work out which equity release scheme is the ‘best’ plan for my clients? We consider a range of factors, such as:
- Equity release interest rates
- Maximum equity release calculation including maximum cash reserve facility
- Early repayment charges
- Set up costs
- Flexible repayment options
- Health and lifestyle factors for enhanced lifetime mortgage plans
- Future retirement plans
- Inheritance plans – attitude to risk
Seven Factors to Help Find the Best Equity Release Plan
Equity release schemes are constantly innovating and keeping up with their progress can be a minefield for those looking for the best equity release plan today. To help provide guidance on understanding the various aspects of equity release plans that can influence this decision, I have provided seven features and areas of research that Equity Release Supermarket advisers would analyze and discuss with you.
- Best Interest rates:
There are some excellent online comparison websites such as www.EquityReleaseSupermarket.co.uk where you can compare the best equity release deals in the market at any given time. The equity release comparison sites will currently highlight Aviva as offering some of the lowest interest rates for both drawdown lifetime mortgages and their lump sum counterparts.
However, simply offering the lowest lifetime mortgage interest rate may not make their scheme the ‘best’. Aviva do charge a higher interest rate to access the funds in any cash reserve facility than the initial rate and they cap the reserve amount if you initially release less than 50% of the overall loan amount. This may not therefore be suitable if you are looking to have a maximum cash reserve facility for your future retirement needs.
Therefore, it is down to your equity release adviser to assess & understand what your priorities are in leading to their recommendation of the best equity release scheme for you.
For instance, if you need to take the maximum equity release loan from your property, interest rates tend to be higher than the drawdown lifetime mortgage schemes. Hence, the ‘best’ scheme could depend on any of the other factors names above. The possible reason for the higher interest rate for the maximum equity releases could be the potential of invoking the no negative equity guarantee is likely to be greater the higher the release borrowed. This cost being passed on by way of the higher interest rate to compensate.
Currently, at the time of writing, the lowest lifetime mortgage interest rate is 4.75% (5.10% representative APR) which is the Hodge Retirement Mortgage. If you want to make monthly payments of interest to maintain a level balance, this scheme is excellent but it wouldn’t be the ‘best’ scheme if you don’t want to make any interest payments. As you can see, the lowest equity release interest rate alone does not determine it being the best scheme.
- Maximum Equity Release Plans
Equity Release Supermarket would always recommend that you only release the capital that you need, rather than releasing the maximum loan. This one area alone, in assessing the best equity release scheme, can have the greatest influence on the final inheritance for your children or beneficiaries. In fact, this aspect we find is where clients need to be guided carefully by their adviser, as many do not understand the consequences of taking too much equity from their home.
In fact, drawdown lifetime mortgage plans are now the most common form of equity release taken in 2014 & will surely be for equity release 2015 aswell. By taking the home equity plan funds in small staggered amounts, rather than all upfront makes practical sense for your own future balance & the inheritance for your beneficiaries. These drawdowns can be taken in little amounts as an initial £10,000, and then followed by smaller £1,000 tranches from the likes of Hodge Lifetime. This can be utilised to suit any future spending plans as & when they arise.
During my 15 years of advising clients on equity release, one of the most common queries I receive is ‘Can I access further funds?’
Let’s look at an example:
Margaret and Graham are both 70 and live in a bungalow worth £300,000. They want to be able to take regular holidays and buy a new car. In the future they’d like to gradually improve their property and supplement their income. My advice was to take an initial loan of £25,000 and set up a reserve facility. In order to work out the ‘best’ scheme for them we discussed whether the interest rate or the size of the reserve was more important to them. They opted for a larger amount of money on reserve. Therefore, after the initial loan – Pure Retirement offered a cash reserve of £83,000, while the Aviva Flexi Plan with a lower interest rate only offered a reserve of £48,000.The clients therefore opted for the Pure Retirement Drawdown Plan based on the future reserve facility.
Another important factor to a recent client was that she wanted the certainty that the funds available on reserve were guaranteed to be in place. Many lenders do not ‘guarantee’ the future of their drawdown facilities in case of change of circumstances, economic reasons or they just decide not to lend again in the future.
My client was concerned in case the lender withdrew her cash reserve funds in the future. In her circumstances LV= proved to be the best equity release scheme for her as they’re the only company to offer a guaranteed drawdown reserve, which is guaranteed to be in place for a minimum of 15 years.
- Best Early Repayment Charges (ERC’s)
Equity release schemes are designed as a lifetime commitment and are not aimed for short term borrowings or people who wish to repay the balance before the plan ends; on death or the last person moving into long term care. That said, there are a growing number of people who would possibly repay their equity release scheme early; due to change in circumstances, future health reasons or maybe family reasons. Therefore the ‘best’ scheme would be one that offered flexibility on early repayment charges over a limited number of years, either none at all or the lowest fixed rate possible if acceptable to the client.
An equity release company plan that has considered the topic of early repayment charges has been Hodge Lifetime. Two of their lifetime mortgage plans have been carefully thought out on this particular subject. The Hodge Lifetime Mortgage Plan allows homeowners the ability to downsize after 5 years of taking their plan & repay their lifetime mortgage with NO penalties. In fact even leading upto this 5 year period, should one downsize the penalty reduces by 1% each year; from 5% down to 0% over this duration.
The second Hodge product that assists with early repayment charges is the Hodge Retirement Mortgage. This product is an interest only lifetime mortgage and has a fixed interest rate for a period of 5 years. The Hodge Retirement Mortgage therefore mirrors this time by aligning the early repayment charges (ERC’s) to match the same term. Subsequently, the early repayment charges are just 5% for the first 5 years of the retirement mortgage term.
Most equity release lenders use government gilts as a measure in working out any potential ERC’s. This means that the early repayment penalty is variable and could be as high as 25% of the initial loan amount. For the standard lifetime mortgage plans, LV= are currently the only company who offer a fixed early repayment charge, which is 5% for the first 5 years and 3% from years 6 to 10. After the 10th year you can repay the scheme without penalty, so this may prove to be the ‘best’ scheme for some clients knowing what their future holds, or the Hodge Lifetime schemes should they have plans for moving house after 5 years.
- Equity Release Set Up Costs:
Typically the lowest set up costs doesn’t necessarily mean the ‘best’ plan, although keeping a check & comparing equity release set up costs is important for a number of reasons, particularly to save money! Why pay more to a broker for their advice fee when another company can advise on exactly the same plan, but for a lower cost.
Equity releases set up costs are made up of a series of fees levied by different parties to the equity release process. These consist of the valuation fee, lenders application fee, solicitors’ fees & your adviser’s advice fee.
Valuation fees vary between lenders, however through certain specialist brokers such as here at Equity Release Supermarket there are now many lenders that will offer ‘free’ valuations by process you application through us.
Lender application fees can also vary, with some either being added or deducted from the release. Remember if the application fee is added this will cost more over the long run if the interest is to compound with no repayments made. The Hodge Retirement Mortgage application fee is the highest at £995, but they do offer the lowest interest rate. Pure Retirement offer a cash-back on some of their plans which can cover all of the set up costs, but their interest rate isn’t the lowest. Just Retirement offer one of the lowest admin fees at £500, but not necessarily the lowest interest rate either. As you can see this is an area where careful advice is needed to find the best equity release plan.
- Interest & Capital Repayment Options
The major change to equity release schemes in the past few years has been the ability to pay either monthly interest or voluntary interest payments in order to cover some or all of the accruing interest. Again, the lowest interest rate might not equal the best plan.
We have already identified that the Hodge Retirement Mortgage offers the lowest rate, but you need to maintain a fixed monthly payment throughout its whole term. However, companies such as Stonehaven & More2life will offer an interest only lifetime mortgage too. However, rather than the concern of possible repossession should payments not be maintained, both Stonehaven & More2life will allow the switch from monthly payments to roll-up (ceasing payments), thus removing the concern of repossession.
Schemes which offer voluntary repayments, such as the Aviva Flexi, Hodge Lifetime and with effect from 1st December Stonehaven Interest Select range all allow upto 10% capital repayments. They all charge a higher interest rate, but they do include greater flexibility with regards to permitting these 10% voluntary payments.
The Hodge Flexible Lifetime Mortgage Plan & Aviva offer these schemes, and have now been joined by Stonehaven. Having a flexible approach has proved a popular way forward for many that wish to retain control over their future balance. These voluntary repayment lifetime mortgages can be planned so that either just the interest is repaid, thus keeping the balance level, or repaying the full 10% and actual seeing the mortgage balance reducing & even repaid over a period of 16-17 years!
- Health & Lifestyle Factors
Your health & lifestyle won’t affect your eligibility for equity release but can actually improve the amount you receive, or the interest rate you obtain! There are currently four equity release companies that offer enhancements to their schemes.
More2life & Partnership Assurance specialise in enhanced lifetime mortgages, however they may not be the ‘best’ plans as the interest rates are often higher. However, this for some retirees interest rates may not be priority, but the maximum equity release lump sum is. Aviva also offer enhanced lifetime mortgages and can either offer a higher maximum release on its Lump Sum Max plan or alternatively reduce their interest rate, if the maximum is not required & taken on their drawdown flexi plan. Depending on your health criteria, some lending may not accept certain ailments. However, certain enhanced lifetime mortgage companies such as Just Retirement, will go deeper into their health & lifestyle questionnaire & consider illnesses the others won’t accept.
- Inheritance guarantees
It’s sometimes important that my clients can leave a set inheritance for their families and some lifetime mortgage providers, such as More2Life, Aviva & New Life offers such guaranteed inheritance features. The inclusion of these guarantees can impact the interest rate and the amount of capital available, so careful consideration is needed to work out the ‘best’ scheme.
On forgotten equity release scheme that is over looked by many advisers are home reversion plans. Companies such as Bridgewater, New Life & Crown still offer this older form of equity release. Its popularity has waned considerably over the years, however the major benefit of home reversion plans is their ability to guarantee an inheritance at the end of the day. This works by selling a percentage of the property to the reversion company in exchange for a cash lump sum. The proportion of the property not sold is guaranteed to be passed on to the heirs once the house is eventually sold.
Overall, equity release advice is a specialist area of retirement planning. As we’ve seen there isn’t one scheme which is the ‘best’ on the market or fits all. There are far too many features & personal issues to consider that could have relevance to your recommended equity release plan. Thankfully, there are plenty of different options from many different providers. By receiving quality, bespoke advice from Equity Release Supermarket we can work out the ‘best equity release scheme‘ for you, without any obligation.
If you are looking to source the best equity release scheme for your particular circumstances & in need of specialist advice then please contact me – Mark Rumney on 07957 974826 or email – email@example.com
Saturday, July 5th, 2014
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!
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 firstname.lastname@example.org
Tuesday, May 27th, 2014
Aviva equity release plans have proved the most popular form of lifetime mortgage scheme over the past 15 years.
The reason for their popularity has been down to a combination of brand name, simplicity and the fact that Aviva have regularly provided the lowest equity release interest rates.
However, during that time there has been a cloud hanging over their lifestyle flexi mortgage range and that is the issue over the maximum early repayment charge & the lack of a partial repayment facility. It’s always been a case of all, or nothing with regards to paying off Aviva’s equity release schemes – now we have a choice.
Aviva – time for change
In the past few weeks Aviva have bravely taken steps to alleviate these issues with some bold amendments to their lifetime mortgage range. In fact the impact these changes could make, will dramatically alter the way equity release schemes will be used & managed in the future. Other equity release companies will undoubtedly take note of these new features & it can only signal the start of further innovation in lifetime mortgage industry.
Aviva have introduced three new approaches to equity release: –
- new voluntary repayment features can be used to actually clear the equity release loan over a set number of years
- Aviva apply a different approach to enhanced equity release rates by actually reducing the interest rate on offer (see later article)
- An early repayment charge exemption can be applied on first death for any new joint equity release lifetime mortgage (see later article)
Why Aviva needed to up the ante
Monday 28th April heralded the start of swinging changes to the Aviva Lifestyle Mortgage range. All Aviva’s new equity release applications from this date forth would have the ability for partial repayments to be made back to Aviva.
However, from our company perspective during 2013, Equity Release Supermarket had seen its share of applications move significantly towards the Hodge Flexible Lifetime mortgage range. This has been due to Hodge Lifetime’s two pronged attack on becoming the most popular & flexible lifetime mortgage product. Their innovative move towards being able to repay upto 10% of the original capital borrowed & the ability to downsize after 5 years & repay the loan with NO penalty has captured a large market share.
Aviva has now responded to the popularity of the Hodge Flexible Lifetime Mortgage plan by matching the 10% repayment option & additionally providing more beneficial features!
A new dawn for the equity release market has started.
How does the Aviva Voluntary partial repayment option work in practice?
From inception of the new Aviva equity release plan there is the inherent ability to make repayments of an ad-hoc nature back to Aviva. Aviva do have a cap of 10% of the original capital borrowed that can be repaid in any one year. Additionally, the earliest date that the first repayment can be made is 12 months from the commencement date of the plan. So some forward planning needs to be made & this ideally would have been made with the involvement of your equity release adviser at recommendation stage.
Consideration needs to be borne in mind that interest will be added to the plan in the meantime for calculation purposes. For example, if a sum of £40,000 equity was initially released at an interest rate of 5.68%, the balance before any repayment could be made would be £42,272.
This is where the first decisions on how much to pay back need to be made, and there are three options available:-
- If only a fixed budget is available, then a contribution towards the interest accruing could be made. Should this be less than the annual amount of interest charged, then the balance will still increase, albeit at a lower rate than would otherwise have been should nothing have been repaid.
- Should a level future balance be the choice moving forward, the sum of £2,272 could be annually sent back to Aviva, thus reverting the balance back to its original starting point of £40,000. This process could theoretically continue infinitum until the plan ends, which would be upon death of the last borrower or them moving into long term care. The balance would always flicker between these two figures, dependent at what point the repayments of £2,272 were made.
- If total repayment of the £40,000 is required, then a repayment strategy could be put in situ which would see this whole amount repaid over a set number of years. Dependent upon how much is initially borrowed & assuming maximum repayments of 10%pa can be maintained for the duration, Equity Release Supermarket can calculate at what point the plan can be fully repaid with NO penalty!
As an example Equity Release Supermarket have calculated someone borrowing £40,000, on the popular Aviva interest rate of 5.68%pa, & repaying the maximum £4,000pa could repay their Aviva lifetime mortgage shortly after the end of the 16th year.
Could this be classed as the first capital & interest equity release mortgage?
Please contact us on 0800 678 5159 for your personalised Aviva repayment calculation or click this link.
How do I physically make voluntary repayments back to Aviva?
A reminder to make repayments will begin with the receipt of your first annual Aviva equity release mortgage statement. This will evidence the amount of interest that has been added to your plan. It is at that point that the first repayment can be made back to Aviva. The question is how much to pay & this will be down to an individual’s personal preferences.
Aviva have cleverly side stepped the issue of MMR (Mortgage Market Review) here. Whereas companies such as Stonehaven & more2life have had to adapt their interest only lifetime mortgage process to the new MMR regime, Aviva due to their ad-hoc approach to repayments have avoided the MMR obstacle. Regular payments cannot be set up to repay the Aviva equity release schemes. Although Aviva do permit upto 4 payments each year, subject to a minimum amount of £500, the repayment process has to still be managed through their head office.
This repayment process would initially involve a phone call to the Aviva offices advising them of the fact a repayment is due to be sent to them. In reply they will provide a verbal form of quote which acts as confirmation. This can be confirmed in writing to you & optionally your adviser aswell so they are aware of your intentions.
The next step would be to send the money which can be in the form of a cheque, credit or debit card or a bank transfer for which Aviva will provide their details & reference number to track. They will not accept payments without this process having been accomplished, or contact being made beforehand. In fact they could return the funds should this process was not followed.
Important repayment points to note
As previously stated, repayments can only commence after 12 months from inception of the loan. However, Aviva have imposed further 12 month conditions on when repayments can be made following certain events: –
- Following withdrawal of cash funds from the drawdown facility of the flexible lifetime mortgage
- Should any additional borrowing be taken in the future
In both situations, no repayments can therefore be made for 12 months following these two events also.
Additionally, the same applies in reverse;
Should a customer have made repayments and has an available cash reserve under their drawdown plan, they cannot gain access to the reserve or additional borrowing until 12 months following their last repayment has been made.
Aviva may consider requests for a further release of equity in exceptional circumstances outside of that rule.
These rules are effectively to prevent to the to-ing & fro-ing of cash funds within the plan which would undoubtedly have made the Aviva equity release plans unmanageable and unprofitable.
Functional planning ideas for managing voluntary repayments & retaining a cash reserve
Although it’s still early days in the life of the new flexible repayment options, some ideas on managing the Aviva voluntary repayments have already sprung to mind.
Unlike Hodge Lifetime, Aviva do not impose a £10,000 lower capital threshold by which no further repayments can be made without penalty. In fact Aviva will allow the continued repayment of interest & capital with NO minimum amount down to zero, or even almost zero.
This could be beneficial for those who want to see the equity release balance to be reduced to a minimum level (e.g. £100 or less), yet still maintain the option of keeping their drawdown lifetime mortgage cash facility for the future. Bear in mind the small outstanding balance will accrue interest (albeit minimal), yet for many the comfort of retaining a cash reserve may have massive benefits should cash be required still in the future.
Aviva have responded well to the changing needs of the baby boomer generation as equity release moves into the next stage of its development. Retiree’s financial needs are becoming more complex with almost 75% of pensioners owning their own property, even carrying debt into retirement & living much longer than previous.
Aviva’s latest changes will therefore appeal to both advisers and consumers alike who are looking for more flexible loan terms on the long road ahead.
To request an Aviva Flexible Lifetime mortgage quote with voluntary repayments please click here.
Click the following link for your FREE Aviva capital repayment calculation.
To discuss any of the points raised in this article please contact Mark on 0800 783 9652 or email email@example.com
Tuesday, May 20th, 2014
Anytime housing values begin to increase, it is time to assess the home buying situation. Retirement has been a topic of some concern for those heading into their 60s. In fact, over 55s are starting to realise while they have worked hard, they may not have enough in their pension portfolio to live on. The reason is all down to living longer – longevity. The average life is no longer to 70, but closer to 90 for females. Even in London families are cash poor, but property rich. Take advantage of new housing statistics and use a UK equity release calculator to determine if there is an equity release solution for you. London equity release schemes are being called upon because of their ability to help those who need cash, but own large amounts of equity in their property.
Equity Release Defined
Equity releases most popular form is the lifetime mortgage. This mortgage comes in various guises and can either come with or without a method of monthly repayment until the property is sold, either because the homeowners move, pass away or end up in long term care. The mortgage can be taken out from the age of 55. These lifetime mortgages do collect interest based on a fixed APR that adds up each year until the mortgage is repaid.
The London Housing Market
London housing prices have increased by 17.7 per cent in the last year. New and pre-owned homes in London are continuing to increase rather quickly. While housing prices are increasing, mortgage interest rates have actually decreased in the last few years, however storm clouds are on the horizon with news that early 2015 could see an interest rate rise. The monthly cost even on equity release is lower than in previous years. Now with lifetime mortgages it is true you do not make a monthly repayment; however, it is important to use an equity release calculator to compare the cost of your lifetime product against a standard mortgage.
By comparing the two you can determine if the low monthly cost stacks up against the equity lifetime release. Standard mortgages in London offer a loan to value of 75 per cent, meaning the other 25 per cent has to be a down payment for the purchase of the property. Even the LTV has been increasing over the last few years and markedly in the last few months. What this means for lifetime equity release is a higher percentage of lump sum tax free cash available for homeowners.
The increase of housing prices means more value is in the home, thus more money can be released with any form of available equity release product. Even though there is a potential for more money to be available, it does not mean all homeowners will take the larger lump sum. It is just important to know it is available and there as a back-up should anything untoward happen.
Agenda – Lifetime Mortgage
Lifetime mortgages are defined and the London housing sector is ripe for the picking. You have an idea of the solution, but why might lifetime mortgages continue to rise in popularity even in the Big Smoke?
Younger generations tend to spend more during an average week than older generations, say those in their 80s. Many retirees are in their 60s, which means they are still spending money as if they were working.
If you add the expenditures that occur each week to the recession issues of the past couple of years, there is a detriment to retirement funds for most individuals, even those in London. Especially people living in London, considering the expense of daily living without being overly effusive with spending.
Housing costs to run a large home, food purchases, travel, and entertainment are all going to be more in the capital city. As retirement pensions and other retirement investments lost a great deal with stock market troubles, it has left many retirees without enough funds to sustain their retirement life.
More so has been the fundamental flaw in endowment mortgage schemes whereby large shortfall are being evidenced upon maturity of the endowment plan. This has left many London homeowners with shortfalls on the repayment of their interest only mortgage. Therefore, London equity release schemes have come to fruition with the likes Of Stonehaven, more2life & Hodge Lifetime whom can provide an escape route via remortgaging onto their London lifetime mortgage schemes.
It puts lifetime mortgages on the agenda because they are a way to gain cash for mortgage repayments, general living, extravagant holidays, and any other type of entertainment retirees might wish to enjoy. The cash poor situation suddenly becomes obsolete as the property rich gain a little of that hard earned money back to use as they grow older.
Inheritance Factors are Imperative
As you consider whether a lifetime mortgage is right for you, it is imperative to think about inheritance, especially with the associated property values in London borough’s. A large estate when provided to family all at once is subject to inheritance tax over & above the £325,000 allowance for each party. This tax can be so large that it wipes out the entire inheritance. It is the reason those with a huge estate set up trusts and other tax planning instruments which can alleviate some of the IHT burden.
A lifetime mortgage can work in one of two ways, both as detrimental to any inheritance you may want to leave behind, but can also be used as a successful vehicle for mitigating IHT issues. Even in London, equity release can threaten an inheritance depending on the type of loan. For instance, the roll-up lifetime mortgage has the interest compounding as long as the mortgage is outstanding. On the other hand it is an opportunity to disperse inheritance without fear of taxes. By using a UK equity release calculator, can help you calculate the percentage of loan to leave as an inheritance.
Before entering into any equity release contract, you must seek independent equity release advice from a reputable company. For a full list of equity release brokers visit the Equity Release Council website, where using a postcode search can identify a London equity release brokerage near to you.
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 firstname.lastname@example.org
Monday, June 3rd, 2013
Equity release interest rates have never shown as much flux as we are seeing today. There are probably two major reasons for this which is greater competitiveness between the lifetime mortgage lenders and lower long term interest rates.
Both factors combined have resulted in equity release interest rates seeing their lowest levels in their history. So, could this be the best time to latch on to one of these deals thereby consolidating a sub 6% interest rate for the rest of your life? Maybe.
There are two very good reasons for securing equity release interest rates at today’s levels. Firstly you will be charged less interest (which remember does compound), thus leaving more equity to use later on in life if required. The second reason would be your beneficiaries will benefit as they will potentially have a smaller equity release loan to repay at the end, when the house is eventually sold.
So the good news is that everyone is a winner at present. With equity release lending increasing as highlighted by the latest Equity Release Council statistics showing that Q1 of 2013 had a 17% increase in advances than Q1 for 2012.
There are many factors fuelling the new tide of interest in equity release schemes. We have seen that there are serious issues highlighted by the FCA report on interest only mortgages and people’s inability or shortfalls in repaying them. Many people are therefore looking at their options & those not wishing to downsize to resolve their shortfall are turning to equity release to settle the bills.
This could be in the form of the roll-up equity release where no monthly payments are required. However, if income is not an issue, then a retirement mortgage could be a better solution such as the range of interest only lifetime mortgage schemes we have available now from the likes of Stonehaven, more2life and Hodge Lifetime.
This is where expert equity release advice can help save you £1000’s in future potential interest charges. By selecting a company such as Equity Release Supermarket, you are accessing a range of interest rates & deals that are more competitive than standard deals on the market. It is wise therefore to always shop around to negotiate the best equity release deal possible.
Selection of the lowest equity release interest rates – June 2013
|EQUITY RELEASE LENDER
||Lifestyle Flexi Plan
||Flexible Repayment Plan
||Lump Sum Lifetime Mortgage
||Roll-up Lifetime Mortgage
||Flexible Lifetime Mortgage
||Interest Select Lite (interest only)
*Aviva equity release interest rates start from 5.42% & dependent on personal criteria.
The majority of these deals come with free valuations and cashback offers.
For a full list of equity rates & to compare deals click here.
For further information and associated offers with the above lifetime mortgage plans please contact the Equity Release Supermarket team on 0800 678 5159 or email email@example.com
These are lifetime mortgage plans. To understand the features and risks, ask for a personalised illustration.