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Posts Tagged ‘Key Facts Illustration’

Equity Release Is For Life, Not Just For Christmas

Sunday, November 3rd, 2013

Equity Release is a Lifetime MortgageI recently read an advertisement in a National newspaper extolling the virtues of Equity Release and was surprisingly written on behalf of one of the main equity release brokers based in Preston. All fine I thought until I saw that it was aimed at grandparents struggling to buy Christmas presents for their grandchildren.


It created a small furore amongst my colleagues and peers. The blogs were alive with advisers & political commentators slating the fact that equity release was being considered for such short term measures. Not only that, but to take equity release to spend on the grandchildren, would effectively be spending their own inheritance!  With the compounding effect of the interest over the remaining years, this will turn out as one expensive Christmas present.


After all, the most popular type of equity release is the lifetime mortgage; appropriately named & for a reason. These schemes are designed for longevity, not short term or for frivolous reasons, where better alternatives may exist.


Some were arguing that whatever legal reason people wanted a release of equity for, withdrawing capital was their choice, not ours as advisers, and on the face of it that is correct.

However, when I looked into this scenario further this played on my conscience for personal reasons and I had serious reservations.


I have five grand-kids, all under five years old. I had to check with my wife, but on average we spend about £150 to £200 on each. Extravagant ? Maybe. Worth it ? Definitely.


With various other gifts for family and friends we spend about £1,500. Agreed not easy on low pension income and little liquid savings.


If I was in that position and saw the advertisement I would almost certainly look into the possibility of equity release schemes. I would hope that I would employ the services of an independent equity release adviser i.e. someone like me who would strongly advise not to go down this route.


And here are the reasons why:-

  1. The minimum initial lump sum on any equity release scheme is currently £10,000. This would have to equate to £2,000 for this Christmas, £8,000 in the bank for the next 4 Christmases. The cash in the bank may attract 1-3% interest whilst I would be paying up to 6% interest on the mortgage. Not a good idea
  2. The set up fees, depending on the lender, could be as high as £2,000. Acceptable if you are considering a large expense such as buying a new car, a holiday of a lifetime, clearing an mortgage or giving the grand-kids a start in life for house deposit or university fees. Therefore, as a proportion of a £10,000 release, set up costs can be a considerable percentage of the initial release. Not so good to borrow £2,000 for Christmas gifts on this basis.
  3. If, like me, your intended beneficiaries are your grand-kids then they are actually buying their own gifts via their future inheritance. Let’s assume £10,000 on a normal roll-up lifetime mortgage, even on the lowest rate with Aviva Flexi Plan currently at 5.62% (5.8% APR) and deducting the set up costs from this, would in 10 years have accrued to about £17,276. So 10 year’s worth of Christmas gifts has cost £7,276.


I applaud the fact that some of the broker companies are bringing Equity Release to the fore and the pros and cons of equity release schemes are highlighted to the general public.


As a dedicated Equity Release specialist I am convinced of the merits of raising capital by these means as long as the following measures are taken: –

  • All possible alternatives are discussed with your adviser and broached with the children. Equity release is classed as a loan of last report by ourselves
  • The initial release matches your needs for the first 12 months of your spending plans i.e. don’t take any more than you actually need
  • You receive independent equity release advice from a FCA (Financial Conduct Authority) qualified adviser
  • The schemes recommended are members of the Equity Release Council (ERC) which ensures they come with the equity release code of conduct indoctrinated
  • You receive separate legal representation from that of the lenders. As from 2014, this will need to involve a face-to-face meeting with your solicitor for added protection
  • You receive a Key Facts Illustration and Suitability Report covering all aspects of your adviser’s recommendation including set up costs, interest rate, future balance & early repayment charges.


I have personally seen the benefit equity release has made and have the testimonials to show the satisfaction & difference a lifetime mortgage can make to someone’s life.

If taken for the right reasons, under the right circumstances and with the right advice, equity release schemes can prove to be the right choice.


If you require further information on whether equity release schemes could be the right choice for you, please contact Barry Adnams on 07989 281108 or email barry@equityreleasesupermarket.co.uk


On Why Finding A Good Equity Release Consultant Is A Must

Wednesday, June 22nd, 2011

The amount of equity you own is the term used to describe the value of a home less any mortgage or secured pending on it. Equity release allows you to free up this money tied up within your home.


The equity release process will allow you to receive a tax free, lump sum of capital allowing you to spend it in whatever way that you choose.


An obvious disadvantage is that you will not be able to hand down all of your property to your offspring. Nevertheless, you do get to live out the remainder of your life in your home, rent free or till you move into elderly care.


If you are considering an equity release scheme, the best way to get started would be to approach an expert. Some organisations which provide equity release schemes also provide a free consultation, so remember to take advantage of their services. Some research of the advisor would be of benefit as they must be regulated by the FSA (Financial Services Authority) & have an individual registration number with them. The equity release adviser should therefore be found on the FSA website register.


Ensure they are independent, which means they are free to deal with ANY equity release provider in the market. So ask. Some companies purport to be whole of market, however upon closer analysis they only deal with a handful of companies. You may therefore be missing out on a beneficial feature of an equity release scheme that they do not have available. This could save you £1000’s in the long run & could prove costly if the wrong equity release plan was chosen.


Your advisor will let you in on all the vital details regarding the procedure. This will be after the equity release adviser has collated all the necessary facts regarding one’s current situation. Guarded with this information, & any soft facts provided such as ‘how important is that you leave part or all of your property to your beneficiaries?’  will be asked. Also income & whether you are in receipt of means tested benefits is important as this will reflect on which equity release schemes are advised upon. The equity release consultant can then document & record this stage of the lifetime mortgage process.
Once an accurate financial picture has been ascertained & observed the clients objectives, the equity release adviser can then discuss the mortgage options available. These would include an explanation of the various schemes available to suit. Included in this would be roll-up equity release schemes, home reversion plans & interest only lifetime mortgages such as the Halifax Retirement Home Plan or the Stonehaven Interest Select.


You do not have to give them an instant decision; after all, going for an equity release scheme is a big decision and something which should not be rushed into.

Upon presentation of the equity release advisers recommendations a Key Facts Illustration must be offered to you. This would include a summary of the scheme in principle, costs & charges, future balance & the commission payable by the lifetime mortgage providers. This is quite a comprehensive overview of the scheme & covers the finer details, as well as the main features, such as the no negative equity guarantee & early repayment charges etc.


Once you have made your decision, all you have to do is simply call your advisor and give them the go ahead. They will have all your paperwork taken care of, contact your solicitor and keep you updated about everything, right to the time that you get your money released.


A professional & courteous adviser will confirm the funds have been released & offer any after care service in the future; for example when additional funds are required such as on a drawdown equity release scheme.


As a company Equity Release Supermarket keep contact with its clients to advise on new products & interest rates in the future as it is important to keep abreast of the market as & when more competitive products become available.


Independent & award winning equity release specialist Equity Release Supermarket offer all the above benefits & quality of service that the testimonials at the bottom of the home page illustrate.


To discuss your options in the release of equity from your property call freephone 0800 678 5159 today or alternatively complete our contact form & one of our advisers will be in touch


Equity Release Schemes – Do The Sums Actually Add Up?

Wednesday, February 16th, 2011

The main concern of equity release schemes is the reduced inheritance which is passed down to beneficiaries. Here we discuss the pro’s & con’s of roll-up equity release plans.


First, let’s look at the effect on the beneficiaries & the source of the causes for concern. This then leads us to the equity release calculator with facts & figures showing how these schemes fair for the beneficiaries on final redemption of the plan.


Ok, we’ve have all heard the saying; bad news travels faster than good news & this is synonymous with terminology ‘equity release’.

Although equity release plans were initiated in 1965, the news damaging these schemes generally dates back to the late 1980’s when the first home income plans were launched.

Linked to an annuities or regular income investment bonds & an interest only mortgage, plans such as these 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 & chastened Shared Appreciation Mortgages (SAM’s), the focus of most causes for campaigns against equity release including Trevor MacDonald’s Tonight TV programme.

Therefore, its no wonder the industries reputation was soured.


So what has the equity release industry done about repairing this negative sentiment?

At the time of the SAM’s debacle, SHIP (Safe Home Income Plans) was launched. Formed from its originators – Ecclesiastical Life, Hodge Equity Release, Home & Capital Trust & GE Life all members agreed to abide by a strict code of conduct, which still exists today.

Soon new lenders entered the equity release market, with household names such as Norwich Union & Northern Rock with their newly developed roll-up equity release schemes bringing a significant boost & trust to the industry.

Although equity release schemes began to blossom around 2003 with approximately 25,000 equity release loans completed, a lack of regulation still overshadowed the equity release sector. The market was still somewhat bighted by the previous misdemeanours.


Thankfully, partial regulation was soon imposed on the equity release industry with lifetime mortgages coming under the auspices of the Financial Services Authority on 31st October 2004. Home reversions soon joined lifetime mortgage schemes & by 2007 full regulation & confidence was brought back to the equity release marketplace.

Therefore, the market has evolved & strived to restore pride; a far cry from the negative perceptions of decades ago.


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 the industry has to 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, they are at least guaranteed no debt can be passed onto themselves.

A crumb of comfort maybe, but certainly peace of mind for parents.


As an equity release adviser, encouragement must always be shown to involve 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 this is a major financial proposition.

Again qualified advisers should play an important role in explaining the pro’s & con’s of equity release mortgages & convey these issues to all parties concerned.


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 equity release loans now.


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 equity release applicants.

We know the equity release balance escalates over the lifetime of the scheme; this is the nature of 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 earlier:

One of the lowest interest rates around at present would be the Aviva Lifetime Lump Sum scheme, which  currently has a fixed interest rate of 6.65% (6.9% APR) annual.


A male, aged 65 borrowing a lump sum of £25,000 on the 6.65% Aviva Lifestyle lump sum 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, based on a release of £25,000 in this scenario would lead to a balance in 10 years of £47,594 & after 20 years 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 the equity releases favour.
One common issue overlooked is the potential for property prices to increase. If so, & with 100% ownership of the house still retained the homeowner will fully benefit from any future escalation in the house price. This will then offset some of the compounding effect of the interest & mitigate its effect on the overall estate. Again, we are looking longer term & no guarantee can be given prices will go up; nevertheless historical data confirms they still have.

As a consequence, a rule of thumb is never to borrow anymore than required beyond the initial 12 months. Plans are now flexible enough with drawdown schemes being available that funds can even be drip fed over time as & when required.

Hence, by taking a lower initial amount would result in less interest being charged, meaning more inheritance passed to the beneficiaries.



The second factor affecting the balance accruing & is the main cause of equity release roll-up is purely down the fact that NO monthly payments are required. This helps retirees to have access to the equity tied up in their property & at the same time leave their budget unaffected.

Nevertheless, equity release schemes do have an increasing role in retirement planning for the over 55’s. Care must always be taken & never rushed into without discussion & involvement of third parties.

Advice should always be provided by an industry qualified equity release consultant. If so, & in the right circumstances equity release can provide a comfortable & enjoyable retirement.


Finally, hopefully lessons have been learned from the past & the industry can move forward, innovate & develop further over time.


To discuss any of these issues & with no obligation whatsoever, please contact the Equity Release Supermarket team on 0800 678 5159 or email mark@equityrelease supermarket.co.uk


Equity Release – An Alternative Means To Generate Funds

Monday, September 20th, 2010

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


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

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


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

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


What if the value of the property falls?

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


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


If you wish to request an equity release quote, contact Equity Release Supermarket on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk


Equity Release – An Excellent Way To Secure Your Retirement

Monday, September 13th, 2010

Are you facing financial problems? If your answer is yes, then equity release schemes may be the perfect option for you. These schemes are specially planned for elderly people to release some cash against their property’s value. There are various equity release schemes offered by financial institutions.


Two of the most popular equity release schemes are lifetime mortgages and home reversion plans. By opting for home reversion plans, you can sell all or a part of your property to the equity release company.


On the other hand, lifetime mortgages are categorised in three different types:

• Roll-up lifetime mortgages
• Fixed repayment mortgages
• Interest-only plan

Of the above mentioned schemes, the roll-up lifetime mortgage scheme is preferred by many homeowners these days.


However, here we feature one of the less common equity release plans: –

Features of a fixed repayment mortgage:

Instead of interest, you have to pay a fixed amount of money which is higher than the original borrowed money. The repayment money is agreed in advanced with the lender. You do not have to worry about repayment money because it is done when your home is sold.


To choose an equity release scheme which suits your requirements, you should always employ the services of an independent equity release advisor such as the team at Equity Release Supermarket, whom have over 30 years equity release experience.

They will guide you. In essence they will ascertain your current situation, gather details of your finances & dicuss your options.


These will include looking at any alternatives prior to explaining & advising on equity release: –

  • Downsizing
  • Interest only mortgage
  • Using any savings or investments
  • Asking relatives for financial assistance
  • Seeking any entitlement to state benefits
  • Taking on a lodger


Once these avenues have been explored the adviser will make their recommendation. This will involve running through a specific Key Facts Illustration (quote) & explaining the pro’s & con’s of the particular product.

Should this be to the satisfaction of the client then the relevant paperwork can be completed by filling out the required documents.

Most equity release schemes offer three payment options. You can get a lump sum or regular monthly income. You can also opt for a combination of both these methods.


For additional information on the alternatives to equity release contact your local Equity release supermarket financial adviser on 0800 678 5159 or email admin@equityreleasesupermarket.co.uk


Do I Qualify For The Halifax Retirement Home Plan?

Sunday, August 1st, 2010

A unique, yet largely unknown equity release product – the Halifax Retirement Home Plan is increasingly being recognised as the answer to a financially secure retirement for the over 60’s.

Here we explain the process which leads to identifying whether you qualify for the Halifax Retirement Home Plan.

Unavailable through the Halifax branch network, this lifetime mortgage can only be recommended by suitably qualified lifetime mortgage advisers such as Equity Release Supermarket.

Using their experience & knowledge, they are required discuss your objectives & using their independent financial status, can research the whole of the mortgage market to find the best deal for you.


Initially, the adviser will gather all relevant information necessary to understand your current situation including:

  • Applicants – Age & income
  • Liabilities including mortgage, loans & credit cards
  • Mortgage requirements – amount & type of product
  • Credit history


This information will enable the adviser to calculate whether you will qualify for the mortgage required.

Prior to this he will provide a key facts illustration (KFI) which outlines the particular product you are looking to apply for & explains its costs & features.

The basis of qualification initially is the Halifax Retirement Home Plan calculator, which acts as a guide as to whether the case qualifies on an affordability level.


This will take into account total incomes including:

  • State pensions
  • Occupational & private pensions
  • Rental income
  • Pension credit
  • Disability living allowance (60%)
  • Carers allowance (60%)


At the same time it will also need any outstanding monthly liabilities including:

  • Mortgage & other secured loans
  • Personal loans & hire purchase agreements
  • Credit cards


Using this data & assuming a credit worthiness commensurate with the applicants previous repayment history, the Halifax Retirement Home Plan calculator will advise a recommended mortgage figure.

As this product is only available to people already retired, the Halifax Retirement Home Plan will not take into account employed or self employed incomes.

The scheme is not designed for people under age 65 & having earned income.

*However, the Halifax Retirement Home Plan does have flexibility on these issues, so always check eligibility first with Equity Release Supermarket on 0800 678 5159.


Subject to the calculator confirming sufficient capital can be raised, then the next steps can be taken…

This would involve the Equity Release Supermarket adviser completing a ‘decision in principle’ with Halifax. This is a means of ‘dipping your toe’ in the water to ascertain whether in principle the application can be acceptable to the Halifax.

Details required are name, address, income, existing liabilities, mortgage amount & the product required e.g. tracker or fixed rate?

Upon submission of this information Halifax will assess this & credit score & complete a credit check on the applicant(s).

An online decision will be made by Halifax as to whether a full application can then be completed.

If successful, then conversion from decision in principle to full application can be made.

From there the payment of any fees are made with the valuation & solicitors then being instructed by Halifax & the case can continue to successful completion.

All processing is now undertaken on the new Halifax online mortgage application system, which provides instant feedback on case criteria. This has improved processing times.

Completion times for the Halifax Retirement Home Plan are now ranging from application to receipt of funds of between 3-4 weeks.


If you have any further questions regarding eligibility on this or other equity release schemes, please contact Mark on 0800 678 5159 or email mark@equityreleasesupermarket.co.uk

For additional information on the Halifax Retirement Home Plan & rates available visit our compare deals table here.


Equity Release Early Repayment Charges – The Truth

Tuesday, May 4th, 2010

Anyone considering taking out equity release  has many choices to make.


One of the biggest & most expensive if not advised correctly could be on early repayment of an equity release scheme .

However, before we delve into the main differences between current equity release schemes we briefly look at why early repayment charges exist & how they can arise.


Primarily, equity release is designed to run for the rest of your life.


There is no fixed term & the scheme will continue to run until the second person has died or moved into care.

At that point the property is usually sold, with the equity release provider being repaid first from the proceeds & any remaining balance is passed into their estate.


With the earliest age of starting one of these schemes being 55, the total term could well be in excess of 30 years. For this reason lenders hedge their bets in order to recover any potential early repayment which may cost them significantly.


Obviously life expectancy for everyone differs.


The Financial Services Authority (FSA) use average life expectancy data in order to provide the basis of a lenders key facts illustration (quote).

It is with this same information that lenders will also formulate their early repayment charge structure.

We can relate such charges with a conventional mortgage, whereby upon early repayment within a specified term the borrower will incur an early repayment charge.


So, upon what circumstances would an early repayment charge exist?


This could be for a number of reasons: –


1.       Sale of property

2.       Inheritance

3.       Death

4.       Moving into long term care


However, not all the aforementioned would incur a penalty upon early repayment.

Equity release providers would not invoke a penalty on death or moving into long term care. Additionally, where some lenders invoke a charge for a set period of time, once this term has expired there would be no penalty thereafter.

However, there would potentially be a penalty if the property was sold during the lifetime of the owner for example if an inheritance was received or downsizing occurred & the scheme was repaid as a consequence.


In addition to the early repayment charge the lender could also levy an administration fee which can vary from zero to £300.


How do lenders calculate the early repayment charge & how much can it be?


The answer to this varies significantly & this can be evidence with the following simplified table: –





Maximum Charge

Aviva Remainder of the plan term Charge linked to performance of gilts. Maximum 25% initial advance
Hodge Lifetime 10 Years Percentage penalty based number of years 5%
Just Retirement Remainder of the plan term Depends on the FTSE UK gilt yield Maximum 20% of total advances
LV= 10 Years Percentage penalty based number of years 5% yrs 1 to 5, 3% yrs 6 to 10


As you can see, all equity release schemes have the inclusion early repayment charges & if you are considering early repayment it maybe a case of damage limitation or manipulation of repayment date that could avoid potential penalties.

From experience, this aspect of equity release penalties I will cover in a separate article to follow & can provide advice on methods of alleviating these penalties from lender to lender.

This will also include topics such as: –

  • Options on downsizing
  • Gilt rates  & where to find current gilt yields
  • Information on repayment to existing equity release borrowers who are looking for additional funds or achieve a lower interest rate
  • Possible avoidance of early repayment charges – lender by lender


If you have any questions or require further information on the subject of equity release early repayment charges, please email mark@equityreleasesupermarket.co.uk or contact Mark on freephone 0800 678 5159.


Stonehaven’s New Interest Only Lifetime Mortgage Lending

Thursday, March 11th, 2010

Stonehaven, the innovative equity release lender that originally sourced its funding from Santander, should now benefit from the withdrawal from the market of the Halifax Retirement Home Plan.

Stonehaven now use various finance houses in order to release equity in this sector. Their Stonehaven Interest Select plan can provide an interest only mortgage  that will run for the rest of your life.


To provide peace of mind to their customers, the interest rates are fixed for life. Therefore you can be safe in the knowledge that your monthly interest only mortgage payment will never change, regardless of external interest rates.


The Stonehaven Interest Select plan  has been given the rare title these days of a self certification (self-cert) mortgage as NO income verification is required. Stonehaven class the payment of interest as a ‘contribution’ as such do not require proof of any income. The Stonehaven Interest Select plan also has the added facility of selecting the amount of interest you wish to pay. Stonehaven will allow a contribution of anywhere between £25pm upto the full interest payment so one can fit the monthly payment in with their budget.


Should not all the interest be repaid, then there will be an element of roll-up onto the original capital raised. The balance will therefore increase over the years, but not as great as otherwise would be if no payment was made at all. This could be great news for the children or beneficiaries who wish to maximise the amount they receive at the end of the day.
After the shock withdrawal of Prudential at the end of 2009, Stonehaven was one of only a number of remaining providers including Just Retirement , Aviva  & LV=  who expressed commitment to the sector.

Stonehaven’s existing lifetime mortgage customers have received continued good servicing & they have pledged to meet all the existing terms and conditions.


New applications, supported by relevant Key Facts Illustration can only be processed by qualified financial advisers such as Equity Release Supermarket & cannot be done direct. Applications must include a cheque to cover the valuation fee.


Offers made by Stonehaven are normally valid for a period 3 months & if you are considering an alternative to the Halifax Retirement Home Plan then the Stonehaven Interest Select plan can meet your requirements.
If you have any enquiries or questions you wish to ask then please contact the Equity Release Supermarket  team on 0800 678 5159.

Mark Gregory CeMap CeRER


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