What is an Equity Release Calculator?

By Mark Gregory on March 11th, 2015

An equity release calculator is an online tool available to retirees looking for equity release products. There are various types of calculators to help you assess the different lifetime mortgages and home reversion plans available to you. As a person who is 55 years or older you may have a situation where you are equity rich in property, but lack available cash funds for your retirement. It can happen. Two recessions, a fluctuating stock market, and pension income issues due to the decline in annuities may have left your retirement funds lower than expected or gone completely. Before understanding what an equity release calculator is and will do for you, it is perhaps essential to look at different products on the market that fit this category.

 

Equity Release Products
Home reversion is a partial or full sale of your home for an agreed upon percentage in value. You may sell 50% of the home and receive up to 30% in value for that portion. The home reversion company earns no interest as you live rent free in your home until you die or need long term care. They only earn on their investment after the home is sold in full on the market. Any portion you still own is given to your beneficiaries and the other funds are the return on investment for the home reversion product.

 

Lifetime mortgages are available in standard, drawdown, enhanced, interest only and now voluntary repayment formats: –

 

1. A standard or roll-up lifetime mortgage compounds interest onto the principle loan amount until you repay it or die, then it gets repaid. No monthly payments are required and usually are for people with little or no interest in the inheritance they leave behind.

 

2. A drawdown lifetime mortgage offers a small lump sum in the beginning and a reserve facility to draw on as you need funds. The interest still rolls-up on the equity release mortgage, but only on the portions of cash withdrawn initially and from the reserve facility. Unused and available funds are not charged interest.

 

3. An enhanced mortgage offers you a larger maximum equity release lump sum than the standard roll-up mortgage based on ill health conditions such as diabetes, angina, Parkinsons or heart disease. The assumption is your life expectancy is lower if you have a health condition. Otherwise, the enhanced mortgage works by compounding interest just like a standard mortgage.

 

4. The interest only lifetime mortgage is going to charge you a monthly interest rate and will need verification of income to support the borrowings. Payments can start at a minimum of £25pm and up to the full amount charged in that month based on the Annual Percentage Rate (APR). The principle balance remains unchanged if all the interest is paid and the balance is repaid upon death or sale of the home.

 

5. Voluntary repayment schemes are the latest addition to the list of exciting new equity release products. Available on lump sum or drawdown basis, they facilitate the ability to repay upto 10% of the original amount borrowed each year without any penalty being applied. Therefore, the homeowner has the choice over how much to repay & when & NO income checks are necessary to qualify.

 

Equity Release Calculators in Detail
You now understand the different equity release products, which also mean there are different calculation requirements for these schemes. The equity release calculator is going to give you an estimated amount you can release in equity based on your age, or if you apply as a couple the age of the youngest, your health, and your property’s value. The sex is based on life expectancy where women used to live longer than men due to stressful working conditions, at least that was the theory. All equity release calculators work on the basis of the youngest applicant as they are theoretically going to live the longest. Others just want to know if you are applying jointly or as a single person. As a couple, at least one of the homeowners must be over the age of 55. Should one applicant not be & are married then most equity release companies will not accept an application. There are ways around this & expert equity release advice must be sought to be able to proceed on such a basis.

 

Your age determines how long the loan will be outstanding. The longer you have left the less you will receive as an equity release, because you have more years as well as more interest accruing onto the loan. Equity release calculators are just an estimate of potential, and not to be used as ‘set in stone’ for the result. They should always be used as a guide and using them this way will not underlie anyone’s expectations.

 

The result can vary because you may not have the current property value. You might use one that is before the recession or one that you obtained many years ago. Accuracy is purely in the information you provide.

 

Other Accuracy Factors
Another accuracy factor is the website you use. Some websites do not update their content frequently; therefore, their calculators do not have the most accurate interest rates and lending criteria to factor an accurate result. With websites that offer fresh and frequently updated content the admin is also working to update the calculator to provide accurate results.

 

You also have the option of finding calculators that are one step. This means you input the data and the result shows up immediately. Some calculators offer results for all lifetime mortgages and home reversion plans. Others will provide results for standard lifetime mortgages and the enhanced version, with a little statement that if your health is poor you can access this larger amount of funding. Make sure you are using an accurate equity release calculator with accurate details provided by you.

 

Now you have the information on what an equity release calculator is, how it works & the life changing results it offers, all you need now is to use one!

 

How to Find the Best Equity Release Plan

By Mark Rumney on December 7th, 2014

Best equity release planEquity release schemes have seen unprecedented growth and have broken sales records upto the end of the third quarter in 2014. There have been many reasons for the surge in popularity, however with steps taken by the Equity Release Council and new product launches from companies like Hodge Lifetime, Stonehaven and Aviva have helped advisers provide a range of equity release solutions to the over 55’s in retirement.

 

One of the biggest selling equity release plans for 2014 has been the Aviva Flexi Lifetime Mortgage Plan. Using a combination of flexibility with its voluntary repayment option and lowest equity release interest rate this plan has seen the biggest impact and assisted many retirees achieve the lifetime goals.  However, what constitutes the ‘best equity release plan’ and why has Aviva’s Lifestyle Flexi & Lump Sum Max products helped break all records?

 

  • Aviva allow homeowners with a voluntary repayment system where they can repay up to 10% of the original capital borrowed every year, in a maximum of four installments at £500 minimum pay each time. There are no penalties for making these payments.
  • Aviva also have a unique feature of allowing on the death of a joint life planholder, the surviving partner to choose whether they wish to sell the property & repay the Aviva Equity Release Scheme within three years of the event.

 

As you can see finding a solution to the best equity release scheme has to incorporate many schemes features and factors. A qualified equity release adviser therefore has to analyse a number of factors which can include all of the following: –

 

  • Lowest equity release interest rates
  • Potential early repayment charges
  • Calculation of the maximum equity release
  • If drawdown needed, sizes of the cash reserve facilities
  • The various set up costs
  • Flexible repayment options built into the plan
  • Health factors which could influence the enhanced equity release plans
  • The future retirement plans of the homeowner
  • The clients attitude towards leaving an inheritance

 

Let’s look at each of these in turn:

 

  • Lowest Equity Release Interest Rates

The Hodge Retirement Mortgage offers the lowest interest rate at 4.75%. However, this is an interest only scheme and is aimed at people who want to pay a monthly payment so that the balance remains the same. Depending on the loan amount, Aviva tend to offer the lowest rates for traditional lifetime mortgages although for larger loans, companies such as Just Retirement, Pure Retirement & New Life may offer a lower interest rate. Your adviser at Compare Equity Release will look at the whole of the market to find the best rate for your circumstances.

 

  • Potential Early Repayment Charges (ERC’s)

Thankfully, you’re usually able to transfer your equity release scheme from one home to another, if you downsize, and carry on with the plan, as it’s a lifetime commitment. Most equity release providers use the movement in Gilts to ascertain whether a penalty would be charged if you do wish to repay early. If you’ve got clear intentions of repaying early, the best plan may a scheme offered by LV= who charge a fixed early repayment charge within the first 10 years and don’t charge any penalty at all after 10 years. Similarly, Hodge would charge a penalty during the first 5 years, starting at 5% in year 1 down to 1% in year 5, and they don’t charge a penalty after 5 years but these only apply upon downsizing. It’s a specialist area of equity release and it could the most important factor when considering the best plan for you.

 

  • Calculation of the Maximum Equity Release & Drawdown Facility

The maximum loan amount can depend on whether you take a one off lump sum or use the increasingly popular drawdown facility. You should only take the maximum lump sum if you need to spend it straight away otherwise a drawdown scheme might be more suitable for you. If it’s important for you to have the maximum drawdown available then Pure Retirement could be best option although their interest rate is not the lowest. Similarly, if you’d prefer to have your drawdown facility guaranteed for 15 years then LV= might be the best option as they’re the only company who offer this certainty. The amounts available as a one off lump sum are often the same from the likes of Aviva, Stonehaven, Pure Retirement & Just Retirement so your adviser can work out the best plan for you.

 

  • The Various Set Up Costs

Again, it’s important for your adviser to look at the whole of the market and consider the overall APR when comparing set up costs. Many companies tend to offer a free valuation, although Aviva increase their interest rate accordingly. The Pure Retirement plan offers a cash-back on completion, depending on the loan amount and product type, which can cover the overall set up fees but their interest rate is one of the highest. The Hodge Retirement Mortgage offers the lowest interest rate and has the most favourable early repayment charges, yet their admin fee is the highest on the market. Overall, the lowest fees doesn’t necessarily mean the best plan.

 

  • Flexible Repayment Options

Most equity release planholders prefer not to make any monthly or voluntary payments as they’d prefer to see interest roll up. Lenders such as Hodge, Aviva and more recently Stonehaven have introduced schemes which allow voluntary interest payments. Basically, you can opt to make voluntary payments of up to 10% per annum if it suits you. More2Life and Stonehaven also offer plans which charged a fixed monthly amount with the flexible option of converting to rolled up interest at any time. Here at Compare Equity Release we’re noticing an increasing amount of enquiries from clients who wish to pay some or all of the interest. We’ve already seen that the Hodge Retirement Mortgage offer the lowest interest rate but their scheme doesn’t allow you to convert to rolled up interest until the younger borrower reaches age 80. It’s a good idea to speak to an adviser here at Equity Release Supermarket as we can explain all of the options and recommend the best plan for your needs.

 

  • Health Factors Affecting the Enhanced Equity Release Plans

Thankfully, you won’t be declined for a lifetime mortgage due to any existing health issues that you may have. In fact, it can work to your advantage as some lenders will release more money if you suffer with a qualifying condition such as high blood pressure or diabetes. It’s important that your adviser discusses your health with you, as companies like Aviva are willing to offer a lower interest rate on their plans due to your health and lifestyle. Overall, though, interest rates tend to be higher for enhanced lifetime mortgage plans so your adviser will consider all options to find the best equity release plans for you.

 

  • Homeowner’s Future Retirement Plans

People are living longer and longer and the equity is usually the last asset that they can utilise for their retirement. Therefore, it’s important to speak to an adviser and explain what your future retirement plans are so he can recommend the best scheme for you. Do you plan to downsize? Do you need a large reserve from which to drawdown? Have you got any pension plans which can meet your objectives? As we’ve seen already, the best plan might not be the plan with the lowest equity release interest rate, lowest set up fees or lowest early repayment charges, the best plan is the one that suits you both now and in the future.

 

  • Attitude Towards Leaving an Inheritance

My client’s views regarding leaving an inheritance can vary considerably. Some plans offered by companies such as More2Life, Aviva and New Life can include a guarantee that you protect a portion of your property for your family, so these may be the best plans for you. Other clients may prefer to make voluntary or regular interest payments so that the outstanding balance either remains the same, reduces or increases more slowly. However, should your attitude to risk be that you’re not concerned about leaving any inheritance, the best equity release plan for you would be schemes which offer higher overall loan amounts.

 

Summary

 

Overall, you need an independent equity release adviser to fully consider all options when you’re considering equity release. As we’ve seen above there’s lots of different factors which can determine the best equity release scheme for you. Ideally, you need to have a full in depth discussion with an adviser to work out the best plan for you.

 

 

Should you wish to arrange a no obligation chat to discuss which is the best equity release for you please contact Mark Rumney DipPFS CeMAP on: – 07957 974826 or email me at markrumney@equityreleasesupermarket.co.uk

What are the Set Up Costs Involved in Equity Release?

By Mark Gregory on October 28th, 2014

Equity release is getting a lot of attention and hype these days as it becoming a recognised mainstream mortgage lending product. Equity Release Council figures for the first 9 months of 2014 have recorded over £1 billion of equity release loans been made. This is the highest ever on record & shows how the UK population have finally understood how these schemes can help someone’s finances in retirement.

 

It is totally different from other conventional mortgage schemes and can offer plenty for those in retirement. However, one area for consideration and some concern can be the equity release set up costs which can vary from lender to lender. Setting up any mortgage can be expensive if the correct advice has not been obtained in the first instance. An equity release specialist would have access to the best equity release deals & these could come with introductory offers such as free valuations & cashbacks.

 

Equity Release Set Up Fees you may Encounter
The main charge equity release companies themselves levy is the lender application fee and can be anything between £0 and £995. The fee is usually deducted before it is sent to the solicitor for further processing; however with certain lenders they may offer the opportunity to add the fee to the equity release loan. Unless this is necessary (say for a maximum release) it would be unwise as by adding the lenders application fee to the loan will also result in this fee being charged interest upon also.

 

It is very important that a valuation of the property is completed which actually decides the amount of equity you are going to receive. Most of the companies will charge you for the valuation of your property, the amount of which is determined by the size of the estimated sale price. However, shop around as there are equity release brokers who can obtain a valuation, free of charge. Some of these worth mentioning are Aviva, Just Retirement and LV. This is indeed a great bonus for all those who have little savings and would struggle paying any upfront fees.

 

Equity Release SolicitorThe next cost involved in setting up an equity release scheme is the solicitor’s costs. The Equity Release Council has made it compulsory to have a different solicitor acting for the lender and the applicant. This means that now you also have to pay the solicitor fees which should total approximately £600-£650 and it is highly recommended that you should opt for the one who is a member of ERSA (Equity Release Solicitors Alliance). ERSA solicitors specialise in equity release and therefore usually have quicker completion timescales & work for a fixed fee. Companies such as Ashfords, Equilaw & Goldsmith Williams are to name a few.

 

Since, this whole process is little bit complicated, you therefore need a qualified equity release adviser who can help in finding the best equity release scheme and thereafter the processing of the application. There are various companies in the market that are offering advisory services. You can opt for anyone of these companies depending upon how good their past experience is. Usually advisers charge you fees which range between £595 up to £1500 and always choose a company that will only ask for the complete payment once everything has been set up as per your requirements.

 

Paying upfront for any equity release advice is not best practice. Why should you? There are experienced equity release UK brokers who are confident that following their advice they are offering you the best deal possible. Brokers such as Equity Release Supermarket will also offer a no completion, no fee offering, confident of their ability to process applications quickly & effectively.

 

It is advised and recommended that you consult someone who has good experience and testimonials relating to their past performance and companies such as Equity Release Supermarket are one of the most competitive in this area.

 

These are the main equity release set up costs you might encounter.

 

Calculating your Expenditure and Releasing Cash
Whenever you start looking at equity release products, you have to consider the fees as mentioned above, but you also have to gain an idea of the cash lump sum you can receive for the equity release product. There are a couple of things that determine the amount to be released: your age and the property value and in some instances the health of the applicants.

 

The importance of assessing whether equity release is right for you or not, is based on the costs and spending funds. There are a couple of ways around this. First you find a company willing to roll the costs of gaining an equity release into the loan. This means the costs are part of the lump sum so you have the money at closing to give to the various people involved in the process.

 

If the funds are put into the loan it also means this is more you have to repay and thus less you actually get to use for your retirement. Additionally some of the costs are required upfront which means you need that money before you can proceed. These costs are usually non-refundable should the case not proceed for any reason such as down-valuation or legal issues with the property.

 

As you calculate the different amounts you might be able to borrow in equity release, be careful in making a snap decision. While you may feel that the equity release calculator leaves you with little option, you may find there is a product out there you just need to take the time to research things. It is another reason that you want an independent equity release adviser in on the deal. They can look for products based on your needs and see if there is something more beneficial for your situation than what you might have found during your search.

 

When it comes to equity release set up costs, you certainly need to calculate the amount you believe you can get for the loan and then determine if it is enough to cover the set up costs and the personal expenditures you require too. Remember, costs can be minimized by shopping around & costs are not always fixed, but negotiable, particularly some of the more expensive brokers charging over £1000 to process your equity release application. After all, the money is better off in your pocket & used for your retirement.

 

What is the Maximum Release from a Home Reversion Calculator?

By Mark Gregory on September 3rd, 2014

An easy answer to how much you gain get as a maximum release using a home reversion calculator is 100%. But in actuality the answer is more complicated. Home reversion by definition in the financial industry is a sale of your home in full or part. If you sell your home in full to a company you are selling 100% of your home, thus you get the maximum amount a home reversion company is willing to give you. At any age, 65 or over, you can sell 100% of your home to the company. The explanation is still not complete as there are many factors that will determine the maximum release amount.

 

Property Value
When you purchased your home, you most likely obtained an appraisal to tell you if the purchase price fell in line with the value of your home on the market. This number was used to determine if a mortgage was possible to help you buy this home, unless you had enough to purchase in cash. So you should already be aware that housing value has a definite influence on potential resale value and the amount of equity in your home.

 

You also know that property can appreciate or depreciate based on economic factors. During an appreciation period it is a great time to sell because your home is worth more and therefore you can get more in the sale.

 

Age of the Youngest Homeowner
The youngest homeowner has to be age 65 in order to qualify for home reversion. The other person such as a spouse can be older, as long as all homeowners on the property title are 65 or older. Age factors into the equity release calculation based on mortality tables. These tables indicate the potential life expectancy of a home owner. Someone older is not expected to have as many years left as a younger individual.

 

The Home Reversion Company
You get a lot for selling your home. You get to live in that home until your death or the death of the youngest person named in the agreement. You could also move out at which time the home has to be sold to the company and you would get the unsold portion in a tax free lump sum. While you live in the home you do not pay rent. You have a lifetime tenancy agreement and equity release scheme that requires you to keep the home in good condition so that it will not depreciate on the home reversion company.

 

In return for living rent free, without needing to repay any of the funds you receive, and tax free cash, the home reversion company has to wait. They have to wait until you die or decide to leave the home. Only when you have left the home and gained a new main residence can the company gain on their investment.

 

The investment is to give you a certain percentage of the total home value based on the amount of home you sell. Remember you can sell 100% of the home and get the maximum release amount, but this is not the same as 100% of the home value.

 

The company has to gain in this situation. If you live in the home for 30 more years the company has given you cash they are not making anything on. They are waiting to sell the entire home at full value, which has hopefully increased due to appreciation. To cover depreciation they provide a percentage that is under 100% of the home value.

 

Calculating Potentials
The home reversion calculator comes in by giving you a guide to a number. The calculator gives you a possible percentage of actual funds you get to take out in equity based on how much of the home you want to sell and your age.

 

Crown is one company offering home reversion. This company is known for their flexible underwriting culture meaning they consider schemes like an enhanced home reversion in which they might be willing to give a higher percentage of tax free cash to you. If you have ill health crown may be willing to seek out a personal investor in their plethora of investors willing to provide more money in a home reversion.

 

As the home reversion calculator is just a guide, you also want to make certain you are dealing with an experienced and qualified equity release adviser able to make you a deal. You can find such a person through a reputable company like Compare Equity Release.com.

 

When a London Property Boom Becomes Gilt-Edged

By Mark Gregory on May 20th, 2014

London Equity Release PropertyPrime London Real Estate is in the news again and this time it is Chesterton Humberts Agents that are doing the talking. You might want to get out your Aviva equity release calculator so you can decide whether the gilt-edged payment scheme is for you or if you just want to ride the tide.

 

What Experts Have to Say

The experts expect real estate in London to rise 10 per cent compared to FTSE indexes and gold, which are set to increase 7.8 per cent and 1.4 per cent in the next 12 months, respectively. The index analysis further states that the property market is seeing a small number of available locations while prices are being driven up in London.
Foreign and domestic home buyers are looking to make purchases. For foreign buyers it is mostly apartments that have a quick return on investment and quick sale option. It is an opportunity for them to increase their portfolio. Domestic buyers want to stay in London to enjoy the main amenities of the Capital. They are also helping economy recovery push forward, which helps the entire UK property market.

 

Equities are another area that is supposed to improve in time, but it will be slower in pace. Gold remains a safe haven for investors over stocks. Yet, in 2013 an 11 per cent increase in prime capital occurred. Oil is another area that might see some fall with major importers thus making housing a more reliable vehicle for investing and ROI (Return on Investment).

 

Chesterton Humberts has forecast a property value increase of 9.7 per cent each year, with a 48.5 per cent increase in the next 5 years. Evidence iscertainly clear for investing in real estate or remaining in an investment already attained. By looking ahead it is possible to see that property growth is going to continue in value, while supply remains fairly low.

 

Equity Release Discussion

Remaining in London property is certainly a possibility for retirees. A worry is that many of these individuals are going to hit their later years say after their 70s and turn cash poor. Pensions; especially, with stock indexes looking poorer than real estate can decrease and eventually evaporate during use. It leaves a choice of leaving London, giving supply to new wealth, or remaining in the home a family has had for more than 20 years by utilising equity release.

 

There are security worries with equity release schemes there is no doubt about it. Many home owners worry they will be unable to repay the mortgage even with a sale of their property at death and leave behind an inheritance. This is where the range of Aviva equity release products can be quite helpful. Furthermore, Aviva’s website includes the free use of the Aviva equity release calculator which can assist in ascertaining the maximum equity release possible.

 

You can calculate the potential expense of the equity release product you are most interested in. You can determine what you can take out, if it would be enough to live on, and still leave inheritance for your beneficiaries.

 

With a London equity release plan, as the property continues to increase in value there is more money in the property, which in turn increases the net equity value one holds. This can help keep the inheritance intact. Furthermore, it gives you something that can continue to supply a return with the right equity release product. A drawdown lifetime mortgage opens up a maximum equity sum that you use as you need it rather than getting it all at once. This keeps the interest rates low. It also helps you tap into more equity as the property value increases.

 

You never have to repay the loan while you are living in the home or even while you are alive in the home. You get to stay your entire lifetime. At the end the home can be sold or other things like investments and life insurance can help pay off the lifetime mortgage. The capital sum and the interest are always paid together at the end.

 

Gilt-Edge Equity Release

Other options exist for paying off a lifetime mortgage. Gilt or conventional gilts are government products based on the liability of the sterling. The HM Treasury offers these products. You can take out a gilt, gain payment every six months, and then at maturity the gilt pays off in full offering you a nominal amount of money. You can invest in such an option over gold and stock market products. By investing in this coupon, you have a means of repaying the lifetime mortgage.

 

You may discover that repayment happens earlier due to the funds from the gilt. You could also use the gilt to cover repayment charges that occur when the mortgage is paid off too early. Check out these options and examine an approved equity release calculator results to see if it works for you. One calculator providing three calculations is the www.EquityReleaseCalculator.net website. They will allow you free of charge to tap into this information.

 

Equity Release Advisers – Where to Find the Best UK Advice

By Mark Gregory on May 12th, 2014

Where to find Equity Release advisersFor many retirees the realisation their emergency fund is becoming imminently exhausted can be a daunting prospect. Even more so, is the next decision is how to replace these funds, in order to maintain the lifestyle one is accustomed to.

An increasingly popular route for many people over the age of 55 is to consider a release of equity from their property. However, although equity release is a product more people are becoming familiar with, knowing where to turn for further information has proven an obstacle.

 

There may still be a stigma attached to the equity release industry which still has many people feeling cautious about where to turn to for advice. There are a number of resources available dependent upon how one wishes to pursue their route to market. An increasingly popular research tool is the internet with equity release websites.

 

Sites such as Equity Release Supermarket & Compare Equity Release offer a plethora of information on what equity release is, the various schemes available, maximum release calculators, the latest and best equity release deals. Letting the client conduct research in their own time is something these websites offer. They provide information on the basics of equity release and help build one’s knowledge about what equity release schemes are all about. Websites such as these are geared towards modern era of the ‘silversurfer’.

 

Other resources could include approaching the equity release trade body itself – the Equity Release Council where a list of competent independent equity release advisers can be found. The advisers would have been verified they are fully regulated by the FCA & possess the appropriate equity release qualifications to enable them to provide best advice. This will help you to find equity release advisers in your area to provide local advice.

 

Must I have an equity release adviser?

 

The answer is a resounding ‘yes’.

Due to the nature of equity release & the impact a wrong decision could make, not only to the applicants, but also their beneficiaries, the Equity Release Council & providers all insist on any application being supported by financial advice. This will ensure that all types of equity release schemes have been discussed including the difference between home reversion plans and lifetime mortgages. Included in the conversation would be the coverage of the equity release pros and cons which will not only explain how equity releases can be a major benefit, but also the potential downside of the schemes features such as early repayment charges.

 

All equity release advisers must abide by the Equity Release Council Code of Conduct which incorporates five set principles. Additionally, all equity release advisers must have been trained to a set standard which will include passing the appropriate mortgage & equity release exams. These principles will have laid the foundations by which the advice process is aligned & implemented.

 

What added value do equity release advisers offer?

 

The whole purpose behind seeking advice is to ensure that equity release is the best option for your requirements. For instance, the adviser will run through all the alternative options, such as downsizing, using existing savings or even checking eligibility for means tested benefits to assess whether these could be more suitable. Equity release should always be considered as a solution of last resort.

Once all the alternative options have been excluded then work can then start on the equity release advice process. This will include the adviser arranging an appointment, either face-to-face or telephone based in order to gather information by completing a factfind of your current situation. They will explain their status, regulatory body; fee & charging structure & where to turn if a future complaint were to be made.

After the collation of this data, equity release advisers should then conduct their research from the whole of the equity release market to find the best deal which fits with your individual requirements.

 

The product features recommended could come from any of the following: –

 

1. The best equity release interest rate
2. The amount of tax-free cash required immediately
3. Whether any further cash may be required in the future
4. If you are likely to repay the scheme in the future
5. Would partial repayments or monthly repayments be required?
6. How much of an inheritance you would like to leave
7. Taking advantage of any special offers such as free valuations or cashbacks

 

The presentation of recommendations

 

Once prepared, the adviser’s recommendations can then be delivered using a Key Facts Illustration (KFI), which is effectively the equity release quotation. This document outlines the product features including the interest rate, future balance, APR, risks involved & forms the basis of the proposal. All KFI’s are provided by the equity release companies themselves & are produced either by the adviser online, or being sent from the respective company via email.

 

Should the recommendations be acceptable to the applicants then the paperwork can be completed & the equity release application process commences. The whole process should take no longer than 6-8 weeks. Again check with your equity release adviser as some companies such as Aviva do provide speedier completion timescales than many, if time is of the essence. Again, the expertise & knowledge of equity release advisers can play an important role in how long an application takes & can be influenced by their relationship with the company, solicitors & their own back office systems.

 

Conclusion

 

Equity release advisers do charge an advice fee to cover their costs which can vary significantly. The cheapest fee, doesn’t always mean the best option, thus always shop around & obtain a few quotes before deciding which brokerage to deal with.

One way of finding out their competence would be to check their online reviews & consumer comments. Ensure they seem genuine and not manufactured.

Do you know anyone who has previously take a release of equity & found the service they received exceptional? It may be worth asking for this adviser’s details and possibly arranging a free initial consultation to assess their recommendations.

 

An experienced equity release adviser can save many £1,000’s over the longer term and can be worth their weight in gold. Take your time in deciding, not only on which equity release provider to place your business with, but also the equity release adviser with whom to process this transaction.

 

One such company would be award winning Equity Release Supermarket, who have a nationwide team of experienced equity release advisers and can be contacted on freephone 0800 678 5159.

Can Equity Release Affect Eligibility for Means Tested Benefits?

By Marcelle Tuckley on February 18th, 2014

Equity release working with pension credit

Equity release can help retirees meeting everyday living costs such as heating bills…

As an independent equity release adviser I’ve been asked many questions over the years about means tested benefits and how clients fear that that by taking equity release these benefits could be reduced; or even worse, withdrawn.

 

I wonder therefore, how many retired homeowners that are in receipt of state benefits have feared to enquire about releasing cash from their homes, and therefore had similar notions?

 

This article aims to explain the relationship between equity release schemes & means tested benefits and how they can happily live side-by-side and function collectively.

 

 

 

The problems faced in relying on retirement income

Joint income households may feel safe in the fact that they can maintain their standard of living based on current pension income.  But, how many of you would qualify for benefits if your income reduced by half?

 

What if you are already in receipt of means tested benefits and you have no emergency funds?

 

We have evidenced recently how winters are getting colder & there are greater extremes of Mother Nature. Boilers seem to breakdown when we least need it. Utility bills are increasing at rates much higher than inflation & certainly more than state pensions! In fact, anything could happen within the realm of the household appliances that maybe needs fixing, plumbing, servicing or maintaining.

 

State Benefits in Retirement

To get into the nitty gritty of pension credit rules would be an exuberant task, and quite honestly, my fingers would ache with all the typing, but I can certainly cover the basics for you.  How many people would even be aware of what the pension credit thresholds are?

 

Well let’s have a look at some figures…

 

The current basic rate for the standard pension guarantee credit in 2013/14 tax year is a minimum of £145.40 for a single person and £222.05 for couples.  This means that if your total pension income is lower than these amounts, you may be eligible for a “top-up” under guarantee pension credit rules. Also if over the age of 65 additional credits may be available so always check.

 

But what if I have savings in the bank?

Well, you are allowed up to £10,000.00 in savings before your guaranteed credit starts to be affected.  If your savings exceed this limit, depending upon how much more, will determine the reduction, even elimination of means test benefits such as pension credit.

As a general rule, for every £500 over the £10,000 threshold, your pension credit can be reduced by £1 per week. Therefore, substantial amounts beyond the threshold would eventually result in the withdrawal of this state benefit. Care must therefore be exercised.

 

Do I have to tell the Department of Work and Pensions about any changes?

There are current guidelines under what is known as an ‘Assessed Income Period’.  This is normally given for 5 years once Pension Credit has been granted but there are rules that apply with age or couples and could be less.  It means that if your circumstances change within the time allotted, you would normally not need to advise the Department of Work & Pensions (DWP) of this.

This is just the tip of the iceberg and to ensure that you get the most out of your entitlement rights, you would need to speak directly to the Department of Work and Pensions to get fully assessed.

 

Case Study

Equity release working hand-in-hand with means tested benefits

So, how does this tie in with releasing equity, and how do you ensure that your entitlements would not be affected?

Let’s have a look at an example:

 

Mrs T lives in a 2-bedroom terraced house which she feels is worth approximately £125,000.00. She is 67 years of age and has been in receipt of Pension Guarantee Credit for the last 2 years.  Mrs T currently has £2,000 in savings but wishes to keep this for emergency use. The property is in need of re-decoration and she would like to refurbish the bathroom.  Mrs T has not had a holiday for the last 5 years and so this is something she would like to do, but not in the immediate future as the priority is the house. She has heard of equity release but fears the roll-up of interest may affect her grandchildren’s inheritance.

 

For all the work to be done, Mrs T has had a quote for £8,500.00 but doesn’t have the capital to pay for it herself.

 

She approached me for advice and recommendation on how she could achieve her aspirations, but also to discuss her concerns regarding the Pension Credit she currently was in receipt of.

 

Drawdown Lifetime Mortgage Recommendation

After a full review of Mrs T’s current financial situation and researching the whole of the equity release marketplace for all the plans available, it was an Aviva Flexible drawdown lifetime mortgage plan would be the most suitable option for her and this could be achieved without affecting her current Pension Credit.

 

Based on Mrs T’s current age of 67 and her property value of £125,000, an initial lump sum of £10,000.00 could be offered at a fixed interest rate of 5.78%. This amount would also incorporate the costs of setting up the Aviva equity release plan.  Mrs T would then have a remaining cash reserve of £20,000 which she could drawdown in minimum amounts of just £2,000 in the future. This would suit her requirements in advance of whenever she requires smaller ad-hoc cash payments on expenditures such as a holiday or additional work around the house.

 

The benefits for Mrs T would be that she only pays interest on the amount she has actually withdrawn form the lifetime mortgage. There would be NO interest charged on the £20,000 left in the cash reserve facility as this is still being held by Aviva until the monies are required in the future.

 

By completing the application as a drawdown plan, the amount of interest accruing would be a lot less than if the full amount had been taken as a capital lump sum from day one.  Additionally, as the full £10,000 is being utilised immediately, the Pension Credit would not be affected the remaining balance on deposit would leave her with savings over the pension credit threshold.  The remaining cash reserve stays with the Aviva until such time as Mrs T elects to take a further release of equity from her £20,000 reserve.

 

Summary

This is just one example of many possible scenarios. Every client and their circumstances are different based on their age, health personal requirements & attitude to risk. Being an independent equity release adviser helps me to source the whole marketplace to find the best equity release deals & terms for each personal individually. My training, experience, being authorised by the FCA & abiding by the core principles of the Equity Release Council, leads me to offering equity release solutions to people all over the UK.

 

Hopefully, this article has provided more insight and clarity into the fact that you can be in receipt of benefits and still have the potential to release equity.  In doing so I have helped Mrs T achieve her four main objectives with the Aviva drawdown lifetime mortgage recommendation: –

 

1. To raise sufficient funds to carry out her home improvements

2. To have the ability to call on further funds at short notice for a holiday in the near future

3. To keep within the pension credit limits so not to lose any potential state benefits

4. To restrict the roll-up and compounding of equity release interest by taking the funds in smaller chunks rather than one larger lump sum

 

Likewise, I would like to be able to provide guidance & advice to many more retirees in search of fulfilling their retirement dreams and in the most prudent way possible.

 

For further information and a free, no obligation quotation, please contact Marcelle on 07971 468460 or by emailing marcelle@compareequityrelease.com

Why Home Reversions Should Always be Considered

By Mark Gregory on January 5th, 2014

Why Home Reversions Should always be consideredHomeowners in the United Kingdom have always had the option to release capital from their properties through home reversions, although their prominence has somewhat abated. There are now further equity release choices which seem to have stolen their thunder, which is called the lifetime mortgage scheme and differs by securing a first legal charge against the home.

 

So what are home reversions?

By obtaining a home reversion plan you sell all, or a part of your home in exchange for a lump sum amount of cash. By selling some of your property you become a co-owner of your property and in recognition of this, the reversion provider will draw up a lifetime tenancy agreement. The tenancy agreement provides the security of knowing you can remain in situ for the rest of your life as long as the terms of the equity release mortgage agreement are fulfilled.

 

How does a lifetime mortgage differ?

Lifetime mortgages are increasingly popular among homeowners. Many homeowners say no to home reversions due to the fact that the idea of selling their home does not appeal to them. The fact is that many people are not aware of the ins and the outs of the home reversion plan and, as a result, they are quick to reject it.

 

The lifetime mortgage in comparison works on a different basis. Instead the lifetime mortgage provider releases equity within the property, but charges interest on the money it lends. This is similar in principle to a conventional mortgage with the difference here being that no monthly payments are necessary, unless the option is selected. The lifetime mortgage company takes a 1st legal charge on the property to maintain its security. The mortgage then runs for the rest of the occupants life, until they have both died or the last person has moved into residential care. At that point the property is sold & the lender is paid back the amount initially borrowed plus interest accrued to date.

 

Why have home reversions become unpopular?

The fact is that the home reversion plans might be exactly what a home owner is looking for, but because this plan is less popular and due to a lack of sufficient information about the plan, the homeowner may reject it and choose the lifetime mortgage. Homeowners are therefore advised to research further into the scheme before turning it down because it may be exactly what they are looking for. It may actually meet their requirements. Advisers must also keep the home reversion plans in mind as some have the automatic assumption that a lifetime mortgage is the better option – which is their opinion, not the clients!

 

The home reversion plan should always be considered if you are considering equity release especially by those who are in need of an immediate lump sum amount. The fact is that the home reversion plan could raise the highest lump sum amount compared to the other equity release schemes. This lump sum amount is tax free and may be used for any number of purposes. With the home reversion plan, the home owner does not have any monthly payments, nor are they charged any interest.

 

With the home reversion plan, the home owner can choose only to sell a part of the home and can choose to retain the other part for beneficiaries. The home reversion plan most definitely has its advantages, which is why it must certainly be considered by anyone who is considering equity release.

 

Home reversions utilise your main residence. The idea behind this scheme is that you have no other property, income, or means of financial support to cover your expenses, home improvements, or other financial necessities like home care help. Your home cannot have a mortgage or outstanding loan on it, since you are selling a portion of the property. If you have an existing mortgage, it would not prevent you from obtaining any equity release, however this mortgage must be repaid either before completion, or at completions from some of the proceeds of the equity release plan.

 

If you do have other secured loans then they too must also be repaid possibly using the money obtained from the home reversion plan. For some this is a benefit they enjoy since it takes care of a debt they would otherwise have to leave behind. Many home owners age 65 or older will use home reversion to pay off credit cards, car loans, or personal loans to rid themselves of debt and leave a small inheritance behind.

 

What are the reversion conditions?

Home reversions do not demand any maintenance that is above standard. You still have to maintain the home and pay the utilities; however, you do not need to make improvements unless it is something that damaged the condition of the house you sold it in. For instance a roof leak would necessitate repair of the roof. The second property owner under some schemes may be responsible for a part of the repair depending on the amount of damage and the reason behind it.

 

Lifetime mortgages tend to gain interest because a person can be 55 years of age and take advantage of the equity release. What most forget to factor in during the comparison is that they are leaving behind a debt and a potential loss of inheritance. A home value that changes for the worse reduces the amount the home is sold for. If the mortgage was 80% of the home value and the home value drops that 20% it takes away the inheritance a person meant to leave behind.

 

Another troubling factor of lifetime mortgages is selling the home before all family members are ready to move on. One family member may be in a long term care centre and the remaining person has to sell the home because they can no longer afford it. Home reversions allow for a lifetime tenancy, which means that other family members can remain rent free even when one person is now in need of more care. To make certain this happens anyone over 65 has to be named in the reversion plan and be included in the lifetime tenancy.

 

Summary

Home reversion schemes are still a functional part of the equity release UK advice process. Always consider ALL your equity release options and ensure you select the right equity release plan for the right equity release reasons. These are specific to you and therefore no recommendation should ever be the same for your financial adviser.

They key to equity release success is to select the plan to suit your attitude to risk; for the actual amount you require, no more and to include the options to meet your ongoing retirement needs into the future.

 

If you wish to discuss any aspects of the home reversion v lifetime mortgage scenario, please call 0800 678 5169 or email mark@compareequityrelease.com.

 

How to Use a UK Equity Release Calculator

By Mark Gregory on December 7th, 2013

Equity Release Calculator UKIf you are a parent and looking for a way to secure a bright financial future for your children and grandchildren, you may have considered a lifetime mortgage. A great number of people struggle throughout their working lives to finance a property and make it into a home. However, during retirement when incomes become fixed, this home can sometimes become a financial burden, since your capital is tied up in the property until it is sold.

 

Equity release allows those aged fifty-five or over the opportunity to release a percentage of the equity from within their property, without the need to move home. For those people who are unsure whether equity release would be beneficial for them, a UK equity release calculator can provide information about the size of lump sum which would be available and the financial implications of committing to a plan.

 

Where to Make An Initial Enquiry

For a great number of people a UK equity release calculator can provide excellent information for their initial enquiries. It can confirm whether you would meet the qualification criteria and whether the maximum available sum would be sufficient for your requirements. Many people use the funds from their equity release to supplement financing their retirement, assisting their children or grandchildren to take their first step on to the property ladder or enhancing their quality of life. It can also be used as part of inheritance planning to avoid your beneficiaries paying higher premiums of inheritance tax. This can enable you to make an informed decision about whether you would like to proceed further in the process and speak to a specialist equity release adviser or lifetime mortgage broker.

 

What Information is Available?

There are a great number of formats for a UK equity release calculator. Some of these provide basic information such as the maximum possible lump sum; whereas others provide more in-depth information which is more tailored to your individual circumstances. Each calculator will ask for you to supply some personal information including the age of the applicants, details of any health issues, the current value of the property and the level of debt currently secured on the property. These factors will be collated by the calculator against the requirements of the equity release providers to provide a figure, interest examples and plan details which may be applicable for your circumstances.

 

How Are Equity Release Calculations Made?

There is a set of criteria which is common to most equity release schemes. Generally, an equity release will be based on the age of the applicant or in cases of joint applications, the age of the youngest applicant. Since the interest on lifetime mortgages is accrued and added to the balance of the loan, the longer the potential duration of the scheme, the smaller the percentage of equity release available. Most schemes are set with a minimum age of fifty-five for this reason with the level of available equity release increasing in increments with the age of the applicant. Obviously the value of the property and the level of debt currently secured against it will be a factor to assess the feasibility of an equity release scheme.

 

What are The Benefits of a Lifetime Mortgage Calculator?

Many people are hesitant about considering equity release. It can be a great benefit to use an online calculator and obtain some figures before discussing the possibilities with your children or grandchildren. It can also assist people to make the decision to seek out a professional equity release adviser for more information or to start the application process. Some of the more sophisticated calculators can also provide details of specific schemes which may be applicable, which can provide an excellent basis of comparison when speaking to a broker.

 

Summary

Equity release can provide an excellent method to provide a degree of financial freedom, especially for those who have found that their pension plan will not provide sufficient funds to sustain them in their retirement. Professional advisers will recommend speaking to your children and beneficiaries about the implications of equity release.

 

However, people find that they are able to obtain a lump sum or additional income through equity release and retain the right to live in their home until they either die or move into long term care. At this stage, the property is sold and once the balance of the loan has been settled, the beneficiaries are entitled to the remaining funds.

 

If you are worried about your financial future during retirement, a UK equity release calculator may be able to assist you to assess whether equity release could provide the solution to your requirements. This can then allow you to make an informed decision about whether or not to proceed further.

 

Call Freephone 0800 678 5169 if you require an equity release calculation performing for you. Alternatively, complete our equity release contact form to make your confidential enquiry.

 

Where to Turn for Professional Equity Release Advice

By Mark Gregory on November 6th, 2013

For many people considering equity release, the prospect can be a little daunting. With so many different products and services, it can be very important to ensure that you have secured the best possible professional equity release advice. While there are a great number of brokers to choose from, it need not be overwhelming to find a specialist offering good quality equity release advice.

 

How to find Professional Equity Release Advice

There are a great many brokers advertising locally and online. However, in order find a provider of quality professional equity release advice, it would be best to take the time to conduct a little research.

 

  • Referrals: This is probably one of the best ways to secure a good advisor. Ask family and friends who may have used this type of service, if they have any recommendations. This will provide an insight into how professional and beneficial the broker’s service is. Your family member or friend will provide an honest opinion about the level of service they received and the satisfaction they have had with their services.
  • Recommendations: There are a great many websites and forums which offer impartial advice on a number of financial matters. It is worth doing a little research on your potential broker to ensure that they offer a good service. However, you should be aware that the reviews and recommendations are based on one person’s personal experience, so it can provide a very limited picture.
  • Equity Release Council: This is a trade body which was established to protect consumers in the equity release industry. They have a detailed website which provides a list of qualified advisors locally and nationwide.

 

Considerations for Choosing Professional Equity Release Advice

When looking for quality and competent advice, there are a number of considerations you should assess before choosing professional equity release advice. These include:

 

  • Is the advisor independent? Independent advisors are not tied to one particular company or product range. This means that they have access to a greater number of financial products which can offer a greater potential for finding the product best suited to your specific circumstances.
  • Do they have the relevant qualifications? In order to provide advice in the equity release industry, brokers must have the relevant qualifications for lifetime mortgages or home reversion schemes. Reputable and professional advisors will prominently display their certification and qualifications on their stationery and advertisements.
  • Do they have experience in the field? Although some brokers have the accreditation to advise in the equity release industry, they may not specialise in the field and have little to no actual experience. This may mean that they are unaware of the latest deals and lack familiarity with the variety of providers which offer the best deals for particular circumstances. Your ideal advisor should have testimonials from past clients and case studies which document how they have provided great advice to people in similar circumstances to yourself.

 

What to Expect

Professional advisors will complete a client fact-find which will gather all the relevant information about your current situation and research tools which allow the advisor to gather the data on any relevant product within the equity release market. They should have a good knowledge of the market and be able to fully explain the advantages and disadvantages of any particular product. They will provide written information on the details of the provider’s product or services, which will allow you the opportunity to read through at your leisure.

As with any financial product, it is important that you fully understand the charges which may be applicable and any limitations or restrictions which apply. If you are unsure about any aspect of the equity release product, confirm the details with your advisor before finalising your application. Reputable providers of professional equity release advice are always willing to revisit any detail of your application to ensure you are happy and confident to proceed.

 

 

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