Monthly Archives: July 2010

Use an equity release calculator to find out how much you can borrow with an equity release scheme. The amount you can borrow is based on a simple formula of age and property value, with the minimum age being 55 years old of the youngest applicant. The equity release calculator will give you an instant answer.

Before conducting a lot of research about whether equity release is right for you it is wise to find out how much you can borrow in the first instance, the reason being if you cannot borrow sufficient for your objectives then there seems little point doing all your research.

Where can I find an Equity Release Calculator

There are plenty of annuity calculators on the world wide web or you can use the one on this website. The one on our website is not intrusive like so many on the other adviser sites. We do not ask you for email address or any other personal details as we believe if you want advice on equity release you will ask for it.

Most of the organisations that ask for email will bombard you with emails after you have used the equity release calculator, we will not do that, and that is a promise as we do not collect your details.

Give our equity release calculator a try and see how much you can borrow.

Recent reports highlight an increased demand for equity release plans. This demand has been building for some time in terms of enquiries, these enquiries are now turning to applications and completions. What is interesting regarding the increase is the reason for the demand. There are as always in these circumstances a variety of reasons, however we are finding more people effecting these plans due to financial problems as opposed to aspirational purchases or luxury goods.

There are two main types of financial difficulties which applicants are encountering. There are those with large outstanding secured and unsecured debt, a relatively new phenomenon of this generation, those reaching retirement or close to retirement with not enough income to service their debt. Some of this group have debt management arrangements that they would like to clear, others have not yet reached that stage and are looking to purely clear all outstanding debt. The problem with the second group is that they often do not have enough equity in the property to effect an equity release plan that clears all debt. Another group are those who are in retirement and have exhausted all savings and now find that their income from pensions simply does not meet their day to day expenses. They have no “rainy day” money left and are worried not only about the normal costs involved in running a house but if there are any repairs required they simply do not have the funds, not to mention small treats or holidays. In truth their standard of living is very poor.

Is Equity Release Acceptable?

Equity release is becoming increasingly more acceptable to this group of people to use the equity in their property to help them to live a life which rises above the edge of poverty. The situation becomes ever more exceptable when you have scenarios in which a pensioner living on purely an old aged pension has a large council tax bill each month on a property worth hundreds of thousands of pounds which is unencumbered. More and more people are realising that this scenario makes no sense to them personally and are using the property to fund a life which takes them away from the poverty line

Many people that have enduring power of attorney over parents estates ask can equity release be completed under a power of attorney. The answer is yes but not all equity release providers will accept applications form those with enduring power of attorney.

An example is detailed below where equity release has been used with an enduring power of attorney:

Mrs G from Manchester, has enduring power of attorney over her father. For the last 6 years Mrs G’s mother has suffered successive strokes leaving her needing 24 hour nursing care. This care is very expensive and costs over £1,000 per week. The family has exhausted the capital they had available and require additional funds to continue the care for Mrs G’s mother.

Equity Release could be used to help fund the nursing care so that the mother could remain at home where she was familiar with the surroundings. With this type of scenario it is imperative that independent financial advice is sought to ensure that the plan is written correctly and that products from the whole market are sourced.

Independent legal advice must also be sought from a solicitor that is experienced in enduring power of attorney law.

If you already have an equity release scheme and you could do with some extra money to pay for something special like a holiday or maybe to complete some home improvements then consider a further advance on your existing scheme.

A further advance on your existing equity release plan could be simpler than you think.

How does an equity release further advance work?

A further advance would be a simple application form to your existing equity release lender and provided that your new loan is within the loan to value (LTV) criteria for your age should be processed in a few weeks. An example is below:

Mr & Mrs J had an equity release plan of £20,000 on their property that is worth £300,000. They are both age 68 and would like to go on a cruise down the Nile before they are too old to do it. A cruise down the Nile in egypt and see the pyramids is something they have always wanted to do. They feel £10,000 would enable them to have a really special time. They approach their equity release lender who agree that they can borrow the additional £10,000. One thing their lender does point out to them is that they should seek equity release advice from an independent financial adviser, something they had not thought about so they contacted the adviser that arranged the initial equity release arrangement.

Within two weeks Mr & Mrs J had the £10,000 in their bank account and excitedly arranged the holiday.

You can use equity release for many things and one that it is popular is funding education for grandchildren.  There is an immense sense of pride seeing your grandchildren go through university and equity release could help them get there.

The finance for university or college can be taken as a tax-free cash lump sum or can be taken as regular income withdrawals as the funds are required. Regular withdrawal or equity release drawdown as it is technically known by also helps save interest charges so can be very efficient.

How do I qualify for Equity Release?

To qualify for equity release you need to be over age 55 and have a qualifying property. A qualifying property is one you own and any person on the title deeds needs to be over age 55, so it is the youngest person applying that needs to be aged over 55. Any mortgage outstanding on the property will need to be paid off as part of the equity release.

Many retirees use equity release to help family. Sometimes, circumstances change unexpectedly and a family member may need some financial help, equity release can provide a potential solution but it is important to consider all the alternatives as well.

The equity release market has been in decline since 2008 and now there are signs that it may soon recover. There has been significant press recently about the slight increase in

New data from Safe Home Income Plans (SHIP) suggest that the equity release market could be turning a corner. In the second quarter of 2010, the value of advances slipped to £196.7 million but the decline was smaller than in the previous three month period.

Drawdown equity release proved to be the most popular course, accounting for over 50% of sales, and the typical equity release client unlocked £45,702 from their home, up from £45,251 in the first three months of the year.

This will be good news for millions of pensioners who will be feeling the pinch. Although because the market declined so badly many of the equity release providers withdrew their equity release schemes in 2009/10. These were names such as Prudential, Coventry Building Society and Stonehaven Equity Release to name a few.

Who is eligible for Equity Release

To be eligible for equity release you need to be at least age 55 for a lifetime mortgage and 65 for a home reversion scheme. You also need to own your own qualifying property and have no mortgage or a very small mortgage that needs to be cleared with the equity release.

TO UNDERSTAND THE FEATURES AND RISKS ASK FOR A PERSONALISED ILLUSTRATION. AN EQUTY RELEASE PLAN WILL REDUCE THE VALUE OF YOUR ESTATE, WILL NOT BE SUITABLE FOR EVERYONE AND MAY AFFECT YOUR ENTITLEMENT TO STATE BENEFIT.

Many retirees that have taken out an equity release scheme are unaware that you should review the plan. The majority will have a lifetime mortgage equity release scheme and as you would with any mortgage, you should review it periodically.

If your equity release scheme is a home reversion then it is less likely that you can do much about changing it. If on the other hand you have a lifetime mortgage then it will be linked to an interest rate. Just as with normal mortgages the interest rates published by lenders on equity release schemes can and do change frequently and you need to ensure that you are not paying more interest than you need to.

What are the advantages of reviewing my equity release scheme?

An an equity release scheme mortgage is linked to an interest rate, you may not make any monthly payments to the lender but you are being charged interest on the loan. The interest is rolled up on the loan and it is rolled up compound, this means you are being charged interest on interest.

You could save thousands of pounds by switching your equity release scheme to a new lender at a lower interest rate.

What are the disadvantages?

There may be an early redemption charge on redeeming the loan, so check with your existing lender. There will also be new costs/charges to bear for moving the loan to a new lender, again you need to check what these are.
An independent financial adviser that specialises in equity release schemes will be able to give you advice.

TO UNDERSTAND THE FEATURES AND RISKS ASK FOR A PERSONALISED ILLUSTRATION. AN EQUTY RELEASE PLAN WILL REDUCE THE VALUE OF YOUR ESTATE, WILL NOT BE SUITABLE FOR EVERYONE AND MAY AFFECT YOUR ENTITLEMENT TO STATE BENEFIT.

Once retired equity release can help you fund those desperately needed home improvements. Many retirees really struggle to get by everyday let alone fund some really expensive repairs to their property. Equity release can provide this much need cash to allow more home comforts in retirement.

Before you do consider equity release to fund home improvements there are some advantages and disadvantages to consider.

Advantages of Equity Release

There are many advantages of equity release, here are a few.

• It can provide a lump-sum payment which is tax-free or it can provide you with a regular income. You can if you wish have a combination of both.
• You could raise tax free cash and buy a purchase life annuity with the proceeds to provide an income for the rest of your life.
• There is No Negative Equity Guarantee built into all the equity release providers that are part of SHIP (Safe Home Income Plans) this protects the borrower in the event of a downturn in the housing market.

Disadvantages of Equity Release

• It may decrease the amount of money your family will inherit upon your death – assuming the value of the property grows at a slower pace than the interest rate on the mortgage.
• It may reduce the amount that you can bequeath to charity.
• In the UK, it may impact any means tested benefits that the borrower may be entitled to.

If you do think that equity release could help you fund some much needed home improvements and you feel that the advantages outweigh the disadvantages then consult with an independent equity release specialist.

If you are aged over 55 then you may qualify for an equity release mortgage if your property qualifies and your credit history is good. There is a lot that can go wrong with an equity release mortgage transaction so this article will help you.

What is an Equity Release Mortgage?

An equity release mortgage also known as a lifetime mortgage is a loan secured against your property just like a normal mortgage would be. The difference with a lifetime mortgage is that you do not make any monthly repayments which makes them extremely good value with retirees. There is a sting in the tail though and that is that the interest being charged is being rolled up onto the loan.
Lifetime mortgages are often called roll up mortgages because of this interest roll up on the loan. With a typical interest rate of 7% most of these roll up loans will double in 10 to 12 years.

Where can I get an Equity Release Mortgage?

The best thing to do when you are considering an equity release mortgage is to visit an independent financial adviser (IFA). If you do not know any IFAs then you can look in yellow pages or go on the internet and search for an independent financial adviser in your local town or city.

An independent financial adviser will be able to search the whole market and make a recommendation. The other thing to remember is the duty of care an IFA has to act on behalf of you.

TO UNDERSTAND THE FEATURES AND RISKS ASK FOR A PERSONALISED ILLUSTRATION. AN EQUTY RELEASE PLAN WILL REDUCE THE VALUE OF YOUR ESTATE, WILL NOT BE SUITABLE FOR EVERYONE AND MAY AFFECT YOUR ENTITLEMENT TO STATE BENEFIT.

Under the current income drawdown rules if you take you tax free cash and invest your remaining fund in an income drawdown plan and subsequently die before age 75, then your fund can be passed on to your estate with a tax charge of 35%.

The new coalition government are reviewing pension legislation and one of the things being considered is a tax charge increase from 35% to 55%. This will affect anyone in income drawdown or unsecured pension who dies before age 75. This does seem an incredible move and a heavy price to pay for those people who do not annuitise to give themselves greater flexibility in retirement.

Those who can afford not to take their pension fund can still pass money on tax free – this could be considered as very efficient life insurance?

Income Drawdown Calculator

You should use an income drawdown calculator to work out how much income you can take compared to annuity purchase.

Take Income Drawdown Advice

As with all these types of complicated contracts you should always consider taking independent financial advice from someone who can take you through the advantages and disadvantages and implications to you and your estate.