Monthly Archives: October 2013

How Far Has The Lifetime Mortgage Evolved?

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The concept of lifetime mortgage to release the equity held in one’s property initially started somewhere in the mid of 1960s. It is based on a simple process to use the value of your property without having to move out of it. These schemes were not as popular then, as they are today because they were neither systematic nor regulated, which gave birth to several poorly devised products called Shared Appreciated Mortgages that made it look like a poor product in those times. Even today, we cannot forget the stigma that still lingers on amongst today’s elderly population in 1990s.

The government understood the need of regulating equity release schemes to provide consumer protection after the sad events that happened in 1990s. There was a need to protect the consumer rights which motivated the introduction of Safe Home Income Plan, abbreviated as SHIP. It laid down certain voluntary measures to be followed by the institutions offering these lifetime mortgage schemes to get their schemes included under the scope and definition of SHIP. Ship has now been superseded by the Equity Release Council (ERC) which lays down the precedents by which all equity release firms & advisers must adhere to.

These new equity release schemes that meet the ERC criteria have to leave the consumer with the right to repay the loan at anytime which secured against the mortgage of the property, if they want, although against some early repayment charges may be levied. It is even mentioned at www.equityrelease2go.com that all the lifetime mortgage plans must have the inclusion of no negative equity guarantee, so that the consumers need not worry about the liabilities stretching beyond the value of the property. With the increasing flexibility and portability, the consumers even got the rights to move to a houses freely and either transfer the equity release scheme or repay it.

All these schemes are today regulated under the guidelines laid down by FSA as well as Equity Release Council. In 2004, the Financial Services Authority fully regulated these schemes as well as the institutions offering these schemes so as to guard the interest of consumers at large all across UK.

Home reversion plans were merged with lifetime mortgages under the guidance of FSA in 2007. Today, these schemes offer greater flexibility to the consumers, enhanced plans for people suffering from several health ailments as well as the options of only paying interests through the interest only lifetime mortgage plan.

Lifetime mortgage schemes have evolved today as one of best products available, in the right place, at the right time to enhance the lifestyle of people even beyond the age of 55.

How popular is Aviva Equity Release schemes?

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Equity release schemes offer people the chance to release the equity on their houses as loan amounts. People around the age of 55-60 remain eligible for these schemes and can easily generate finance for the rest of their lives through these equity schemes. There are various companies and financial institutions which offer equity release schemes. Each company has its own equity release plans and they have their own set of requirements and conditions. One such company is Aviva which offers Aviva Equity Releaseto people over the age of 55 who own a house.

Aviva is one of the most trusted names in the industry and remains a preferred choice of the people. The reason behind this is the fact that Aviva is one of the oldest institutions that offers equity release schemes. Aviva was earlier known as Norwich Union before the expansion started in 2000 and the company came to be known as Aviva. One of the largest multi insurance companies in the world at the moment, Aviva has now evolved into a brand.

Aviva Equity Release is popular without a shadow of a doubt and there are two reasons behind this popularity. One reason is the fact that Aviva is now a brand. Just like all the lines of a popular clothing brand become famous and popular, all products of Aviva get popular by default as well because of its excellent and bankable brand name.

Secondly, the popularity of other products offered by Aviva brushes off on the equity release schemes offered by Aviva as well. People who have worked with Aviva as a part of their insurance plans, investment opportunities, annuities and retirement plans use their equity release offering simply because they have had a positive experience working with other products offered by Aviva.

One must not also look over the fact that the two-fold equity release offered by Aviva is excellent and that some of its popularity lies in its excellent package. Aviva offers Lump sum Max and Flexible option as its two equity release packages so as to suit the requirements of applicants of all types. All this contributes to the popularity of Aviva equity release schemes.

Is It Hard Releasing Equity From Your Home?

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It is not at all hard to release equity from your home under the given market conditions. Releasing equity from your home can be a straight forward event under the right advice from brokers or independent financial advisers. It is important that you seek advice only from the qualified and approved independent financial advisers. They can help and guide you in understanding all the key features as well as the associated risks related to the different equity release schemes regulated by the Equity Release Council.

The eligibility for taking an equity release on your home in not difficult. You must be at least 60 year old for opting a home reversion plan, however the minimum age for lifetime mortgages is defined as 55 years by most of the equity release providers. You must also own a home in UK, which is in reasonable state and free from any outstanding mortgage.

If the house is under some shared arrangement with your spouse or partner then the equity release can be taken jointly by the consent of both the partners. Moreover, in joint occupancy cases, the age of the youngest homeowner must be at least 55 years. The process starts by fixing an appointment with a financial independent adviser or broker. Financial adviser will recommend you some equity release schemes depending on your individual requirement and financial state.

The application process for releasing equity from your home starts by filling an application form with the help of your financial adviser. He will also help you to submit the form to an equity release provider along with the required fees. The equity release provider will appoint a RICS qualified surveyor to visit your home and do the valuation of your property after your application form is received.

An offer will be made to you stating the amount that can be borrowed and your solicitor will help you understand all the legal terms and conditions attached to it. You as well as your solicitor will be required to sign the acceptance form and send it back to the equity release provider. After completing all the legal checks and formalities, the equity release provider will release the funds to your solicitor who will assist you to get the money transferred in your account.

Are you entitled to an Enhanced Equity Release Plan?

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One of the most discussed financial topics these days is equity release. Most people are still unaware of equity release plans and their benefits; however, those who are aware of these plans are using them to their full advantage to fund their retirement. Equity release is your solution to having a comfortable life after retirement when your income sources will not be the same or as much as you were accustomed to before. Therefore, if you own a property and you are in retirement, you can use your property as an income source during your lifetime as a retiree.

There are two types of enhanced equity release plans: lifetime mortgages and home reversion. This article will focus mostly on the enhanced lifetime mortgage as this is the most common plan availed by customers and will try to highlight the details which can help you in finding out whether you are eligible or not for either.

Lifetime mortgages and enhanced lifetime mortgages may sound familiar but in reality they are two different plans. Actually, the lifetime mortgage is designed for those who own a property and may need the money to maybe maintain their standards of living, pay for bills etc. The enhanced lifetime mortgage is the same as a lifetime mortgage but it also enhances the payout for your business. This equity release scheme is a bit more generous and allows the user to avail more benefits as compared to the normal lifetime mortgage. This is indeed perfect for all those who are looking to borrow more money in order to meet their health care needs.

Well, in order to avail this enhanced equity release scheme you have to appear in front of a tribunal which will ask you various questions related to your health and lifestyle therefore it is important you should know about the questions beforehand so you can answer confidently. The most commonly asked questions are as follows. What is your weight? What is your height? If you smoke, which brand do you mostly use? They even ask you questions related to your eating habits, blood pressure and other details related to your lifestyle.

Your answers to these questions will determine whether or not you are eligible to receive the benefits of enhanced equity release. There are not many providers in the market who are offering enhanced equity release. You can check out their plans and choose the one which suits you the best.

Why Has Aviva Ditched their Home Reversion Plan?

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A home reversion plan is an equity release scheme that gives homeowners the opportunity to sell their property or a part of it in order to obtain money that they can spend on whatever they want. A home reversion plan allows homeowners to remain in their home although they have transferred the legal title of their home to the home reversion provider. They are free to remain in their home rent free until they pass away or until they are no longer capable of taking care of themselves.

A home reversion plan is portable. This means that if for any reason homeowners need to move to a new home, the plan can be transferred to the new home as long as the new home is eligible. One of the advantages of a home reversion plan is that homeowners are not required to sell their entire property. If they sell just a part of it, they can leave the other part as an inheritance for their family.

The home reversion plan is not one of the most popular equity release schemes due to the fact that the property is sold for less than its market value. The home reversion provider purchases the property for a lower value as a form of compensation for allowing the homeowners to continue to remain in the property. If the homeowners would like to buy back the share of their property that they sold, they will have to pay the full market value. So they still end up losing.

Aviva is one of the best known & trusted equity release provider. Aviva has been providing home reversion plans as well as lifetime mortgages to homeowner over the years via Grainger PLC. However, they have now decided to withdraw its home reversion plan with immediate effect.

Most people choose the home reversion plan because it provides them with the option of being able to leave an inheritance. This option is now being included in the roll-up lifetime mortgage schemes of Aviva which is why it has decided to no longer place emphasis on the home reversion plans.

When homeowners are considering equity release, it is advisable for them to involve their family in the decision process as any decision will impact on their eventual inheritance.

Is Equity Release the Best Option?

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You might be in need of an extra source of income now that you have retired. You might be looking for a way to raise money to finance your needs or the needs of your family. If this is true, then you might just be in need of equity release. Equity release allows you to raise money against the value of your home or property. Equity release is ideal for people in retirement who own a property and does not have a mortgage on it. In such cases, they have equity but it is tied up in their property. With equity release schemes, they are able to release the money that is held up in their property.

One of the most common uses of equity release UK is the funding of education. Older parents who still have children in college or university can use the funds released from their property to pay for the education of their children. Grandparents can also use the money they get from equity release to pay for the education of their children.

In order to qualify for equity release, a person needs to be above 55 years and must own a property. It is better if there is no mortgage on the property but if there is, it will be paid off as a part of the equity release scheme. In essence, equity release is borrowing money against the value of your property. This money is paid back through the sale of your property which would normally take place after your death.

Before you make the decision to release equity from your property, you should seek financial and legal advice. You should always consider if there are other options available. The implications of equity release are many and will affect each aspect of your life. For example, how will your children react to this? In essence, you are borrowing against their inheritance. If they are not able to repay the amount you borrow, they will lose their inheritance.

If you do decided that equity release is the best option for you, you are then able to obtain a lump sum amount or you can agree for regular withdrawals.

What is an Enhanced Lifetime Mortgage?

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An equity release scheme is a way to release some of the cash value of a property, either in instalments or as a lump sum, without having to sell the property and a lifetime mortgage is just one type of equity release scheme. An enhanced lifetime mortgage scheme is a type of lifetime mortgage equity release scheme designed for applicants over the age of 55 years, who have suffered or are still suffering from certain illnesses or impairments.

The standard amount that can be released or borrowed on any equity release scheme depends on a number of different criteria; such as the valuation of the property and the age of the applicant. An enhanced lifetime mortgage goes one step further. In the case of enhanced lifetime mortgage schemes, the amount that can be released or borrowed still depends on age and property valuation, but additionally the severity of the applicant’s health condition is taken into account.

An enhanced lifetime mortgage is designed for those suffering from illnesses or conditions that are likely to reduce their life expectancy. A shorter life expectancy allows lenders to offer more of a tax free lump sum. So, like enhanced annuities, all enhanced lifetime mortgage equity release schemes, allow those with certain health conditions to optimise their assets and get the most out of them to support their retirement plans.

To apply for an enhanced lifetime mortgage scheme, the applicant must complete a lifestyle questionnaire which asks health related questions that allow the lender to assess the applicant’s case.

Some examples of these health related questions are: –

  • What is your height and weight?
  • Have you smoked more than 10 cigarettes per day for the last 10 years?
  • Have you been diagnosed with high blood pressure, requiring medication?
  • Do you suffer from diabetes, requiring insulin or tablets?
  • Have you suffered from a heart attack, stroke or angina?
  • Have you been diagnosed with cancer requiring treatment?
  • Have you been diagnosed with Parkinson’s disease or multiple sclerosis?
  • Are you taking prescription medication or retired on the grounds of ill-health?

By qualifying for just one of these illnesses alone is not always sufficient to qualify. However, should you meet more than one qualifying criteria the greater the chance, and the greater the enhanced tax free lump sum you could receive.

As you can see enhanced lifetime mortgage schemes cover quite a wide spectrum of health and lifestyle conditions, in terms of severity. The amount that can be borrowed depends much on each individual case, and the health questionnaire allows the lender’s underwriters to actuarially assess how much they can afford to lend. In general, the more severe the health condition, statistically the shorter the lending term will be. This allows the lifetime mortgage provider to comfortably offer more cash without the threat to their no negative equity guarantee.

Enhanced lifetime mortgages are different from conventional equity release plans in that they allow you to maximise borrowing, and borrow more than any conventional equity release plan. In fact, an enhanced lifetime mortgage could allow you to borrow even more than selling 100% of your property under a home reversion plan!

Companies such as Aviva, Partnership and more2life are all now offering enhanced lifetime mortgage schemes and their criteria on impairment is slightly different, so it is always necessary to check with an independent equity release adviser. With interest rates fixed for life and starting from 5.57% with Aviva upto 7.65% with Partnership, there is a wide range of criteria to take into account.

These types of equity release schemes can be suitable for those who are possibly looking for the maximum lump sum available and not too concerned about any inheritance they may leave behind. These people may have certain lifestyle needs due to longstanding health conditions, or who have concerns about their longevity. They may therefore wish to make improvements to the property to account for any disability and hence maximise borrowings on their property.

Call 0800 321 3159 for further information on enhanced lifetime mortgage schemes today.

Can I use Equity Release to pay for Long Term Care?

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Retirement is supposed to be the golden period when you should be able to reap the benefits of your working life. But as people live for longer and the cost of living increases, financial planning during retirement is becoming more and more significant. There are thousands of pensioners across the UK without enough cash to support their lifestyle during retirement and they are looking towards equity release plans for a solution.

Real estate prices have soared since the 1990’s and houses are essentially pots of gold waiting to be opened. But a house doesn’t turn into usable money unless it’s sold, and this is exactly where equity release schemes come into the picture. Equity release plans address this issue by allowing older homeowners to release some of the value built into their property and using it as cash.

Different people have different reasons for releasing equity from their home. Some people need more money to support their lifestyle after retirement, and equity release plans allow them to supplement their pensions for more comfortable monthly income. Others may need extra cash for a specific one off expense. This could be anything from building a conservatory, buying a car, or an international dream holiday!

Another important expense during old age can be paying for home care. Some people who require permanent care prefer living in their own homes instead of moving into a care home. As long as the owner is living in their home, the equity release scheme can remain in place. So an ER scheme can be used to pay for the provision of care as long as you’re living in your own home.

Equity release plans need to be closed once the owner has died or moved into a permanent care home. In case of joint applicants, this applies to the second applicant. So the house can only be sold when both the applicants have either died or moved into care. As such, ER can also be used to support paying for care in a care home, as long as the second applicant continues to live in the property.

Releasing equity can be a good option for those who own a property, and wish to increase their income or raise money for a particular cause. Equity release plans work for some and don’t work for others, so they need to be considered carefully before taking a final decision.

How does a Lifetime Mortgage Scheme and a Home Reversion differ?

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As people live for longer, planning carefully for retirement becomes more and more important. Living costs are on the rise, and there are a growing number of people who own valuable property but are strapped for cash during old age. This is why equity release schemes have become a popular concept. Because it allows people to free up the equity tied up in their homes, without the need to sell the property or move.

Equity release schemes have come a long way since they were first introduced to the market. Rising demand for equity release solutions resulted in increased competition among providers, and today, the equity release market is much more favourable for customers. Equity release plans available today are much more flexible, and interest rates are also generally lower than a few years back.

The two main types of equity release are lifetime mortgage deals and home reversion schemes. Both types of equity release allow customers to free up some of the equity built up in their home and use it as cash. The amount can be taken as a lump sum or in the form of monthly installments. Most equity release schemes need to be repaid only when the owner has died or moved into care, which is when the property can be sold.

A lifetime mortgage is a loan that is taken out on the property. In this case, the applicant retains full ownership of the house. The loan along with the accumulated interest is repaid once the property is sold. Interest that is incurred on the amount is added to the principle amount, so that effectively, interest is charged on the previous interest. This is known as compound interest. One of the most common concerns with compound interest is that the debt can quickly grow very large.

There are some new lifetime mortgages known as interest only mortgages, which do not incur any compound interest. Instead, interest is paid monthly, and in the end the amount to be repaid remains exactly the same as the original amount that was borrowed. Interest only lifetime mortgages may have higher interest rates in order to be financially viable for the lender.

Home reversion plans involve selling a certain portion of the property to the lender. The ownership is transferred into the lender’s name, and the customer retains some portion of the ownership. When the house is sold, the lender retains the same proportion of the sale value. Both home reversion and lifetime mortgage equity release schemes have their own pros and cons. If you’re considering equity release as an option, consult a financial advisor for objective and professional guidance.

What can I spend the proceeds of an Equity Release on?

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Equity release is a way of turning the value tied into your home into cash. It is becoming increasingly popular today and more and more people want to use this option to use some of their home equity to generate additional income during retirement. There are many equity release plans available from several different providers.

Retirement is known as the golden period of life, when one is finally free to do what one wants. But ironically, it is during retirement that cash flow can be a problem and this can limit one’s freedom in so many ways. A pension is generally the main source of income during retirement, which may not always be enough to maintain a comfortable lifestyle. This is why more and more homeowners are considering equity release plans as a way to supplementing their income.

Some people have enough income to support their day to day life, but the problem arises when there is a relatively big one-off expense that needs to be made. This could be anything from home improvement work, to a dream holiday! The released equity can be taken in regular monthly installments or as a lump sum and one off expenses is another reason why people consider releasing equity from their home.

There is absolutely no restriction on what you can use the money for. The proceeds you get from equity release plans are tax free and could be used for a variety of purposes, depending on personal needs. Some common uses of equity release proceeds are home improvement works, buying a new car, investing in a second property or paying for care in your home. Another common use is to gift money to children and family or as supplementary income.

Equity release plans are many and varied. As the concept caught on and became popular, more providers entered the market and equity release schemes became flexible. Increased competition among providers has resulted in a customer-friendly market, with favourable interest rates and better terms of contract. Equity release schemes are now fully regulated by the FSA (Financial Services Authority) which was not always been the case.

Equity release plans can be a good way to generate usable cash from the equity built on your property without selling the house. Obviously, equity release does have some potential risks and disadvantages, and is not for everyone. To understand more about how equity release works and whether it’s right for you, seek the advice of an independent financial expert.