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Mark Gregory, Founder and CEO at Equity Release Supermarket
www.equityreleasesupermarket.com
Tel: 0800 678 5955
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Question
Coronavirus: Charging interest until sale of house
I have a query about my father’s equity release plan. He has just died and the company he has the plan with (Newcastle Building Society) say the type of plan he has will still charge interest up until the loan is repaid.
I live in a different part of the country – I can’t clear the house or put the house on the market, nobody can come and view it either.
Have I got any grounds to have interest suspended for a period? I understand that three-month mortgage holidays are being offered at the moment, but even three months’ suspension of interest may not take account of the current lockdown.
What would your advice be?
Answer
Firstly, I am sorry to hear about the passing of your father. Please accept my condolences.
The equity release plan must now be repaid in-line with its terms and conditions and lenders generally give you a year in which to do this, usually from the sale of the property with the proceeds being used to repay it. It is also common that the interest continues to accrue on the plan until it is repaid.
However, given the current extraordinary circumstances with Covid-19, I suggest that you speak to Newcastle Building Society and explain the situation to them. Many lenders are sympathetic and will want to help and support you to repay the loan, and I hope that you’ll be able to find a solution with them.
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Question
Covid-19 delay – can I finish my application
I was in the middle of an equity release application but, because of coronavirus, home visits have been cancelled for the time being. I was due to receive legal advice from a solicitor but now I don’t know what will happen.
I have heard talk about using video conferencing such as Skype and Zoom, but I am a little confused about how the contracts will be signed. I am starting to get a bit worried. Do you have any advice?
Answer
Please try not to worry and I hope that I can reassure you.
The equity release industry has moved very quickly to put processes in place so that while we are having to socially distance and work remotely, you are still able to progress with your plan.
I can’t speak for the company you were dealing with, but at Equity Release Supermarket we are now offering a ‘video chat’ facility to enable you to effectively continue face to face meetings with your adviser and of course you can always continue to communicate with them on the telephone or via email.
We are also continuing to email and post documents to our customers in the same way we always have done and uniquely at Equity Release Supermarket, we’ll continue to place documents in the personal and secure online portal we provide for our customers, which they can access at any time. It’s also a simple and convenient way for them to track the progress of their application.
The other important steps in the equity release process have been affected by coronavirus are the valuation of your property and the support of your own, independent solicitor.
The valuation of your property is one of the factors lenders use when deciding how much money they’ll lend you and your solicitor is vital to ensure that the legal aspects of equity release are taken care of.
A surveyor is not able to visit your property at the moment. The equity release industry initially stalled as lenders and funders adapted to the changes required to continue with the application process. However, many lenders, quickly implemented solutions to overcome the need for immediate physical valuations and agreed an interim process to allow applications to progress, via a semi- automated valuation process.
Similarly, a face to face meeting with your solicitor is normally one of the requirements of the Equity Release Council (the trade body for the equity release market). However, in these difficult times, the Council has temporarily waived the necessity for the solicitor to be the one to witness the mortgage deed.
Your solicitor will ensure you are still provided with the necessary legal advice and you will now be given the choice to receive their advice over the telephone, by video calls or as done previously – face-to-face. Your mortgage deed can now be witnessed by an independent person, under social distancing conditions and your solicitor will work with you to provide you with the best solution for your personal circumstances.
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Question
Can I increase borrowing with a new provider?
Are rates of lending for equity release rising and is it good time to take a lifetime mortgage to increase borrowing and change provider of existing equity release? I already borrowed on my property at quite a high rate. Many thanks.
Answer
In the last few weeks we have seen some lenders marginally increase the interest rates on their lifetime mortgages, but it is worth mentioning that interest rates are currently at an all-time low and the Equity Release Council has recently reported that the average interest rate in Q4 of 2019 was 4.48%.
You can switch a plan at any time, but you obviously you need to take expert advice, where the adviser will complete a ‘switch analysis’ by comparing your existing plan with the potential of securing additional benefits such as a lower interest rate and/or additional borrowing. The outcome of the analysis will determine the viability of remortgaging or simply staying with your existing lender and borrowing additional funds. Whether you can switch plan and also borrow more at the same time depends upon a number of factors including the age of the youngest borrower, the current value of the property, where the property is in the UK and any existing early repayment charges you may incur with your current provider.
I recommend you speak to an independent adviser at Equity Release Supermarket who will be able to review your situation and conduct an analysis whereby they can then recommend the best outcome for you.
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Question
Should I still go ahead with equity release at this time?
I have been considering taking out equity release to free up some money to improve our quality of life during retirement. I am now in a dilemma because of the coronavirus. On the one hand, my daughter has lost her income and cannot afford her mortgage payments. She can taken a mortgage holiday but this is only for three months and we don’t know what her longer-term prospects will be. Therefore, if we can help her financially during this time, by releasing some money locked in our house, it would provide us with great comfort and relief.
But is now really the best time to be releasing equity? Will our house be valued at a lower rate? Will interest rates be going up? I am very torn about the whole thing. I felt I had gained a good understanding but now I feel everything I have learned is up in the air.
Answer
As with my answer to the earlier question, I hope that I am able to reassure you.
While current measures of social distancing and remote working have impacted our daily lives, it hasn’t adversely affected the equity release industry; there are now processes in place to manage our way through and it is ‘business as usual’.
However, it is important to consider all of your options including potential short-term unsecured lending such as a personal loan from a bank or building society.
If you prefer to use some of the equity in your home, plans can be tailored to meet your personal circumstances such as choosing not to make payments and let the interest roll-up, or you make flexible, voluntary payments with fixed interest rates and fixed early repayment charges.
With any financial commitment, it is best to consider all of your options and ensure you consider your short, medium and long-term objectives. As previously noted, I recommend you speak to an independent adviser at Equity Release Supermarket who will be able to review your situation and then recommend the best outcome for you.
As mentioned earlier, house valuations (surveys) are being carried out remotely and your solicitor will also manage the legal aspects of equity release with you remotely, if required.
Lenders are taking different approaches to conducting surveys and most are using teams of independent surveyors, providing ‘desktop valuations’ whereby they can access over 20 data points that are openly available on the property (e.g. Google Earth/street map etc) and also using data from nearby properties that have previously sold.
Once the valuation has been completed, dependent upon the product, each lender has revised their underwriting criteria. Some lenders have reduced their standard loan-to-values to accommodate the additional risk of desktop valuations. Others will apply a ‘haircut’ to the valuation – for instance Legal & General will only use 95% of the valuation figure for calculation purposes. In other scenarios lenders may hold back upto 10-25% of the loan applied for and release the remainder once a satisfactory physical valuation has taken place.
Please note, if you are not happy with the terms and conditions within the the offer, you can always put your application on hold and return to it at a later date, once the market normalises and physical valuations resume. Alternatively, we can look elsewhere for a solution from the whole of the market, with most providers offering free valuations.
On balance, I would encourage you to continue with your equity release plans now and as a next step, why not speak to one of our impartial, independent and expert advisers at Equity Release Supermarket? We are one of the few advisory services that will search all the plans from all the lenders and find the best deal for you.
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