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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
Can I find a better rate for my equity release plan?
I have had my equity release since 2008, the interest rate is very high – 6.9% compared with today’s rate. I am 83 and recently lost my husband. I would ideally like to have a plan with a lower rate.
My apartment is about £240,000, I had £63,000 equity release which has cost me more [like] £100,000.
I have contacted the company, Scottish Widows, but they are unable to reduce the rate as they are no longer in the market of equity release. Can you suggest anything else, please?
Answer
Scottish Widows equity release plans mainly offered a fixed, early repayment charge period of either five or 10 years, depending on the rate.
As you have now had your plan is place for over 10 years, it is likely that you can switch plan to a much lower rate without incurring a charge.
As well as offering rates under 3%, the latest plans also come with a range of flexible features that will enable you to create a plan tailored to your individual needs.
As a next step, I recommend you speak to an independent adviser at Equity Release Supermarket who will be able to discuss your current Scottish Widows plan and hopefully find you a new and better deal.
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Question
Concerns over equity release repayments
My equity release has reached over £100,000 to my regret. I took out £48,000 and would like to find a low interest rate.
I do regret having had to do this in the first place and worry that my daughter who lives with me will have to sell the house when my husband and I are gone. Can you please advise me on my options?
Answer
Let’s look at each of your questions in turn.
Firstly, could you switch plan to a lower rate? You can switch plan at any time, but you obviously need to be financially better off by doing this.
Whether you would be, depends upon your lender and the type of plan you have. If your plan has ‘gilt based’ early repayment charges (as many older plans do), it may not be in your interest to switch plan as the early repayment charges (ERCs) can be high.
That said, you may be better off over the longer term switching, even if your plan does have ‘gilt based’ ERCs. I recommend you speak to an independent adviser at Equity Release Supermarket who will be able to review your situation and recommend the best outcome for you.
If it is in your interests to switch plan, then many new plans offer the ability to make overpayments each year mainly up to 10% to 15% of the amount first borrowed. So, if you have any additional funds available, this could be a way for you to manage the interest accruing on your lifetime mortgage going forward.
Alternatively, you could consider an interest-only lifetime mortgage, whereby repaying the interest accruing on your plan monthly, only the amount you first borrowed is repaid when you plan ends.
Your daughter may also be in a position able to help you financially with making either an adhoc or a monthly repayment.
It is common for children to do this as it helps to protect their eventual inheritance. Again, your Equity Release adviser will be able to talk through all your options with you.
Regarding the situation with your daughter living with you. Once you and your husband have either moved into long term care, or are no longer with us, your plan will have to be repaid.
Usually this is through the sale of the property, but it doesn’t have to be. If your daughter has the funds available, she could repay the lifetime mortgage with these and retain ownership of your home.
Lastly, we need to consider the effect of house prices over time and how this can impact the amount of money left in your estate when your plan is repaid.
As house prices have historically risen over time, there could still be a significant amount of money for your daughter to inherit when your plan is repaid. We have a calculator for you to use, which will give you an idea of the value of your estate when your plan is repaid.
If you are at all concerned about future house prices, many new lifetime mortgages also offer a ‘guaranteed inheritance’ feature which enables you, at no extra cost, to automatically protect a proportion of the future sale value of the house based on the amount you initially borrowed.
As ever, the best way to review all your options, is to talk to an independent and impartial adviser at Equity Release Supermarket.
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Question
Can my mum release equity on her maisonette?
I am writing on behalf of my mother who is 82 and lives in a maisonette. We would like to know is she too old to take out an equity release policy?
But we would also like to find out if she would be allowed to release equity on a maisonette? It’s a ground floor property, two bedrooms and she owns it outright.
Answer
Yes, your mother can take out an equity release at 82. In fact, as she is older, she could borrow more because the older you are, lenders offer higher loans to value or LTVs – that is the amount you are able to borrow against the value of your home.
If your mother has any pre-existing medical conditions, she may also be able to borrow even more through an enhanced lifetime mortgage.
Because of your mother’s age, an adviser from Equity Release Supermarket would meet her in the comfort of her own home and we would also recommend that you are also there to ensure that both you and your mother fully understand what’s involved when taking out equity release.
There are no issues lending on a maisonette unless it is ex-council in which case there are only a few lenders that would consider it and that would be dependent on things such as if there is a lease in place and how long the remaining lease term is.
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Question
Equity release and moving house
My wife and I would like to take out equity release on our property. We wondered, however, what might happen in several years if we decided to move house to downsize? How might this impact our policy?
Answer
One of the benefits of all lifetime mortgages offered by lenders who are members of the Equity Release Council (the industry’s trade body) is that you must be able to take your lifetime mortgage with you when you move home.
For your added peace of mind, at Equity Release Supermarket, we only advise on plans that offer this feature. We are also long-standing members of the Equity Release Council.
Transferring a lifetime mortgage is known as ‘porting’ and the property you are moving to must meet the provider’s lending criteria as well as being valued. For example, some lenders won’t let you transfer your plan to a retirement property.
No lender charges a penalty if you port your scheme to a new property, although you usually need to pay a valuation fee and possibly an administration fee, as well as your usual legal fees when moving to a new house.
Should the property you are moving to be of lower value, and the amount outstanding on your current plan is too high to port the whole balance, then you may need to make a part-repayment upon porting. However, this would come out of the equity that you would be raising by downsizing anyway.
Lenders consider each case on an individual basis and so if you are considering moving in the future, it’s worth speaking to your Equity Release Supermarket adviser first.
There are alternatives to ‘porting’ that you could also consider. That’s because many new lifetime mortgages also offer a ‘downsizing protection’ feature. This means that should you want to move home and fully repay your lifetime mortgage (instead of transferring it to your new home) in the future, you are able to do so without charge, but usually only when your plan has been in place for at least five years.
But right now there is a lender that will allow you to do this when your plan has been in place for just one day!
For extra peace of mind, another benefit that many joint life lifetime mortgages now offer is a ‘compassionate early repayment exemption’.
With this feature, should you or your wife die, the lender will offer the surviving partner a three year window during which you are free to repay your lifetime mortgage – penalty free.
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