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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
Japanese knotweed identified: What are our options?
We have been refused equity release on our property due to Japanese knotweed, 10 metres away from our house over a wall. Are there any other options available to us?
Answer
Obviously, I don’t know which broker you’ve spoken to and who has told you that you can’t get equity release due to Japanese Knotweed, but in our experience, given that the plant is 10 metres away from your home, then there are lenders who will consider it – at a distance of seven metres or above.
Having said that, lenders consider Japanese Knotweed on a case-by-case basis and are guided by the surveyor’s comments in their valuation report. This is because the severity of the infestation can vary greatly, given that the roots of Knotweed can be three metres deep and seven metres long, affecting a property’s foundations and drainage systems.
I wrote a comprehensive article all about Japanese Knotweed on our website which you can read using this link, and as every situation is different, I recommend that you speak to an adviser at Equity Release Supermarket as we regularly come across this problem and have a great deal of experience in finding a solution.
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Question
Major building work: Can I get equity release?
I am just writing to enquire if I am allowed to use equity release to fund building work on our home? We live in a three-bedroom semi and it’s getting very tired and in need of a make-over. We would like to extend over the garage to create a fourth room so our families and grandchildren can stay.
However, we also need to re-do kitchens and bathrooms and other miscellaneous jobs. We were quoted between £60k and £100k and are considering one of the higher end quotes. Our house is valued at £630,000. My husband and I are both 71.
Someone has suggested we get a mortgage but we are considering equity release too – would we be allowed to release this kind of sum and can we use it for building work?
Thanks for any advice/guidance you can provide.
Answer
Mortgages may be an option for you and there are two you might want to consider. These are Retirement Interest Only (RIO) and retirement mortgages.
The major difference between the two is that, as its name suggests, with a RIO mortgage only the interest accruing on your mortgage is repaid (so that the balance outstanding remains the same), whereas with a retirement mortgage you have the option to also repay the capital (the amount you borrowed) and so reduces the balance over time.
Both RIO and retirement mortgages require you to pass the lender’s affordability checks as these are residential mortgages and the same ‘rules’ apply. You will need to prove that your income satisfies the lender both now and in the future. For example, they will also need to know that if one of you dies, that the income of the surviving partner is sufficient to repay the mortgage.
The lender will always reserve the right to repossess your property with these types of mortgage as well.
In reality, there isn’t much of a difference between these two types of ‘later life’ mortgages and a lifetime mortgage – which is the most popular type of equity release – as lifetime mortgages now offer a range of features and benefits, including fixed term early repayments charges, meaning that the lifetime mortgage may be repaid at some point in the future without penalty.
With lifetime mortgages (equity release) there are no affordability checks to pass, which is one of the main reasons that they continue to be the most popular way to borrow in later life.
There are now an enormous range of lifetime mortgages to choose from, with over 500 products available from a range of lenders including big high street names from the insurance world such as Aviva, Legal & General and Scottish Widows.
As your house is valued at £630,000 and you are both 71, you could borrow up to a maximum of 47.6% of the value of your home – or £299,880 – so there is plenty of equity in your home to pay for the home renovations you are considering.
But as we always advise at Equity Release Supermarket, only borrow what you need, and the most popular type of lifetime mortgage allows you to do just that.
With a drawdown lifetime mortgage, the lender provides you with a ‘cash facility’ so that once you have borrowed a minimum of £10,000 from your facility, the remainder of your money is held by the lender for you, and you can make withdrawals from your ‘pot’ as and when you want to – without any additional charges.
The advantage of drawdown schemes – if you have a scope of works over a period of time, is that you could take smaller amounts as and when you require the funds, as the project progresses. The big advantage with drawdown is that you only pay interest on the amount borrowed, which enables you to better manage the interest accruing on your plan over time.
To research your situation further an adviser would need to get an idea of the full works available, also whether planning permission is required and if an extension is being built, some lenders restrict the size of the extension, based on the original footfall of the house.
Hence, as you can see there is further information required to ascertain eligibility, but as independent and impartial advisers at Equity Release Supermarket, we can search the whole of the market to find the right solution for you.
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Question
Comparing deals – can we get ‘quotes’ for equity release?
I am currently weighing up the pros and cons of using equity release and am about to book an appointment with an adviser. I wondered – will the adviser offer different product options or should I speak to a few other advisers too, in order to gain some comparison? I am very new to this so am grateful for any pointers.
Answer
I would always recommend that you speak to an equity release adviser who is totally impartial and independent. The two biggest brokers (that advertise on TV) are part of the same companies as their lenders – and so they will try to find a solution for you from one of their lender’s plans – if this is the best outcome for you.
If you were to speak to a lender directly (such as Aviva or Legal and General) then obviously they will only be able to advise you on their own plans, and not those available from other lenders.
Without being biased, the UK’s largest, independent and impartial equity release broker is Equity Release Supermarket. I founded the company in 2008 and being an ex-adviser myself, it’s always been central to our values that we provide our customers with truly independent advice. We are not tied to any lender or biased to any provider and so the advice we offer is completely impartial.
So, as a next step, I’d recommend that you speak to your local adviser. This will cost you nothing and you only ever pay for your advice once your plan has completed and your money is in the bank.
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Question
Can I release equity on a rental property?
I am 74 and live with my daughter and her family. They are looking to move to a bigger property and I would like to help them by providing some money. I used to live on my own in a four-bed house which I now rent out and receive an income from.
Before you ask – we cannot move there because it’s too far from my son-in-law’s work. Besides I would like to continue to benefit from the income as it’s my only source of money aside from the State Pension.
I wondered, therefore, if I could release equity from this property to help my daughter and son-in-law move up the ladder. It would mean I could have some independence too as I could live in an ‘annexe’. I look forward to your reply.
Answer
I’m going to assume that you rent out your former home, using an ‘Assured Short Hold Tenancy Agreement’, which is the standard tenancy agreement, as this is a stipulation of most lenders.
To raise money on a buy-to-let (BTL) property, you could still consider a conventional BTL mortgage, either interest-only or capital and repayment. These will be subject to the lenders underwriting criteria and there will be repayments involved.
Therefore, consideration should be given as to whether you (or your daughter) wish to make payments at all? If not, then a BTL lifetime mortgage could also be an option as with these you do not need to prove affordability and have the option of whether to make payments, or not. This market is restricted to one lender currently offering buy-to-let equity release – Canada Life.
If this type of tenancy agreement is in place, and as you are no longer living in the property, then yes, you should be able to borrow against your BTL property.
As I’ve just mentioned, buy-to-let is a specialist type of equity release and is only currently offered by one lender – Canada Life – and as such the rates available are higher than with residential lifetime mortgages (the most popular type of equity release plan).
The rates currently available on Canada’s Life’s ‘Over 55 Buy-to-Let Lifestyle’ plan are 5.63% MER (fixed for life), while the cheapest standard lifetime mortgage on the market offer are just 2.75% MER (again fixed for life). So, you can see that these specialist plans come with much higher interest rates.
Here are a couple of links to our website so that you can read more about buy-to-let lifetime mortgages and the buy-to-let plan that is currently available.
As you’ve told me that you’re 74, then you could borrow up to 38% of the value of your BTL property (and this goes up to 39% on your next birthday). Again, I don’t know the value of your home but if your home was worth £300,000 – then you could borrow around £114,000 – which could provide a great boost to your daughter’s finances and help them move to a bigger property.
As a next step, I recommend that both you and your daughter speak to one of our specially qualified equity release advisers, who will be able to talk through your options in detail and find a solution that’s right for you.
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