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Mark Gregory, Founder and CEO at Equity Release Supermarket
www.equityreleasesupermarket.com
Tel: 0800 802 1051
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Question
Will the interest rate rises impact my equity release plans?
With interest rates going up – and looking highly likely to continue rising – how might this impact equity release rates?
I am looking at plans where I can drawdown money over time and was thinking of doing this next year. But should I bring my plans forward to avoid being struck by increasing rates?
Answer
Thank you for your question, and over the last 22 years of being an adviser, and now a business owner, I have been asked this question on many occasions.
Firstly, I can confirm that if you apply for a flexible lifetime mortgage, you will be provided with a fixed rate of interest for the entire term of your plan based on your initial borrowing.
This rate of interest will depend on your personal circumstances, and one of our expert advisers here at Equity Release Supermarket will provide you with an interest rate based on your circumstances without obligation.
One of the features of a flexible lifetime mortgage depending on your circumstances, is that you may be able to include a cash reserve facility that you can drawdown further capital in the future. One of the benefits of the cash reserve facility is that you do not pay interest on the funds held in reserve until you need additional funds in the future.
However, the interest rate for that drawdown borrowing will not be fixed until you request the capital from the provider, and the interest rate for that borrowing will be based on the prevailing interest rate at that time. This interest rate could be lower than the initial fixed interest you secured, or it could be higher.
During my 22 years of experience, I have seen interest rates as low as 2% and as high as 8%, and it is therefore impossible to predict what interest rates will be in the future – especially in these uncertain times. For an idea of the latest equity release interest rates please visit our comparison tables.
I would always suggest you borrow enough capital to fulfil your immediate objectives therefore avoiding compound interest on the capital you do not need, and then consider contacting the provider directly when you need any further capital in the future.
Taking any money now, when it’s not actually required, based on the assumption that rates will rise, is not something we would advise. Money languishing in a deposit account currently, would not achieve a higher rate currently being charged on any lifetime mortgage.
Finally, you are not committed into take any further money from the cash reserve facility, and the provider will confirm your interest rate for the additional capital before you accept their offer.
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Question
Can we release equity to buy another property?
My husband and I own our home and its price has soared in value over the last year or two. We are now looking at buying a home by the coast in Devon. This will NOT be a holiday let – simply a place for us, our family and friends to use for holidays and breaks.
Our house is valued at £950,000 (home counties) and we wish to buy a property worth in the region of £350,000. Can we use equity release for this purpose and if so, how much would be able to use?
Answer
Here at Equity Release Supermarket, we have helped many customers secure capital to fulfil their objectives including home improvements, gifting capital to loved ones, and repaying interest only mortgages to securing a home for their retirement. We have also helped many customers fulfil their retirement dreams by helping them secure new static caravans, mobile homes, and holiday homes.
Based on your property value, you will be able to release equity for your objectives; however, as you have not included your ages, I am not able to confirm how much capital you could secure.
However, if we assumed the youngest of you both was 65, then a lifetime mortgage could help you release equity anywhere up to 43% of the value of your main residence – hence up to £350,000 is achievable based on property type.
With Equity Release, depending on your age there are alternative options including Home Reversion Plans, flexible Lifetime mortgage or a Retirement Interest-only mortgage (RIO), and our specialist advisers will discuss the best option for you.
For example, a lifetime mortgage is often used to purchase a holiday home, because the plan includes many flexible features that can be tailored to your requirements, such as making voluntary payments to repay the interest and fixed early repayment charges, should you wish to repay without penalty in the future.
Here at Equity Release Supermarket, we are truly independent and have no allegiance with any provider. We provide bespoke whole of market, equity release advice, and tailor a plan specifically based on your circumstances and your requirements.
If you contact Equity Release Supermarket you will talk to one of our advisers immediately, as we do not have any call centres. They will be able to give you an example of what you can borrow and the fixed interest rate without any obligation.
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Question
Worried about my neighbour – will adviser spot a red flag?
I have concerns about my elderly neighbour, and I am writing to you for advice since it is in regard to equity release.
She is in her late 70s and lives alone after being widowed over a decade ago. I often pop in to help with shopping, cleaning etc and we have nice chats. She has early onset dementia and I know she has had support for mental health problems in the past, so I feel she is vulnerable. She doesn’t have a social worker, however.
In the last couple of years, she has befriended her podiatrist and they have become very close. She told me recently she is planning on releasing equity from her home to pay off her podiatrist’s debts.
I have to say, I was quite shocked. My neighbour has no children however she does have a niece who she doesn’t see very often so I feel there is no one I can speak to in regard to this.
She has made an appointment with an adviser, and I wondered whether you knew if there were any safeguards advisory firms had to adhere to before allowing money to be released in this way? I realise it’s not really my business, however something doesn’t feel right, and I would value some advice on the equity release process to help me understand how to proceed.
Answer
Thank you for your question, and I can understand why you have concerns for your neighbour and sadly, coercion can happen, and you are right to be cautious.
Firstly, to reassure you, equity release advisory firms are regulated by the Financial Conduct Authority (FCA) and many firms are members of the Equity Release Council. Here at Equity Release Supermarket our advisers are fully trained with helping and advising vulnerable customers, and they complete annual continuous professional development examinations.
When advising customers, we always suggest that they are accompanied by a friend or relative who could provide them with support and guidance. Therefore, would it be possible for you to contact your neighbour’s niece who could attend the appointment?
Furthermore, for your additional reassurance, if your neighbour did apply for equity release, they would have to have an appointment with their own solicitor, who would interview your neighbour on their own before proceeding.
Although your neighbour has not yet been the victim of fraud, I am aware that scammers use devious tactics that can trick many people.
Therefore, anyone who becomes aware of someone who they think may have been scammed, should contact Action Fraud at https://www.actionfraud.police.uk/ or you can also report fraud by calling the Action Fraud team on 0300 123 2040.
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Question
Equity release: What’s the right price?/strong>
I am new to the equity release market and would value some guidance on the costs. What kind of interest rates apply and are there any other costs?
I have a four-bedroom house which I own outright and is valued at £650k and I am aged 72. I am not sure how much I need to release, yet, but I am looking top up my pension.
Answer
Thank you for your enquiry, and I can confirm that based on your age and property value you are eligible for Equity Release. At this stage of your research, it would be advisable to spend some time with a specialist adviser who would assess your circumstances before making a formal recommendation.
Although equity release is an option for you, there may be alternative solutions before you consider releasing capital from the equity in your home. I would strongly recommend that you talk to one of our independent specialist advisers who would not charge for an initial consultation.
Here at Equity Release Supermarket, we charge a fixed fee, which is only payable upon the completion of any plan recommended.
As noted, you’re eligibility for equity release extends to including a Home Reversion Plan, Retirement Interest-Only (RIO) and the most popular which is the flexible Lifetime mortgage. The best solution for you depends on your personal circumstances, and your attitude to inheritance and future capital considerations.
A Lifetime mortgage is where you retain ownership of your home, and you borrow money that is secured against your property – the same principle as any conventional mortgage.
Where a Lifetime mortgage provides greater flexibility over a conventional mortgage is around the ability in deciding whether you want to make repayments, or not.
Additionally, and to support your requirement of topping up your pension, you have the option of creating a drawdown facility.
So, after you have taken your initial lump sum, any unused tax-free cash you don’t require immediately can be placed into a cash reserve facility that you can access (drawdown) anytime in the future, whenever a ‘top-up’ to your income is required.
These drawdowns can usually be taken in small amounts – which can be as low as £500 a time, without a restriction on the number of withdrawals.
The beauty of drawdown is that whilst your money sits on reserve you are not charged any interest on it. You only pay interest on the amount you have physically received into your bank.
Additionally, when you do decide to take a drawdown payment, there are no valuation, application or solicitors fees and the money can usually be in your account within two weeks.
One of our truly independent equity release specialist advisers can assess your circumstance and create a bespoke plan for you without obligation.
If you decide to accept a recommendation for equity release, you will need to have a specialist solicitor who will provide you with the legal advice. Here at Equity Release Supermarket, we have a panel of expert, independent solicitors who charge a fixed fee, and once again this is not payable until the completion of an application. Alternatively, you have the option of using your own equity release specialist solicitor.
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