[col type=”one-third”]
Mark Gregory, Founder and CEO at Equity Release Supermarket
www.equityreleasesupermarket.com
Tel: 0800 678 5955
[/col]
[col type=”two-third last”]
[hr style=”single”]
Question
Home improvement conundrum: what comes first?
Hello there – I have a ‘chicken and egg’ type scenario I need some help with please. I would like to get building work done on our home. My husband and I are both retired and desperately need work done to improve our home, so we are pondering over equity release to help us fund the refurb.
I feel utterly overwhelmed and don’t know where to start. I want to find out if we are eligible for equity release – or another product – but without getting builders in for quotes we won’t know what figures we are dealing with.
However, on the flipside, we also don’t want to start looking into building work and getting plans drawn up if we don’t know we can get equity release.
For information we have a house worth (by my reckoning) £375k, we own outright and have an income of £3,500 per month. We have very little in the way savings – hence the need to release equity.
Answer
The three main criteria for equity release eligibility are that the youngest homeowner is over 55, the property is worth at least £70,000 and it is in the UK. From what you have told me, it appears that you are eligible for equity release on these terms.
The amount that you can borrow with a lifetime mortgage is then determined by your age and the value of your property. In essence – the older you are, the more you can borrow.
As I don’t know your exact ages, I’ll give you an idea assuming that you are aged 65 and 70.
At 65, you could borrow up to 39.8% of the value of your home. Using your valuation of £375,000 – that’s up to £149,250. At 70, you could borrow up to 45% of the value of our home – that’s £168,750.
Always bear in mind you should only withdraw the amount you actually need, as there are plans such as drawdown schemes that will allow you to take funds as and when you require them, rather than taking the whole lump sum all at once. Remember with lifetime mortgages the greater the loan-to-value, the higher the interest rates become, hence another reason to be cautious on the initial amount taken.
There are other borrowing options you could consider such as retirement interest-only (RIO) mortgages or retirement mortgages as they potentially allow you to borrow much more than with a lifetime mortgage.
With a RIO, you could borrow up to 75% of the value of your home (£277,500) and with a retirement mortgage, up to 90% (£337,500). Both are dependent on your incomes.
The main differences between a lifetime mortgage and a RIO or retirement mortgage is that RIOs and retirement mortgages are residential mortgages and you are required to make monthly repayments of either interest only or interest and capital – just as you would have done with the previous mortgage on your home. You must also pass the lender’s affordability and credit criteria – which considers your income and ability to make repayments both now and in the future.
While you can’t borrow as much with a lifetime mortgage, you don’t have to make any repayments – unless you want to – and there are no affordability checks to pass.
As a next step, I recommend that you speak to an independent and whole of market equity release adviser who will be able to discuss your financial goals and find the right solution for you. All our advisers at Equity Release Supermarket are experts in their field and it won’t cost you anything to speak to us.
In fact, Equity Release Supermarket won’t charge you anything until your plan is complete and your money is in the bank. You can find your local, Equity Release Supermarket adviser here.
[hr style=”single”]
Question
Can I get a new deal?
I have been on an equity release plan now for five years but I have noticed rates are starting to look a lot cheaper than they were when I signed up. Can I switch to another deal? If so, how do I go about this and will I need to pay an exit fees?
Answer
Having been an adviser now for over 20 years, I’ve had plenty of experience remortgaging many older lifetime mortgage plans away from the higher interest rates they used to attract.
Switching lifetime mortgage plans can be done for a number of reasons, not just for a lower rate, although this is the most popular reason.
The first thing to do is to assess whether it’s in your best interest to change plans by conducting a comprehensive ‘switch analysis’ exercise. This basically studies your existing plan – interest rate, current balance, any early repayment charge, closing admin fee and its existing features.
We would then calculate how much capital is needed to set up the new plan. For instance, we need to account for the set up costs of the new plan (application, valuation, legal and advice fee – where applicable), exit penalties from the old plan and we add two months interest as an estimate of how long it would take for the new plan to start.
We would then consider any features or benefits that you may be losing from your existing plan and then complete an in-depth personal questionnaire, where we’d establish what features you require in the new plan.
Armed with this information, we would then conduct our research from the whole of the market to find which lifetime mortgage plan could offer the amount and features required – at the best interest rate available.
Our analysis tool will then compare both plans and establish the break-even point – this is where it becomes profitable for you to switch plans.
As long as this period was reasonable and fits with your age, and future life expectations, then you could proceed with a switch to a new company and product.
Here at Equity Release Supermarket we have a handy switch calculator that provides a break-even point as to when switching would be most favourable. Our advisers have also been trained to conduct full switch analyses, and check whether it would be in your interests to move your plan to a new lender.
As you can see, there is more to switching than just finding a better interest rate. Newer plans have many more features than previous such as downsizing protection, voluntary payments, inheritance protection, fixed early repayment charges and three-year no ERC window on death/long term care for joint plans.
The viability of changing plans is usually determined by the early repayment charges of your current lender and so I recommend that you speak to one of our independent and impartial advisers at Equity Release Supermarket, who will be able to advise you on the best route to take.
[hr style=”single”]
Question
Downsizing versus equity release?
We were looking at releasing equity on our property to pay for our retirement (husband and I were worried our pension would not stretch). However, now the stamp duty holiday has been enforced and following the lockdown we are starting to wonder if we should leave the city and head off to the coast, thus downsizing?
It seems a no brainer but we wanted to check there were no benefits of releasing equity that we hadn’t considered. Not just practical, but financial.
Our house, in a London suburb, is worth approx. £550,000 and we are looking at coastal properties on the market for £200,000. But we would need to travel frequently to see our London-based children and grandchildren.
Is there a questionnaire we could do to find out the financial pros and cons to help us with this big decision?
Answer
It can be difficult to decide what is the best course of action for you when considering how to fund your retirement.
Downsizing is certainly one option and assuming you have no mortgage, you could purchase the £200k property and have the capital released to use for your retirement plans, whether that be for income or investment purposes. A nest egg for the future.
However, downsizing does come with associated costs – such as Stamp Duty on the purchase of the new property, though as you point out this is £0 on a property valued at £200,000 until 31 March 2021, plus there are estate agent’s, moving and solicitor’s fees to consider.
Many people also don’t think about the costs of repairing or modifying a new home to make it personal to their own taste. Also, many decide against downsizing as it involves moving away from family, friends and their support network.
You also need to think about the inheritance you want to leave for your loved ones as the value of a costal property, at less than half the value of your home in London, may not appreciate in value at the same rate in the years to come. Obviously the larger your estate, the larger your inheritance will be.
Equity release is also an option you could look at, as well as the other types of ‘later life lending’ such as retirement and retirement interest-only (RIO) mortgages.
They all come with their own pros and cons but the main difference between equity release and retirement mortgages is that with retirement mortgages you are able to borrow more (now up to 75% of the value of your home) – which means that you could access more money than through downsizing, but you are committed to making monthly repayments or interest and/or capital – which may not be financially viable for you.
Lifetime mortgages can work much more flexibly than a retirement mortgage for post-retirement purposes where regular payments are required over a period of time.
For instance, we have drawdown plans where after taking an initial lump sum, you have access to a cash facility where you can draw money (usually a minimum of £2,000 a time) as and when required in the future, with no further admin charges.
There are also income plans which offer a fixed income over a fixed number of years (10, 15, 20 and 25) that can help supplement your retirement spending and bridge any shortfalls.
How much you can borrow through equity release (lifetime mortgages are the most popular option) depends on the age of the youngest borrower and at age 65, you can access up to 39.8% of the value of your home which rises to 45% at age 70.
So, depending upon your age, you may not be able to realise as much money through equity release as you could through downsizing – if that is your main reason for wanting to downsize.
Which brings me around to inheritance again. Equity release will reduce the value of your estate but by how much is entirely dependant upon you as you are able to manage the amount to be repaid through the lifetime mortgage plan that you choose, and whether you want to make ad hoc or regular repayments.
We have a free to use equity remaining calculator, which will give you an idea of the value of your estate in the future – which takes into account rising house prices.
As you have a lot to think about, I recommend that you speak to an independent adviser who will be able to talk through your financial situation and recommend a solution that is right for you both now and in the future.
It costs you nothing to talk to one of the expert advisers at Equity Release Supermarket and they would be more than happy to guide you through your options. You can find your local adviser here.
[hr style=”single”]
Question
Downsizing versus equity release?
We were looking at releasing equity on our property to pay for our retirement (husband and I were worried our pension would not stretch). However, now the stamp duty holiday has been enforced and following the lockdown we are starting to wonder if we should leave the city and head off to the coast, thus downsizing?
It seems a no brainer but we wanted to check there were no benefits of releasing equity that we hadn’t considered. Not just practical, but financial.
Our house, in a London suburb, is worth approx. £550,000 and we are looking at coastal properties on the market for £200,000. But we would need to travel frequently to see our London-based children and grandchildren.
Is there a questionnaire we could do to find out the financial pros and cons to help us with this big decision?
Answer
It can be difficult to decide what is the best course of action for you when considering how to fund your retirement.
Downsizing is certainly one option and assuming you have no mortgage, you could purchase the £200k property and have the capital released to use for your retirement plans, whether that be for income or investment purposes. A nest egg for the future.
However, downsizing does come with associated costs – such as Stamp Duty on the purchase of the new property, though as you point out this is £0 on a property valued at £200,000 until 31 March 2021, plus there are estate agent’s, moving and solicitor’s fees to consider.
Many people also don’t think about the costs of repairing or modifying a new home to make it personal to their own taste. Also, many decide against downsizing as it involves moving away from family, friends and their support network.
You also need to think about the inheritance you want to leave for your loved ones as the value of a costal property, at less than half the value of your home in London, may not appreciate in value at the same rate in the years to come. Obviously the larger your estate, the larger your inheritance will be.
Equity release is also an option you could look at, as well as the other types of ‘later life lending’ such as retirement and retirement interest-only (RIO) mortgages.
They all come with their own pros and cons but the main difference between equity release and retirement mortgages is that with retirement mortgages you are able to borrow more (now up to 75% of the value of your home) – which means that you could access more money than through downsizing, but you are committed to making monthly repayments or interest and/or capital – which may not be financially viable for you.
Lifetime mortgages can work much more flexibly than a retirement mortgage for post-retirement purposes where regular payments are required over a period of time.
For instance, we have drawdown plans where after taking an initial lump sum, you have access to a cash facility where you can draw money (usually a minimum of £2,000 a time) as and when required in the future, with no further admin charges.
There are also income plans which offer a fixed income over a fixed number of years (10, 15, 20 and 25) that can help supplement your retirement spending and bridge any shortfalls.
How much you can borrow through equity release (lifetime mortgages are the most popular option) depends on the age of the youngest borrower and at age 65, you can access up to 39.8% of the value of your home which rises to 45% at age 70.
So, depending upon your age, you may not be able to realise as much money through equity release as you could through downsizing – if that is your main reason for wanting to downsize.
Which brings me around to inheritance again. Equity release will reduce the value of your estate but by how much is entirely dependant upon you as you are able to manage the amount to be repaid through the lifetime mortgage plan that you choose, and whether you want to make ad hoc or regular repayments.
We have a free to use equity remaining calculator, which will give you an idea of the value of your estate in the future – which takes into account rising house prices.
As you have a lot to think about, I recommend that you speak to an independent adviser who will be able to talk through your financial situation and recommend a solution that is right for you both now and in the future.
It costs you nothing to talk to one of the expert advisers at Equity Release Supermarket and they would be more than happy to guide you through your options. You can find your local adviser here.
[hr style=”single”]
[/col]
Mark Gregory, Founder and CEO at Equity Release Supermarket
www.equityreleasesupermarket.com
Tel: 0800 678 5955
[/col]
[col type=”two-third last”]
[hr style=”single”]
Question
Home improvement conundrum: what comes first?
Hello there – I have a ‘chicken and egg’ type scenario I need some help with please. I would like to get building work done on our home. My husband and I are both retired and desperately need work done to improve our home, so we are pondering over equity release to help us fund the refurb.
I feel utterly overwhelmed and don’t know where to start. I want to find out if we are eligible for equity release – or another product – but without getting builders in for quotes we won’t know what figures we are dealing with.
However, on the flipside, we also don’t want to start looking into building work and getting plans drawn up if we don’t know we can get equity release.
For information we have a house worth (by my reckoning) £375k, we own outright and have an income of £3,500 per month. We have very little in the way savings – hence the need to release equity.
Answer
The three main criteria for equity release eligibility are that the youngest homeowner is over 55, the property is worth at least £70,000 and it is in the UK. From what you have told me, it appears that you are eligible for equity release on these terms.
The amount that you can borrow with a lifetime mortgage is then determined by your age and the value of your property. In essence – the older you are, the more you can borrow.
As I don’t know your exact ages, I’ll give you an idea assuming that you are aged 65 and 70.
At 65, you could borrow up to 39.8% of the value of your home. Using your valuation of £375,000 – that’s up to £149,250. At 70, you could borrow up to 45% of the value of our home – that’s £168,750.
Always bear in mind you should only withdraw the amount you actually need, as there are plans such as drawdown schemes that will allow you to take funds as and when you require them, rather than taking the whole lump sum all at once. Remember with lifetime mortgages the greater the loan-to-value, the higher the interest rates become, hence another reason to be cautious on the initial amount taken.
There are other borrowing options you could consider such as retirement interest-only (RIO) mortgages or retirement mortgages as they potentially allow you to borrow much more than with a lifetime mortgage.
With a RIO, you could borrow up to 75% of the value of your home (£277,500) and with a retirement mortgage, up to 90% (£337,500). Both are dependent on your incomes.
The main differences between a lifetime mortgage and a RIO or retirement mortgage is that RIOs and retirement mortgages are residential mortgages and you are required to make monthly repayments of either interest only or interest and capital – just as you would have done with the previous mortgage on your home. You must also pass the lender’s affordability and credit criteria – which considers your income and ability to make repayments both now and in the future.
While you can’t borrow as much with a lifetime mortgage, you don’t have to make any repayments – unless you want to – and there are no affordability checks to pass.
As a next step, I recommend that you speak to an independent and whole of market equity release adviser who will be able to discuss your financial goals and find the right solution for you. All our advisers at Equity Release Supermarket are experts in their field and it won’t cost you anything to speak to us.
In fact, Equity Release Supermarket won’t charge you anything until your plan is complete and your money is in the bank. You can find your local, Equity Release Supermarket adviser here.
[hr style=”single”]
Question
Can I get a new deal?
I have been on an equity release plan now for five years but I have noticed rates are starting to look a lot cheaper than they were when I signed up. Can I switch to another deal? If so, how do I go about this and will I need to pay an exit fees?
Answer
Having been an adviser now for over 20 years, I’ve had plenty of experience remortgaging many older lifetime mortgage plans away from the higher interest rates they used to attract.
Switching lifetime mortgage plans can be done for a number of reasons, not just for a lower rate, although this is the most popular reason.
The first thing to do is to assess whether it’s in your best interest to change plans by conducting a comprehensive ‘switch analysis’ exercise. This basically studies your existing plan – interest rate, current balance, any early repayment charge, closing admin fee and its existing features.
We would then calculate how much capital is needed to set up the new plan. For instance, we need to account for the set up costs of the new plan (application, valuation, legal and advice fee – where applicable), exit penalties from the old plan and we add two months interest as an estimate of how long it would take for the new plan to start.
We would then consider any features or benefits that you may be losing from your existing plan and then complete an in-depth personal questionnaire, where we’d establish what features you require in the new plan.
Armed with this information, we would then conduct our research from the whole of the market to find which lifetime mortgage plan could offer the amount and features required – at the best interest rate available.
Our analysis tool will then compare both plans and establish the break-even point – this is where it becomes profitable for you to switch plans.
As long as this period was reasonable and fits with your age, and future life expectations, then you could proceed with a switch to a new company and product.
Here at Equity Release Supermarket we have a handy switch calculator that provides a break-even point as to when switching would be most favourable. Our advisers have also been trained to conduct full switch analyses, and check whether it would be in your interests to move your plan to a new lender.
As you can see, there is more to switching than just finding a better interest rate. Newer plans have many more features than previous such as downsizing protection, voluntary payments, inheritance protection, fixed early repayment charges and three-year no ERC window on death/long term care for joint plans.
The viability of changing plans is usually determined by the early repayment charges of your current lender and so I recommend that you speak to one of our independent and impartial advisers at Equity Release Supermarket, who will be able to advise you on the best route to take.
[hr style=”single”]
Question
Downsizing versus equity release?
We were looking at releasing equity on our property to pay for our retirement (husband and I were worried our pension would not stretch). However, now the stamp duty holiday has been enforced and following the lockdown we are starting to wonder if we should leave the city and head off to the coast, thus downsizing?
It seems a no brainer but we wanted to check there were no benefits of releasing equity that we hadn’t considered. Not just practical, but financial.
Our house, in a London suburb, is worth approx. £550,000 and we are looking at coastal properties on the market for £200,000. But we would need to travel frequently to see our London-based children and grandchildren.
Is there a questionnaire we could do to find out the financial pros and cons to help us with this big decision?
Answer
It can be difficult to decide what is the best course of action for you when considering how to fund your retirement.
Downsizing is certainly one option and assuming you have no mortgage, you could purchase the £200k property and have the capital released to use for your retirement plans, whether that be for income or investment purposes. A nest egg for the future.
However, downsizing does come with associated costs – such as Stamp Duty on the purchase of the new property, though as you point out this is £0 on a property valued at £200,000 until 31 March 2021, plus there are estate agent’s, moving and solicitor’s fees to consider.
Many people also don’t think about the costs of repairing or modifying a new home to make it personal to their own taste. Also, many decide against downsizing as it involves moving away from family, friends and their support network.
You also need to think about the inheritance you want to leave for your loved ones as the value of a costal property, at less than half the value of your home in London, may not appreciate in value at the same rate in the years to come. Obviously the larger your estate, the larger your inheritance will be.
Equity release is also an option you could look at, as well as the other types of ‘later life lending’ such as retirement and retirement interest-only (RIO) mortgages.
They all come with their own pros and cons but the main difference between equity release and retirement mortgages is that with retirement mortgages you are able to borrow more (now up to 75% of the value of your home) – which means that you could access more money than through downsizing, but you are committed to making monthly repayments or interest and/or capital – which may not be financially viable for you.
Lifetime mortgages can work much more flexibly than a retirement mortgage for post-retirement purposes where regular payments are required over a period of time.
For instance, we have drawdown plans where after taking an initial lump sum, you have access to a cash facility where you can draw money (usually a minimum of £2,000 a time) as and when required in the future, with no further admin charges.
There are also income plans which offer a fixed income over a fixed number of years (10, 15, 20 and 25) that can help supplement your retirement spending and bridge any shortfalls.
How much you can borrow through equity release (lifetime mortgages are the most popular option) depends on the age of the youngest borrower and at age 65, you can access up to 39.8% of the value of your home which rises to 45% at age 70.
So, depending upon your age, you may not be able to realise as much money through equity release as you could through downsizing – if that is your main reason for wanting to downsize.
Which brings me around to inheritance again. Equity release will reduce the value of your estate but by how much is entirely dependant upon you as you are able to manage the amount to be repaid through the lifetime mortgage plan that you choose, and whether you want to make ad hoc or regular repayments.
We have a free to use equity remaining calculator, which will give you an idea of the value of your estate in the future – which takes into account rising house prices.
As you have a lot to think about, I recommend that you speak to an independent adviser who will be able to talk through your financial situation and recommend a solution that is right for you both now and in the future.
It costs you nothing to talk to one of the expert advisers at Equity Release Supermarket and they would be more than happy to guide you through your options. You can find your local adviser here.
[hr style=”single”]
Question
Downsizing versus equity release?
We were looking at releasing equity on our property to pay for our retirement (husband and I were worried our pension would not stretch). However, now the stamp duty holiday has been enforced and following the lockdown we are starting to wonder if we should leave the city and head off to the coast, thus downsizing?
It seems a no brainer but we wanted to check there were no benefits of releasing equity that we hadn’t considered. Not just practical, but financial.
Our house, in a London suburb, is worth approx. £550,000 and we are looking at coastal properties on the market for £200,000. But we would need to travel frequently to see our London-based children and grandchildren.
Is there a questionnaire we could do to find out the financial pros and cons to help us with this big decision?
Answer
It can be difficult to decide what is the best course of action for you when considering how to fund your retirement.
Downsizing is certainly one option and assuming you have no mortgage, you could purchase the £200k property and have the capital released to use for your retirement plans, whether that be for income or investment purposes. A nest egg for the future.
However, downsizing does come with associated costs – such as Stamp Duty on the purchase of the new property, though as you point out this is £0 on a property valued at £200,000 until 31 March 2021, plus there are estate agent’s, moving and solicitor’s fees to consider.
Many people also don’t think about the costs of repairing or modifying a new home to make it personal to their own taste. Also, many decide against downsizing as it involves moving away from family, friends and their support network.
You also need to think about the inheritance you want to leave for your loved ones as the value of a costal property, at less than half the value of your home in London, may not appreciate in value at the same rate in the years to come. Obviously the larger your estate, the larger your inheritance will be.
Equity release is also an option you could look at, as well as the other types of ‘later life lending’ such as retirement and retirement interest-only (RIO) mortgages.
They all come with their own pros and cons but the main difference between equity release and retirement mortgages is that with retirement mortgages you are able to borrow more (now up to 75% of the value of your home) – which means that you could access more money than through downsizing, but you are committed to making monthly repayments or interest and/or capital – which may not be financially viable for you.
Lifetime mortgages can work much more flexibly than a retirement mortgage for post-retirement purposes where regular payments are required over a period of time.
For instance, we have drawdown plans where after taking an initial lump sum, you have access to a cash facility where you can draw money (usually a minimum of £2,000 a time) as and when required in the future, with no further admin charges.
There are also income plans which offer a fixed income over a fixed number of years (10, 15, 20 and 25) that can help supplement your retirement spending and bridge any shortfalls.
How much you can borrow through equity release (lifetime mortgages are the most popular option) depends on the age of the youngest borrower and at age 65, you can access up to 39.8% of the value of your home which rises to 45% at age 70.
So, depending upon your age, you may not be able to realise as much money through equity release as you could through downsizing – if that is your main reason for wanting to downsize.
Which brings me around to inheritance again. Equity release will reduce the value of your estate but by how much is entirely dependant upon you as you are able to manage the amount to be repaid through the lifetime mortgage plan that you choose, and whether you want to make ad hoc or regular repayments.
We have a free to use equity remaining calculator, which will give you an idea of the value of your estate in the future – which takes into account rising house prices.
As you have a lot to think about, I recommend that you speak to an independent adviser who will be able to talk through your financial situation and recommend a solution that is right for you both now and in the future.
It costs you nothing to talk to one of the expert advisers at Equity Release Supermarket and they would be more than happy to guide you through your options. You can find your local adviser here.
[hr style=”single”]
[/col]
