1 Your essential guide to equity release from the UK s No. 1 specialist
2 Contents What is equity release? How could equity release help you? Why choose Key Retirement? Mr & Mrs Lane Seek independent advice A safe decision What can you expect from your adviser? Mrs Stonehewer What types of plans are available? Our promise to you Thank you for taking the time to read our guide to equity release and congratulations on taking your first step to a brighter future. At Key Retirement we work with a wide range of intermediary partners, who are confident about referring customers to us for our specialist advice. If you are considering taking a big step such as equity release, you naturally want to consult people who can offer you excellent advice. As the UK s No. 1 independent equity release specialist, we offer 100% impartial advice on unlocking the cash from your home. We can do all the hard work for you by researching the entire market to find the best plan for your personal circumstances and secure exclusive deals. In fact, we are so committed to the needs of our customers that if we don t think equity release is actually the best option for you, we ll tell you. It s this unique, personal approach to equity release which has won Key Retirement forty-nine industry and consumer awards. This guide will introduce you to some of our happy customers who have benefited from the same awardwinning service that we are proud to extend to you. Colin Taylor Chief Executive Officer
3 What is equity release? Put simply, equity release allows you to generate cash from the value of your home in the form of a tax-free lump sum, or by drawing smaller instalments as and when you need them, without the hassle and stress that moving can involve. After years of working hard to make monthly mortgage repayments, your home is likely to be your biggest asset, particularly if you have benefited from the huge increase in house prices over the last few decades. But what good is it to have all that money tied up in your bricks and mortar, if you could use it now to enjoy life to the full? Equity release at a glance Receive a tax-free cash lump sum Typically no monthly repayments You can spend the money however you like You can stay in your home for as long as you choose for the remainder of your life The amount of inheritance you leave is reduced Your entitlement to some means-tested benefits may be affected Who qualifies for equity release? People aged Properties worth at least 60,000 How could equity release help you? If you are considering releasing a tax-free cash lump sum then you probably have an idea in mind of how you intend to spend it. Tens of thousands of people have already used the value of their home to boost their finances, and for many different reasons. Some of the most popular reasons for releasing cash include Home and garden improvements Clearing credit cards and loans Taking more holidays Giving money to the family Paying off the mortgage Leaving the family home and neighbourhood can be an emotional upheaval. Equity release gives you options, however, enabling you to release the cash locked up in your home without the stress of having to downsize or sell the home you love. With people living a lot longer these days and with pensions not being what they used to be, savings have to stretch a lot further to last through retirement. You might wish to release cash to top-up your income, so you can really enjoy your free time after years spent working. Think carefully before securing other debts against your home.
4 Why choose Key Retirement? When Key Retirement was established in 1998, our vision was to give honest, impartial advice to anyone considering equity release. Since then, Key has grown to become the UK s number one independent equity release specialist, and has helped over 1 million customers decide if equity release is the right option for them. Because of our trusted name within the industry we are able to secure exclusive deals with leading plan providers creating fantastic offers which can potentially save you thousands of pounds over the life of your plan. From our UK-based contact centre to our expertly trained advisers, our award-winning customer service is second to none. Why not find out for yourself what makes Key so unique? We offer a free no-obligation consultation for you to find out more about equity release and ask any questions you might have. We put your needs first During the appointment process your Key adviser will ensure you have considered all the alternatives to equity release. These may include Downsizing your house Assistance from family Using any savings you have to fund your plans Other forms of borrowing And remember, if equity release is not right for you, we ll tell you! Unless you decide to go ahead, Key s service is completely free of charge as Key s typical advice fee of 1.65% of the amount released would only be payable on completion of a plan. We can offer Comprehensive coverage with over 80 local advisers Over the phone as well as face-to-face appointments Exclusive offers Confidence 1 in 3 Equity Release Council plans are arranged by Key Retirement 04
5 Our home has given us the freedom to get up and go! Peter and Jean Lane haven t looked back since they released cash from their home in Reading. They first started looking for extra funds when they decided to visit their son, who lives in New Zealand. The couple did consider selling their house and downsizing, but they ve lived in their home for over forty years and it would have been a heart-wrenching move. The service we received from Key was really wonderful said Jean. We invited an adviser round for an appointment so we could find out more about equity release and ask how much we could release. He really took the time to get to know our circumstances and answered all our questions very patiently. He came back to our home at a later date to present his findings; all the facts and figures were there to show the very best option for us financially. Most importantly, there was never any pressure, everything went at our own pace and we came through the process knowing we had definitely made the right decision.
6 Seek advice from an equity release specialist Once you have read through this guide and have developed a basic understanding of equity release, it s time to ask to be referred to Key. It is essential that anyone considering equity release seeks the service of an independent, professional adviser. Equity release is an important financial commitment and you need to be sure of your decision before you go ahead. Most importantly, you should be completely confident that you have made the right choice for you. Key offers unbiased, specialist advice. For your peace of mind, all of our advisers are independent equity release specialists, so they are free to advise you on the entire market. They will search all the available plans and then recommend the most suitable one for you. If however, equity release is not right for you, they will tell you. Searching the entire market to find the best plan for you, including... Ask to be referred to Key today 06
7 A safe decision You can be sure that you are in safe hands with Key; all equity release plans are regulated by the Financial Conduct Authority (www.fca.org.uk), which provides protection and security to all equity release customers. As part of this regulation, during your second appointment with one of Key s advisers they will present the full details of their recommendation to you. This will include Why they believe this is the most suitable option for you Any costs, penalties and interest rates involved with a plan Key are also founding members of SAFER (Specialist Advisers For Equity Release), ensuring all members of the public can obtain quality advice on equity release from specialist independent advisers. Because equity release is a lifetime commitment, it is only expected to be repaid upon your death or entry into longterm care. Your Key adviser will explain the early repayment charges which may apply if you decide to repay the plan early. As an extra safeguard, Key are members of the Equity Release Council (ERC) and recommend ERC approved plans. When you see the ERC logo on a plan that is recommended to you, you can have total peace of mind of the following guarantees: Peace of Mind You have the right to remain in your home for as long as you choose The freedom to move to another property without financial penalty (subject to criteria) A no negative equity guarantee, so you never owe more than the value of your home
8 What can you expect from your Key Retirement adviser? During your initial consultation, your Key adviser will explain the different types of equity release plans available and help you to understand all the negatives and positives of releasing cash from your home. The appointment process is usually done in two stages: First appointment Key will take the time to get to know you, your priorities and your circumstances, so we can fully understand what you want from your retirement. We can discuss long-term financial planning with you and make sure you have considered the alternatives to equity release. Second appointment Your Key adviser will give you a full report as to what the best option is for your personal circumstances which can include a state benefits report and you can see how your entitlements may be affected if you release cash from your home. If equity release is right for you then we can inform you of the products you qualify for, the best plan for your needs (you may even be able to get more cash if you have any health conditions), how much you can release from your home and the costs involved. Equity release could also affect your income tax position but again, your adviser should give you guidance on this. Involving your family If any appointments are to take place in the comfort of your own home then we welcome you to invite your family too. Releasing cash from your home reduces the value of your estate and the amount of inheritance you leave. Therefore, involving your children and any other dependants from the beginning will allow them to join in the decisionmaking process and ask any questions they might have. This involvement may make things easier for them too, when the plan comes to an end. Remember, your initial appointment with Key is free with no obligation, so there is no pressure to proceed with a plan. It is simply an opportunity for you to find out more about your options. 08
9 Equity release completely transformed my life Jean Stonehewer, a retired police civilian employee from Manchester, looked into equity release as a way of funding some major home improvements, which she had wanted doing for a long time. Jean doesn t have any family, so she found it very helpful to be able to talk everything through with her equity release adviser. He first looked into the possibility of a grant to help pay for the work I needed doing, but unfortunately I was unable to get one, so we proceeded with a home reversion plan to release the money instead. There was never any pressure at all the fact that he was looking into grants for me really demonstrated his willingness to find the very best solution to my needs. With the money she released, Jean has enjoyed her first holiday in years, relaxing for six weeks in the south of Spain. I have done so much already, the money has really made a difference to my life. As well as repairing the roof of my house, I have also had a new driveway, new central heating system, painted the outside of the house and bought a new car!
10 What types of plans are available? Once you have had an appointment with one of Key s equity release advisers, they will carefully consider all your options and give you a full recommendation as to whether equity release is the best option for you at this time. If you do proceed with a plan, the most popular types are Lifetime Mortgages where you receive either a cash lump sum or drawdown amounts when needed. Lifetime Mortgages A lifetime mortgage is a form of equity release plan where a loan is secured against your property to provide you with a tax-free cash lump sum or a regular income to spend as you wish, with typically no monthly repayments to meet. Compound interest is added to the lifetime mortgage loan throughout your lifetime. The loan plus interest is eventually paid back when the home is sold, usually when you move into long-term care, or when you and your partner die. You can typically release between 11-50% of the value of your property with a lifetime mortgage, depending on your age. Enhanced Plans If you or your partner has any health or lifestyle conditions you may be able to release more money from your home. Health issues such as diabetes, heart problems or high blood pressure are typical examples where you could qualify for an enhanced equity release plan. The same also applies to lifestyle factors such as heavy smoking. You may miss out on thousands if you choose an adviser who cannot advise on this. Protected Plans If you want to guarantee an inheritance for your family this is now possible with some lifetime mortgages. A couple who are able to release 50,000 and want to ensure their grandchildren are left with an inheritance could take 30,000 (60% of the maximum available) leaving 40% of the property protected. Combined Plans Flexibility within lifetime mortgages means that Key, as impartial advisers, are able to assess how you could benefit from a combination of these options. This could not not only save your estate money, but also tailor your plan to your current and future needs. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration. Example: If you want an inheritance for your family and need lump sums of money at different stages over the next 15 years, you may be able to have a protected plan with a drawdown facility you may even benefit from one of Key s exclusive cashback deals. 10
11 Drawdown Plans Drawdown lifetime mortgages work in the same way as general lifetime mortgages but with added flexibility. Once you know the maximum amount of money you can release, after an initial release amount you can then choose to drawdown the cash in stages as and when you want to. The interest is only added on the amount released so it adds up more slowly than it would if you released the full amount at the outset. These are a flexible option and can form an essential part of planning your future finances. Example: Alan Myres has a 2 bed bungalow worth 215,000. He wants to update the kitchen and plans to visit family in Canada next year. He is worried that his pension will not meet his needs when he gets older and wants to make his bungalow more manageable should something happen to him. He wants to release 64,000 and have the choice to take the cash as one lump sum or when he needs it i.e. drawdown. Comparison between a standard Lifetime Mortgage and a Drawdown option of 64,000 released over 15 years with an interest rate of 5.89%, based on a 70-year old man. Drawdown at end of year Outcome after 15 Years Option Initial advance Interest charged Total owed Lump sum 64,000 n/a n/a n/a n/a 87, ,009 Drawdown 20,000 15,000 8,000 7,000 14,000 50, ,926 Saving 36,083 This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration. The table above shows the workings and savings that Mr Myres will have by picking a drawdown over a lump sum option. His adviser points out that Mr Myres estate will save 36,083 in interest and he is not committed to take the extra sums if he doesn t want to.
12 What types of plans are available? Home Reversion Plans With a home reversion plan you sell part or all of your home to a reversion plan company in exchange for a tax-free cash lump sum. You have the absolute right to stay in your home rent-free for as long as you choose which is why you don t typically receive full market value for the share of the home you sell. Both you and the reversion plan company share in any increase in your property s value, providing you have not exchanged 100% of its value. With home reversion plans you are also able to guarantee an inheritance to your beneficiaries. When the plan comes to an end, the home reversion provider takes its percentage share of the sale proceeds from your property. Example: Mike Walsh 69 and Janet Walsh 68 have a property, which is valued at 250,000. Each month they have enough money to live on but the cost of living has put a strain on any extras they want to have. They discuss it with their daughter who also attends the appointment with their Key adviser and they decide that they can raise the maximum amount by choosing a home reversion plan. They use 50% of the property to get 39,976 whilst the other 50% will be left to their daughter. When Mike and Janet die the house is worth 284,523 and their daughter is left with 142,261. This is a home reversion. To understand the features and risks ask for a personalised illustration. Lifetime Mortgages and Home Reversion Plans offer the following options: Feature Receive a tax-free cash lump sum Typically no monthly repayments No negative equity guarantee Stay in your home for life Move and take the plan with you (subject to provider criteria) Protect a percentage of your property / guarantee an inheritance Feature Entitlement to some state benefits may be affected Regulated by the FCA Specialist independent advice should be sought Advised on by Key Retirement The value of your estate is reduced 12
13 Differences between plans Comparison Chart Feature Lifetime Mortgage Drawdown Lifetime Mortgage Home Reversion Take smaller amounts of money when you need them You own your home You sell a share of your home Interest accrues on the loan Secure a pot of money for the future Interest Payment Plans To meet the growing needs of people wanting to take equity out of their homes, it is now possible to get interest payment mortgages. Interest payment works on the same basis as a lifetime mortgage and you choose how much interest you want to pay and how long you want to pay the interest charged each month (for example, 1 year, 5 years or even up to the lifetime of the loan).* The advantage of this option is by paying some interest payments during the plan term, the amount your provider takes at the end of the plan will be less, as you have already paid off some of the interest accrued or all of it. Also, if for any reason you are unable to make repayments, this plan can be converted so interest is added as with a standard lifetime mortgage. With options such as this it is essential that you seek specialist independent advice and speak to one of Key s advisers to find the best plan for your needs. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration. Switching plans When choosing to take out the equity in your house Key will do all the comparing you need, to make the right decision. It is also comforting that if things change with many plans it s possible to switch to another. Whether it s to save your estate thousands or to change to fit your new circumstances Key can advise you through your journey! *Subject to minimum interest payment.
15 Our promise to you Providing our customers with independent, impartial advice is core to what Key Retirement is all about. We strive to offer you the very best in everything we do, from the first time you are referred to Key right through to the completion of your plan and beyond, we will always put your needs and priorities first. Every person at Key works towards the same goals, and we promise To listen to you and act in accordance with your best interests To behave in a professional, caring manner To be clear, fair and not to mislead you in any way To clearly explain every step of the process To allow you to make informed decisions and choices without any pressure To give you the best possible independent advice To provide the highest levels of service To offer a wide choice of safe equity release plans This is an equity release plan. To understand the features and risks ask for a personalised illustration. Ask to be referred to Key today to find out how equity release could help you. The next steps... Referral Having been referred to Key, you will be contacted to arrange an appointment with one of Key s specialist advisers A survey to assess your home s value will be requested and carried out by an independent surveyor We will contact your chosen solicitor to let them know they will be acting on your behalf Acceptance Your plan provider will issue an offer of how much cash they will allow you to release. This is sent to both you and your solicitor. Legal process All your work will be completed by your solicitor, who will contact you when everything is ready to sign. Completion The process from acceptance to completion takes approximately eight to twelve weeks. The equity release funds will be sent directly to your solicitor. It s time to enjoy your money!
16 Key Retirement Baines House, 4 Midgery Court, Fulwood, Preston, PR2 9ZH All information correct at time of going to press, May This document does not constitute financial advice under the Financial Services and Markets Act If you require such advice, you should seek appropriate professional advice. Key Retirement is a trading name of Key Retirement Solutions Ltd. Registered in England No CKP53 (05/15) Key Retirement Solutions Ltd 2015