WHAT IS EQUITY RELEASE? WHY CONSIDER EQUITY RELEASE?

Transcription

1 WHAT IS EQUITY RELEASE? Equity Release can free some of the capital tied up in your home, while you continue to live there. This money can be in the form of a tax-free lump sum, a regular income or a combination of both. And there are no restrictions on how you use the money. Equity can also be taken from a second home or a buy to let property that you own. WHY CONSIDER EQUITY RELEASE? There are many reasons why people use equity release. Common ones are: Home improvements Buying a car or taking a holiday Helping children or grandchildren Paying off a mortgage Paying off debts Pay for home care Pay for medical expenses Helping a family business However, there may be other solutions available which are more suitable to your needs than equity release. Your adviser will go through these with you before you make a decision. AM I ELIGIBLE FOR EQUITY RELEASE? You need to: Be over 55 (and your partner too) Own your home or be looking to buy a home. Equity release is also available on a second home or buy to let property that you own. Have little or no mortgage (any outstanding mortgage must be repaid from the cash released) Your property needs to be worth at least 70,000 SHOULD I INVOLVE MY FAMILY? We recommend you talk to your family before deciding on equity release as it may affect their inheritance. Obviously the decision is down to you whether to have a family member present but it often helps to have your family involved at every stage.

2 WHAT SCHEMES ARE AVAILABLE? 1. Lifetime Mortgage Roll Up 2. Lifetime Mortgage - Interest Only 3. Home Reversion Plan 1. LIFETIME MORTGAGE Roll Up A Lifetime Mortgage is a loan against the value of your home and can be taken as a lump sum, a monthly income or both. No capital and interest repayments are made until the property is sold. Instead, the interest is rolled up and added to the total amount of the loan. Some Lifetime Mortgage providers allow you to take the capital in stages called 'drawdown'. The benefit of 'drawdown' is that the interest only becomes payable when you actually take the capital. So the total debt builds more slowly and interest grows more slowly as well. Although there is no guarantee that property values will rise in future, any rises in property value will offset the effect of the rolled up loan interest. Advantages Disadvantages 1. You will have a substantial lump sum to spend as you wish, without making any interest payments until the scheme ends. 2. You still own your house so will benefit from any increase in value. 3. The plans are available to borrowers as young as You can still move home if you wish. 5. You don't have to make a monthly repayment. 1. The loan debt accumulates rapidly. The younger you are when you borrow the money, the greater the potential debt due to greater life expectancy. 2. The value of your estate is reduced, leaving less for your beneficiaries (unless protected ). 3. Interest rates may, but not always, be higher due to the long term nature of the loan. 4. Further loans may not be possible. 6. You can elect to protect a percentage of the eventual sale of your home ensuring a guaranteed inheritance is available 5. There may be early redemption costs. 6. When you take out the mortgage it

3 7. It may be possible to draw higher amounts if you are in ill health isn t possible to know how much the final cost of the mortgage will be. 8. All Equity Release Council (SHIP) members have a No Negative Equity guarantee providing you do not break the terms of the agreement, there is a No Repossession Guarantee 7. Equity Release may affect your eligibility for means-tested state benefits like guaranteed pension credit and savings pension credit. 55+ always checks this for you. 2. LIFETIME MORTGAGE Interest Only An interest only lifetime mortgage allows you to make monthly repayments as opposed to having the interest roll up on the debt. This means the debt will not increase over time. The debt is repaid on death, entry into long term residential care or on early repayment. Advantages Disadvantages 1. You can make full or part monthly 1. Further loans may not be possible payment (you decide at the outset) 2. There may be early redemption costs. 2. Available to borrowers as young as Equity release may affect your 3. If you make full payments, the debt eligibility for means tested benefits. will not increase. 4. If you miss payments the whole loan 4. The interest rate is fixed for life. will revert to a roll up mortgage. 5. You can stop making payments at any 5. There may be early repayment costs. time and the mortgage will revert to full roll up. This avoids repossession. 6. You retain ownership and control of your home and will benefit from any increase in its value. 7. You can still move home if you wish. 8. You can elect to 'protect' a percentage of the eventual sale of your home so ensuring a guaranteed inheritance is available to your beneficiaries

4 3. HOME REVERSION SCHEMES A Home Reversion scheme means selling all or part of the equity in your home to a reversion company. You may not receive full market value, because the reversion company also gives you the right to live in your home rent free for the rest of your life. However, there are now reversion companies who will allow you to draw the maximum share for your age, gender and property value for a percentage share in your property. When the property is sold, usually on death, the reversion company receives its share of the proceeds of the sale. So, for example, if you sold a 60% share of your home, the reversion company receives 60% of the proceeds and you retain 40% when it is sold. Advantages Disadvantages 1. You will have a substantial lump sum or regular income to spend as you wish. 1. It will reduce the value of your estate and therefore the amount left to your beneficiaries. 2. You don't have to make a monthly repayment. 3. You will not build up any debt. 4. Beneficiaries know the proportion of your home (if not the value) that they will receive from your estate. 5. Unless you have sold 100% of your property, you continue to share in the rise in value of your property. 6. You can take further cash depending on the amount you originally sold. 2. If you die soon after starting the plan, you could have effectively sold off your house (or a share of it) cheaply. Some schemes may give a rebate if death occurs within the first few years of the start date. 3. Some schemes can take a long time to arrange, and some companies are very selective about the properties they consider. 4. Equity Release may affect your eligibility for means-tested state benefits like guaranteed pension credit and savings pension credit. 7. Minimum age is You can usually draw more from a Home Reversion scheme than a lifetime mortgage.

5 WHOLE OF MARKET SPECIALISTS WORKING FOR YOU At 55+ Equity Release, we have been mortgage industry professionals for over 25 years - but for the last five years, we have specialised in the fast-growing field of Equity Release. We realised that here was a product that provided the ideal solution to a wide range of problems, from purchasing a home for the children to providing long term care. However, many people were put off by horror stories in the newspapers and confused by the claims of all the Equity Release providers who had suddenly entered the market. We set up 55+ Equity Release to help people understand what Equity Release was all about, to avoid all the pitfalls and get the best possible service along the way. We make sure that our clients and their families know all the facts and implications, before they decide to proceed. We look at the whole of market before recommending the Equity Release scheme to suit their requirements. And then, we act as the main point of contact while the transaction goes through, helping with all administration and paperwork involved until the money is safely transferred into their account. A service designed to pay for itself. You can read about the costs involved in equity release on our 'How Much Does It Cost?' page. All costs are disclosed to you in full, in black and white, prior to you committing yourself to equity release. We believe our service pays for itself and more - because we find the most cost-effective scheme. And of course, we only recommend leading specialist providers. We now have Equity Release clients in Lancashire, Cheshire, Manchester and also in London and the South East. You can read some of their letters on our Testimonials page. We also have clients referred to us by their IFAs, accountants and other advisors, who lack our specialist knowledge of this field. So read though our website to get all the background information on Equity Release. Then call for a free initial consultation.

6 The 55+ Service At 55+ Equity Release, we offer a two stage service. Firstly, we make sure that an Equity Release scheme is the right option for you. Secondly, we look at the whole of the market before recommending the scheme that suits you best Initial consultation The initial consultation can be a face to face meeting in your home, or it can take place over the phone. Either way, it lasts about 1 1/2 hours and aims to answer all your questions about Equity Release and the various products available. We also like to hear from other family members at this stage to answer their questions, too. So make sure you invite them along. This initial consultation is entirely free and places you under no obligation to us. However, at the end of it, you will have all the information you need to decide if Equity Release is right for you - and whether to take a lump sum or a regular income. You Decide When you have made your decision, contact us and ask us to look at the options available on the market. You should also inform your legal advisor - or appoint one. Presenting the plans We will then present our recommendations, with the lender and product that best suits your needs. If your initial appointment was face to face, this could be done over the phone. If not, we would visit you at home to present our recommendations in person. Either way, we answer all your questions and give you all the facts you need to decide whether or not to proceed. If you do decide to go ahead, we will help you fill in the application form. Progressing the application We then continue to work on your behalf, progressing the application for you and acting as your first point of contact if you have any problems or questions along the way. The first stage is for us to submit your application to the lenders. They will appoint a surveyor to value your property before making an official offer. The lender then makes a formal offer of a mortgage, which is processed by your own solicitor in much the same way as when you first bought your home. When all the paperwork is completed the money is paid into your account. The whole process usually takes from 4-6 weeks.

7 WHAT ARE THE COSTS? There are a number of costs involved in setting up an Equity Release scheme. Some are deducted from the money you receive, others are payable separately. 1. Valuation Fee. This pays for the lender's valuation of your property and usually comes to around 230 for a property worth 170,000, although some lenders may offer free valuations. This charge must be paid when you submit the application form. 2. Arrangement Fee. This covers the cost to the lender of setting up the plan and is usually from This sum is deducted from the advance. Some lenders do not charge this fee. 3. Legal Fees. These are paid to your legal adviser to cover the costs of conveyancing and should be between They are also deducted from the advance. 4. Our Fees. At 55+ Equity Release we charge 845 on completion. We also receive a commission from the lender. OUR LENDERS As specialists, we are able to look at the whole of the market before choosing a plan that's right for you. Some of our lenders are household names - others are not. All are members of the Equity Release Council. THE EQUITY RELEASE COUNCIL CODE OF CONDUCT (SHIP) The Equity Release Council is the official governing body of the equity release industry and is dedicated entirely to the protection of equity release planholders and promotion of safe home income and equity release plans. All member companies must adhere to the strict code of conduct: 1. The right to remain in your home for life provided the property remains your main residence. 2. You must be provided with a fair, simple and complete presentation of your plan. 3. The right to move your plan to another suitable property without any financial penalty 4. The right for you to choose an independent solicitor of your own choice to conduct your legal work. 5. The ERC certificate signed by the solicitor is there to ensure you are aware of the terms and implications of the plan including the impact of equity release on your estate. 6. All ERC plans carry a no negative equity guarantee. This means you will never owe more than the value of your home and no debt will ever be left to the estate

8 FREQUENTLY ASKED QUESTIONS What is SHIP / Equity Release Council (ERC)? SHIP stands for Safe Home Income Plans. Renamed in 2012 as the Equity Release Council it is an organisation dedicated entirely to the protection of planholders and promotion of safe home income and equity release plans. Members of this organisation subscribe to a Code of Conduct and their plans guarantee that you cannot lose your home whatever happens to the stock market or interest rates. ERC members also offer a no negative equity guarantee. This means that you will never owe more than the value of your property. ERC also provides a formal procedure for handling complaints. Information is available on-line at: I m worried about the roll up of interest. Can I protect a percentage of the value of my home to leave to my children? Yes you can. A number of lenders offer this guarantee built into the plan. Please ask your adviser for further details. Can I make monthly payments, just like a mortgage? Yes, this is possible with some lenders. You can make full or part monthly payments. If you make full payments, your debt will remain the same. Can I alter or extend my property? Most providers will allow this, however, you will need their written consent before starting any alterations Can I move home? All Equity Release Council members will allow you to move home whenever you wish. You must, of course, inform the provider before doing so. At the time of the move, you may repay the loan and interest in full, or alternatively, you may be eligible to transfer the plan to your new property if it meets the provider s criteria at the time. What if my new home is a different value? If you move to a property of lower value than the property on which the plan was taken, you may have to repay a proportion of the loan and interest. If your new home is of substantially lower value, you may be required to end the plan and repay the loan and interest in full. However, if you move to a house of greater value, you may have the option of releasing a further capital sum. Does my home still belong to me? Yes. You are still the legal owner of your home with a lifetime mortgage and a home reversion plan if you sell up to 99.9% of your home. Will I be responsible for maintaining the property? Yes, you will be responsible for maintaining the property in at least as good a condition as it was when the plan was taken out.

9 What happens on my death? With a lifetime mortgage, on your death (or on second death for joint plans) the loan and interest are due to be repaid. This would normally be done by the administrators of your estate selling the property and repaying the loan and interest from the proceeds. With a home reversion scheme, the property is sold and the corresponding percentage of the sale price is made available to the beneficiaries of your estate. What happens if my heirs wish to retain the property? With a lifetime mortgage, generally, they are free to do so providing they pay the total amount owed to the provider within six to twelve months of your death. Generally this is not possible on a full Home Reversion Scheme. If I sell my home, must I buy a new house? Sometimes circumstances can arise when you may want to sell your home, but don t intend to buy another property. You may for example live with relatives or move into residential care. If this happens, you will usually have to repay the amount due to the provider from the proceeds of the property although some lenders may allow you to keep the property. What happens if there is a change of ownership? Change of ownership can be requested following marriage, divorce or remarriage. This may result in you having to repay part of the loan. Can I end the plan early? If your situation changes, you may wish to repay your lifetime mortgage plan early. You should however, remember that these plans are intended to be long term plans and therefore, the provider may charge an early repayment fee. You cannot cancel a home reversion scheme once it has started. Can I take more money later? There are a number of circumstances that may allow you to release more equity in future but the availability of further releases will depend on criteria and conditions that apply at that time. Will this affect my pension? Taking out an equity release plan won t affect your State Pension or any personal pensions. What about State benefits? Equity release may affect means tested benefits. Your 55+ specialist will assess this for you but you are always advised to check your situation with your local tax/benefits office or council. What about tax? Under current legislation, any cash sum drawn will not attract Income Tax or Capital Gains Tax Why should I tell my family? By using your property to improve your retirement, you will reduce the value of your estate on your death. This could lead to problems in future. We therefore strongly

10 recommend that, unless there are exceptional circumstances, you discuss your intentions with your family before taking this big decision. How much money can I release? The amount you can release depends on your age and the value of your property. Generally speaking, men can release more capital then women. Please refer to the calculator on the main page for guidance. How long does the process take? The process usually takes around 4-8 weeks from the time you sign the application until you receive your money. Should I take legal advice? Yes, you should appoint your own independent solicitor who will act on your behalf throughout and ensure that you fully understand the process at every step. We can refer you to a specialist, independent solicitor if you wish. Does eligibility for the plan depend on my income or health and will I need to take a medical? Neither your income nor state of health has any bearing on your eligibility for a plan. Could I lose my home? All Equity Release Council members have a no negative equity guarantee and, providing you do not break the terms of the agreement, a no repossession guarantee. Is all equity release regulated by the Financial Services Authority? Yes, lifetime mortgages and home reversion schemes are both regulated by the Financial Services Authority. What will it cost to set up the plan? There may be a provider s arrangement fee. You will also be liable for the cost of valuing your property and your own legal fees. In some cases, you may also have to pay the provider s legal costs or you may receive a refund of your valuation fee on completion. The provider will also require you to maintain buildings insurance on your property for the duration of the plan.

11 WHY CHOOSE 55+ EQUITY RELEASE? We support you through every step of the process We offer a free initial consultation with no obligation We are specialist equity release advisers and so look at products from the whole of market. We talk to you face to face in your home at a time convenient to you. WHAT HAPPENS NEXT? 1. Call us to make an appointment to speak with one of our specialist advisers. This consultation is free and will usually take around 1 ½ hours. The adviser will explain in full the benefits and risks of equity release and take some personal and financial details from you to work out whether or not equity release is right for you. We recommend a family member is present at the meeting although the choice is always yours. 2. At the second meeting your adviser will present their recommendations to you and go through the details of the plan in full. This meeting will usually take about 1 hour. 3. If you decide to go ahead then your adviser will complete an application with you. A valuation of your home will then be arranged by the lender. This usually takes around 2-3 days. 4. You will need to appoint a solicitor who will give you independent legal advice. 5. The equity release documents will be forwarded to both you and your solicitor once the lender is satisfied with the valuation and title to the property. 6. Your solicitor will make an appointment to discuss the equity release plan with you and sign the legal paperwork. 7. When this is completed you will receive your money through your solicitor. CONTACT 55+ EQUITY RELEASE ON EQUITY RELEASE SCHEMES, SUCH AS LIFETIME MORTGAGE OR HOME REVERSION PLANS, MAY REDUCE THE VALUE OF YOUR ESTATE AND COULD AFFECT YOUR ENTITLEMENT TO BENEFITS. TO UNDERSTAND THE FEATURES AND RISKS ASK FOR A PERSONALISED ILLUSTRATION. WE CHARGE A FEE OF 845 PAID AT COMPLETION AND WE RECEIVE COMMISSION FROM THE LENDER. 55+ EQUITY RELEASE IS THE TRADING NAME OF MORTGAGE SALAD LTD AND IS AUTHORISED AND REGULATED BY THE FINANCIAL SERVICES AUTHORITY. MORTGAGE SALAD IS REGISTERED IN ENGLAND AND WALES. COMPANY NUMBER