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2 Responsible Guide To Equity Release How to release equity (and release it intelligently) Around 2m people over the age of 50 will rely on their property, not a pension, to pay for their retirement - Beck Barrow, Daily Mail, September 2011 Equity release has come a long way since regulation in 2004, as the UK s 55 plus population looks to safely take advantage of their biggest asset to fund their ambitions. We set up Responsible to work with the growing number of people who want to use equity release as a sensible, responsible way to improve their lifestyle. Lifelong aspirations, debt-riddance, income top-ups or family matters may be the reason you have enquired about equity release. Now it is time to see if equity release is the right way to achieve your aims. This guide is designed to simplify equity release and debunk the myths. All without taking away any of the detail and information that will help you make your decision. We ll also bring our new money-saving features to life using examples based on industry facts. We like you to ask the right questions of us. The more you know, the better we can play our part. We hope you ll find this guide to be open, honest and genuine. Contents What is equity release? Types of equity release. How can equity release help me? Points to consider. Equity release examples. Why should I choose Responsible? If you d like to release equity, we d like to be the ones to help you along your way. Throughout this guide, we hope you ll see why so many people look to use their property and why you might want to work with an organisation like Responsible. 1 Equity Release may involve a lifetime mortgage or home reversion plan. To understand the features and risks ask for a personalised illustration. CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN ANY DOUBT, SEEK INDEPENDENT ADVICE. Responsible Life Limited trading as Responsible Equity Release is an appointed representative of HL Partnership Limited which is authorised and regulated by the Financial Conduct Authority. The FCA registration number is

3 What is equity release? Equity Release gave me the money to nip away in the weekends when the weather is nice. I don t always go to the golf course, I promise! Equity release lenders now give homeowners aged 55+ the option to turn the equity built up in their property into tax-free cash without selling up or downsizing. You continue to own the property 100%, keep the deeds in your name and have the right to remain in your property for life. Equity in your home is the difference between the home s fair market value and the outstanding balance of all mortgages, secured loans and charges on the property. Usually, to access your equity you would need to sell your property or remortgage with straining monthly repayment commitments. However, equity release is a product designed to meet the needs of assetrich homeowners who don t want to move. It s popular because it makes sense. The equity release lenders like to invest in reliable, long-term UK property whilst those releasing equity benefit from gaining access to money that would have otherwise been tied up for life. The money you receive is yours to spend as you please and as the equity is already yours, it is completely tax-free. You can also choose how you would like to receive the money - whether it be a cash lump sum, an account to draw upon as and when required, or a mixture of the two. Examples of equity Peter buys a house for 200,000. Peter personally pays 100,000 and borrows 100,000 in the form of a mortgage. The value of the home has increased to 300,000 over the years and Peter has paid off all but 20,000. Peter has 280,000 equity. Peter can access a percentage of this through equity release. The Equity Release Council, formerly known as SHIP, is an organisation dedicated to the protection of the equity release consumer through a code of conduct which goes over and above Financial Conduct Authority Regulations. We only ever recommend Equity Release plans that adhere to strict Equity Release Council standards. Only those who hold the required qualifications are allowed to advise and arrange an Equity Release Council plan. Equity Release Council plans carry, amongst other things, the right to transfer the plan to a new property, the no-negative equity guarantee - you will never owe more than the value of your home - and the right to remain in your property for life. 2 This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

4 Types of equity release Holidays were a rarity - even though I had lots of free time. Equity Release cleared my existing mortgage and I use the cash reserve to pay for trips to Malta! There are three main types of Equity Release that Responsible recommend. We do not advise on home reversion plans. We only advise on Lifetime Mortgages where you retain ownership. You ve worked hard for your property, we want you to keep it. 1) Roll-Up Lifetime Mortgage 2) Drawdown Lifetime Mortgage 3) Interest Only Lifetime Mortgage You receive a cash lump-sum and maintain 100% home ownership. There are no monthly repayments to make. Interest will accrue on the amount of cash you choose to release. The interest and lump-sum amount will be paid off when the last home owner on the deeds dies or moves into permanent long term care. Your estate will usually settle the amount owed from the sale of the property. Most lenders allow up to 12 months for the estate to sell the property without interference. If your family would like to keep the property instead, they are welcome to pay the balance from other means. Works the same as a Roll Up Lifetime Mortgage except you can choose to release the money flexibly, as and when you need it. You can choose to have money in a reserve account, ready to drawdown. Interest will not accrue on the money held in reserve until you have released it. Allows you to reduce the interest charged and have the safety of a cash reserve, ready to draw upon when needed. As with the Roll-up and Drawdown Lifetime Mortgages, you receive a cash lump-sum and maintain 100% home ownership. Unlike the others, though, you can choose to pay the interest on a monthly basis. In fact, you can choose to pay anything from 25 per month up to the full amount of interest due. Any interest you do not pay will accrue as with the Roll-up Lifetime Mortgage. You can decide how long you want to pay interest for (for example, 1 year, 5 years or even up to the lifetime of the loan). If you decide you don t want to make monthly payments any more, you can stop and the plan will change to a regular Roll Up Lifetime Mortgage. 3 CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN ANY DOUBT, SEEK INDEPENDENT ADVICE.

5 How can equity release help? All three generations of my family benefited from my decision. I helped my son s family buy their 1st home and have plenty left to visit them more often. Retirement can be a time of limited income and many people have valuable properties but little cash Equity Release can provide tax-free cash to help alleviate this problem. 1. You may want to use the money to take that holiday you ve always dreamed of, perhaps visiting family that you haven t seen for years. 2. You may want to buy a new, more reliable car to help you get around. 3. You may want to use the money you release to make up the shortfall that retirement sometimes creates. 4. You may want to consider releasing equity to help make home improvements, such as putting up a conservatory, landscaping the garden, installing a more modern kitchen or extending the home to accommodate more frequent family visits. 5. Equity Release can be used to pay off your mortgage or credit card bills - meaning you can reduce your monthly outgoings and free up cash for more rewarding expenditure. 6. Like more and more people you may want to release equity to help support your family, children or grandchildren as and when they need the help instead of the more traditional route of waiting to leave an inheritance. The advantage to this is that you can see and enjoy the help you have provided. 7. You may want to use Equity Release as a tool in a more comprehensive inheritance tax strategy. At Responsible, we can put you in touch with qualified advisers who can help plan to reduce inheritance tax. * 4

6 Points to consider It s nice to see their inheritance in action. Because of equity release, my granddaughters don t want for anything when it comes to education. Points To Consider Releasing equity from your home could affect your entitlement to means tested state benefits. An adviser will be able to explain exactly what this means to you personally and can then provide Responsible advice accordingly. A Drawdown Lifetime Mortgage can often be used to ensure you don t jeopardise your benefits. If you invest the money you release then your tax position could be affected and the investment return may be less than the interest charged on the equity released. Releasing equity will reduce the value of your estate over time. All plans recommended by Responsible do come with a No Negative Equity Guarantee ensuring you will never owe more than the value of your home. Some plans allow you to guarantee an inheritance to protect your estate. see page 8 for a Protected Equity Guarantee example. It s important to remember that Equity Release does not usually come with monthly payments, meaning you can t face repossession for missing payments. Even with the interest-only plan, if you do miss payments, or it is no longer affordable, it will convert to a Roll-up Lifetime Mortgage. A Step-By-Step Guide To Getting Sound Advice When you look for advice on equity release, make sure you: 1. Request advice covering plans from all of the lifetime mortgage lenders 2. Place more weight on advice with the safety net of a second opinion 3. Go for advice with no fees to pay unless and until you complete 4. Expect free, no obligation home visits to discuss your circumstances 5. Request a free suitability report outlining the best course of action 6. Get advice that respects the alternatives to equity release 7. Ask for a clear explanation of added features that can save you money 8. Choose a specialist who has access to preferential deals from lenders and arranges enough equity release plans to give them expert status 5

7 Equity release examples My car was getting on a bit and had a difficult clutch. Equity Release helped me buy a new runaround that s a lot less thirsty on the petrol and a real treat to drive. Roll Up Lifetime Mortgage Example: Sally was aged 55, her husband John was 62. Sally and John s house was worth 200,000. They borrowed 25,000 to pay off bills and buy a car. They received an interest rate of 6.7% APR. The interest rate was fixed for life and the interest added to the loan each year. Sally outlived her husband but died 20 years after taking out the equity release plan. Their house has increased in value at a yearly rate of 2.85% (only half the average yearly house price growth for the years ). Their house is now worth 350,846. They made no monthly repayments during their lifetime and so the interest has rolled up. It is time to pay back the Equity Release and the loan now stands at 89,433. Once the house is sold and the Equity Release loan is paid back, Sally and John s estate receives 261,413 from their property with which to service Sally and John s will. 6 * Please note that this is only an example using half the previous years actual growth as a comparison and the value of your house could go down or not increase at the same rate as it previously had. Responsible only recommend plans that guarantee you will never owe more than the value of your home. The source for the historic growth figures is the Nationwide House Price Index at 5.7%.

8 Equity release examples I felt such a great relief when I finally cleared my mortgage and credit cards! Debt payments are no more and I now look forward to the post! Drawdown Lifetime Mortgage Example: Michael was aged 71, his wife Mary was 69. Michael and Mary s house was worth 400,000. They borrowed an initial release of 40,000 to gift to family using Equity Release and reserved 20,000 in a drawdown facility to help with monthly bills. They received an interest rate of 6.7% APR. After 5 years, they drew 5000 from their drawdown reserve and when Michael died 10 years after taking the plan out, Mary drew 15,000. Mary remained in the house until she passed away 15 years after taking out the plan. Their house has increased in value at a yearly rate of 2.85% (only half the average yearly house price growth for the years ). Their house is now worth 609,711. They made no monthly repayments during their lifetime. The interest only accrued on the money after it was actually drawn. Had the couple taken the 60,000 all at once, the total loan plus interest would have been 156,069, leaving 453,642 to their estate. It is time to pay back the Equity Release provider and the loan now stands at 134,124, leaving 475,587 to their estate. 7 * Please note that this is only an example using half the previous years actual growth as a comparison and the value of your house could go down or not increase at the same rate as it previously had. Responsible only recommend plans that guarantee you will never owe more than the value of your home. The source for the historic growth figures is the Nationwide House Price Index at 5.7%.

9 Equity release examples I hadn t quite retired and still had an income but banks didn t want to loan me money because of my age. I chose an interest-only plan and expect to release more and stop paying the interest when I retire. Protected Equity Guarantee Example: James was a 62 year old widower. James house was worth 300,000. James released 30,000 from his property at a rate of 6.7% APR and chose the protected equity plan where he ringfenced 50% of his property from any effects of the equity release plan. The house had decreased in value at yearly rate of 0.1% and James died 25 years later and the house was worth 233,346. Despite falling house prices, as James had opted to protect his equity, he only owed 50% of the property which worked out at 116,673. Had he not protected equity James would have owed 147,575 and left 85,771 to his estate. James was able to release 30,000 when he needed it, remain in his property for life and still leave 50% of the property ( 116,673) to his loved ones. 8

10 Why choose Responsible? I wanted to pay my debts and then create a little area of my garden that looked pretty and could be enjoyed in all seasons. I did just that, thanks a million. Responsible assure you that no matter what, you can expect the following from us: You will have the safety net of advice signed off by two advisers. Your personal financial circumstances will be taken into account and plans will be recommended accordingly. We will give you access to our exclusive deals from providers as and when they arise. We offer plans from the whole of the marketplace. We work for you and you only. You will have the choice of face-to-face or telephone advice. We only charge fees for our advice if you go through with our recommendations. Your enquiry will be dealt with promptly and courteously. When desired, we will offer plans that guarantee an inheritance. 9 Your initial contact will ensure that all your questions are answered and that all advice provided will be by appropriately qualified Equity Release specialists. Plans will be laid out clearly with respect shown to all alternatives. Whether you choose face-to-face or telephone advice, we provide free consultations to discuss your needs, priorities and preferences. Only if you choose to go ahead with a plan do we charge a fee. RESPONSIBLE Advice Assurance

11 Why choose Responsible? Knowing we have the cash from Equity Release there for us in a reserve, we now feel free to enjoy the retirement we have worked hard for! Now that you ve read our informational guide, would you like a more personalised service? If the answer is yes, we d like to discuss with you the features and savings of the different plans that we have extensively sourced and negotiated on your behalf from the whole of the marketplace. You ll be in the comfort of your home, explaining to a relaxed, mature, qualified adviser what you would like to achieve. Unlike our competitors, we will bring personalised quotes on the first visit so your priorities, goals and ambitions can be matched with sound, detailed advice on how you can achieve them. We only ever charge for all of this should you complete a plan and we don t expect payment until you receive your money. If you decide it s not right for you, we won t charge you a thing for our time. It s an industry we re proud of and we want you to know all about it. For your peace of mind in what is an important decision, we go further than our competitors. All advice we provide benefits from a second opinion from another one of our expert advisers. They will be sent the facts to look through, discuss the proposed solution and sign off the advice. That way, you get twice the experience at the same cost and without any time or cost requirements to see more than one person. Our knowledgeable, qualified specialists offer expert advice you can trust, they answer your most probing questions about future downsizing or care plans, the impact on inheritance, taxation and state benefits. Steven Wilkie Managing Director Arrange a date for a visit: Read up some more: Ask a question: questions@responsible.org.uk 10 You ll then be free to make the right decision based on high quality advice and lots of clear information. If you decide to proceed, you can arrange another free visit to help you with the paperwork. Speak to our advisers:

12 A final thought from a couple of customers Responsible Equity Release have changed my life dramatically. As is common with those my age, I had a fixed income and it wasn t enough. I considered moving to a cheaper home but loved the home I was in. Responsible gave me the chance to stay in my home, own it 100% and still have enough money to do the things in retirement that I have worked hard to do. The way they relayed information was a 10/10 and I d recommend them to anybody. As I sat in my garden yesterday, 0800 I am ever so 012 glad I went 4180 through with equity release. I paid off what remained of my mortgage, fixed up my living room and had a or helping visit hand come in to turn my garden into a manageable state of affairs! All I wanted was to be able to relax at home and not worry how the next bill was going to be paid. I can do all those things now...and more. My Peruvian Lilies have just started to bloom and life is good! Mrs. Briggs Mr. Stratford Why not see how Responsible can help make your retirement more comfortable? Arrange a home visit : Visit our website : Ask a question : questions@responsible.org.uk Write to us : Responsible Equity Release Responsible Life Unit 11, 4 Mills Bakery Royal William Yard Plymouth Devon PL1 3GE