Category Archives: Equity Release
Using an Equity Loan to Purchase Your First Home
Buying a home and getting on the property ladder is one of the biggest goals that many in the UK have. It’s not just something that’s limited to the UK, either — you might find that your neighbors across the pond in Canada as well as the US will definitely share your dream of owning a home. No matter where you live, it can feel like it’s downright impossible to buy your first home. Property values on the rise again, and tough credit conditions make it hard for “regular people” to find themselves in their first home. However, does that mean that we all just stop trying to make life better for ourselves? Not at all. You will definitely want to make sure that you focus on getting the loan that you need to get the home no matter what. It’s going to be the key to long term investing in your life.
Yes, renting is something that a lot of people do for a very long time, and you will probably need some time to work up a deposit. But what if you already have a deposit and you still don’t have enough to really get the home that you want?
There might be some help with you after all. The government has done a scheme where you can buy a home using an equity loan.
You can use FirstBuy or HomeBuy Direct to purchase a new-build home. The way it works can sound a little complicated at first, but don’t worry — it gets easier over time!
There are some restrictions that you need to make sure that you can follow below you apply for the program.
As mentioned earlier, these equity loans are only for certain newly built homes on specified housing developments in England. They are provided through HomeBuy agents — they hold the right to decide if you can buy a home this way. These housing associations can run schemes for people who have a tough time buying a home.
There is an income restriction — your household has to earn 60,000 GBP or less. In addition, you will have to prove that you cannot afford to buy a home in your area any other way. This is so that people that need help the most will be able to get their needs met.
These loans are going to be open mostly towards first-time buyers as well as anyone that rents a council or housing association property.
The basic scheme here is that you buy the home with 70% of the cost met by your mortgage and the savings that you’ve built up over time. The other 30 per cent is handled by the govenrment and the house builder through an equity loan.
Now, it’s important to understand the finer print here. The loan is called an equity loan for a reason — the value is going to change based on how much your home is worth. The amount you owe is going to rise and fall with the value of your home. The title will still be in your home, which means that you can sell your home at any time.
What happens when the home is sold? That’s a good question — the 30% that’s held by the government is going to be taken out of the proceeds of the house sale.
If you decide to keep the home, you will need to pay back the equity loan after 25 years.
There are indeed some fees involved with this scheme. There are no fees assessed for five years — this gives you time to save up for them. The 6th year that you have the loan you will be charged a fee of 1.75% of the loan’s value. Every year after this, the fee is going to go up. The amount of increase is calculated using the Retail Price Index plus 1 percent. You can find the RPI index in most newspapers, within the finance section.
Keep in mind that these fees are on top of your equity loan payments. You can pay them to the National HomeBuy agent, and they will contact you before the fees begin to set up monthly payments with your bank.
If you want to pay the equity loan back early, this would definitely be a good thing. It’s known as staircasing, and many homeowners use it when they realize that they can pay a little extra and have the interest costs kept to a minimum.
You still have to talk to the National HomeBuy agent and figure out if there are nay additional costs for this.
Overall, we think that this govenrment scheme for first-time buyers and those with a low to moderate income is a good fit. Everyone should feel like they have the chance to own a home, and this scheme could be just what you’re looking for! Check it out for yourself today — you’ll truly be glad that you did!
A New Look At The Best Equity Release Schemes
Trying to make your retirement a little sweeter is the subject of a lot of guides, and for good reason. If you’ve worked hard all of your life the last thing that you honestly want to do is find that you really can’t provide for yourself after working so hard for so many years. There is something to be said about going beyond just living — you want to thrive and you want to be able to have a good time. It’s going to be up to you to look through any and all resources that you can use for this purpose. We really like equity release schemes, but we find that people really don’t know as much about these schemes as they would like to believe.
So this guide covers much of the high points of these schemes.
Overview
One of the first things that you need to know is that all equity release plans are going to reduce the overall value of your estate. So your surviving heirs will not receive as much for an inheritance as they might have — but if you already let your family members know upfront what you’re doing, they can actually plan ahead and still take care of themselves. These are pretty serious decisions that you should honestly make as a family rather than just assuming you must keep it a secret.
If you are entitled to state benefits, you will need to make sure that the equity release doesn’t affect this at all. This is something that you’re going to be doing for a lifetime, which means that there are some penalties for paying the loan back in full.
If you move into a long term care facility, you will have to repay the loan at this time. It can be done through the sale of your home, but it’s up to you.
The good part of equity release schemes is that you really don’t have to leave your home if that’s not what you want to honestly do. It can be better to stay in the home that you bought all of those years ago and tap into the equity than to have to move around. You get to keep your home, and there are no monthly repayments to meet.
You get to still use the savings or investments you already have.
Make sure that you go with plans that are SHIP approved — this stands for Safe Home income Plans. This guarantees that you don’t fall into negative equity and you can move home if you wish. If you want to stay in your home for life, you can do this as well.
The two top types of equity release out there are lifetime mortgages and home reversion plans.
The lifetime mortgage is definitely the most popular, because it allows you to receive a tax-free cash lump sum, and there’s no monthly payment schedule to have to deal with. You get to truly stay in your home for life — this is not a gimmick of any kind.
If you want to move and take the plan with you, you can generally do this. You may even be able to protect a percentage of your property and guarantee an inheritance.
Home reversion plans are a little more complicated, as they let you sell all or a part of your home to another company in exchange for a cash lump sum of income. You can still stay in your home for life, but the plan comes to an end when the company takes its percentage share of the property. This is usually when you pass away, but it can also be when you move into long term care.
What if your circumstances change? This is something that’s definitely on everyone’s minds. If you actually do need to switch plans because something has come up, you can definitely do this as well.
A qualified adviser can go over your unique situation and give you what you really need to know in greater detail than any guide can. Keep in mind that you will need to be at least 55 years old in order to enjoy any equity release scheme. Your home also needs to be 50,000 GBP or more.
Equity Release – A UK Scheme That Could Leave You In a Great Financial Position for 2012
As you get older, the time comes to make more decisions that are all designed to give you the best quality of life possible. You don’t want to find yourself unable to make these decisions, because they directly affect the quality of life that you’re going to enjoy. If you’ve worked hard your whole life to enjoy a home, then you’re going to need to start thinking about trying to figure out an option that’s going to allow you to enjoy your home to the fullest.
Many homeowners in the UK have worked hard to actually pay off their mortgages. Yet they’re left with a problem — they still owe bills. They still have things that need to be taken care of. This means that you will need to still need to make sure that your expenses are covered.
Equity release is a great way to make sure that you can not only release equity from your home and take care of expenses and other things that you actually want to do.
Trying to figure out the equity relapse market can take some getting used to. There’s a few different ways to make everything come together.
The two main types of equity release schemes available in the market are the lifetime mortgage and the home reversion plan. The lifetime mortgage involves taking out a brand new loan secured on your property, while the home reversion plan involves selling a share of ownership in the property.
The right plan depends on what you’re actually trying to achieve. You need to figure out how much money you can raise through either scheme, what will be left for your heirs, and what impact that dying earlier or living longer than expected can have. You will also need to think about the impact of inflation on your circumstances, which would include your income and the value of your property.
Many homeowners in the UK go with the lifetime mortgage option, because it allows them to often get a lot more money than the home reversion option.
Lifetime mortgages are straightforward. As mentioned before, you will be taking out a new loan secured on your property. You don’t have to make any repayments while you are alive. Instead, the interest is rolled up to be paid when the scheme is ended — if you pass away or move into long-term care, your house is sold and the amount that’s borrowed (including interest) is paid to the lender. After the costs, anything left over is passed to the estate at large.
You can check into lifetime mortgages with confidence, considering that they are regulated by the Financial Services Authority.
The top advantages of a lifetime mortgage is that you get a lump sum or a monthly income for the rest of your life. This money is secured as a mortgage against the property. You need to pay nothing while you live at the property.
These loans are often fixed-interest, so there’s no worry that your costs are going to drive up. Unlike in the US, the UK equity release scheme can be available to people as young as 55. There are also staged payment options available as well.
However, there are some cons that you will need to think about. For starters, the interest can mount up very fast, and it will reduce what your family will inherit. Your family could easily end up with nothing from the sale proceeds. So if providing for your family after you pass away is important, you will need to make sure that you have this taken care of.
You will not be able to get a top-up loan later in most circumstances. Less money is available than what you would receive with a home reversion plan, but this is not always the case.
You will also need to make sure that your tax position as well as benefits that you receive from the state are not affected. Talk to an independent specialist that only deals with equity release. They will explain it all to you with more specific information — this is just general financial advice.
Now is definitely the time to start thinking about an equity release scheme. If 2011 wasn’t the year that you expected or wanted, you have a fresh New Year to begin making all of the right moves — check it out for yourself!
Will Equity Release Mean I Lose My Home?
Many people worry that if they take some of the collateral out of their home, then it means that they will eventually lose their house. There have been scare stories in the past, when this has happened, but these days it is not often the case. There have been tales where people have been forced to leave their homes as they have to be sold to pay back the loan. Normally this does not happen because the terms are normally that the house will only be sold when the person has finished with it, which normally means that they have passed away.
The key thing with this sort of scheme, is to make sure that you fully understand the terms and conditions. You need to be completely aware of what you are getting yourself in to and what will happen in the future as well.
What normally happens is that you will be given a lump sum of money or a regular monthly income. This value will be taken away from your property. When you no longer need the property, it will be sold and the company will get the money.
This can be a worry for some people, because they want to be able to feel that they can pass the property on to their children. In some cases the property will be sold and not all of the value will be taken by the lender but whatever is left over will go to the estate of the deceased.
It is important therefore, to make sure that a sensible choice is made when choosing an equity release scheme. It is worth thinking hard about why you need the money and how much you need, to ensure that you are making the right decision. You also want to make sure that it really is the right thing to do. Think about whether it will improve the quality of your life and what a difference the money will make to you and what a difference reducing your estate when you pass away will do. It can be a very difficult decision. It should not be something that you rush in to, so it can be worth investigating before you have a need to do it.
Then, if you are suddenly desperate for money in the future, you will not have to spend so much time doing research and you are less likely to make an error when making your decision.
Is Equity Release Safe?
When equity release first came about, there was a lot of talk of it being a con. Many people felt that they were not treated well when they tried to get money from their property and they were worried that they may not be able to continue living there after a certain period of time. Sadly this gave the whole scheme a bad reputation.
Things have changed now and equity release schemes are regulated. This means that everything is overlooked and so should be fairer. However, there are still better schemes than others and so you need to be responsible and make sure that you choose the right one for you.
You need to think about what you want and how much money you need, then look at what is available. Look at how the different lenders work and then when you have found a few that you think will suit you, make sure that you read the terms and conditions very carefully, so that you know exactly what you will need to expect.
You will find that they will differ in how much they lend, how they charge for the loan and things like that. It is therefore important to look carefully at a broad range of options, so that you know what is the best option for you. You should find that the options are safe, but it really depends on how you define safe. You need to think about what you want from the scheme and which fits in with this. You will have to be prepared to make some sacrifices to get the money, in the same way that people always do when they get a loan and so you will need to decide whether you feel it is worth it.
It is also worth carefully choosing the company that you use as this will allow you to feel safer. If you use someone with a good reputation or that you have heard of, then you will feel better about using them, than if it is a company that you have not heard of and therefore have little trust in. Many companies do now have their own equity release schemes and so there is a high chance that you will find one who you have heard of or already trust. However, it is still wise to do some research in to the company and their equity release schemes to make sure that you are fully happy with them.
Will Equity Release Programs Really Last In a Troubled Economy?
The rise of a troubled economy is never a good sign, but the good news is that some things really don’t change. In fact, many of the resources and guides that we’ve published have been in direct response to the wobbly economy and the cooling off of credit markets. These are points that everyone needs to pay attention to, whether they’re ready to retire or not. It can be tricky to retirement when everything is shaky, but there are ways to get back on your feet and keep fighting for a better future.
The first thing that you really need to think about here is the equity release scheme. In a troubled economy, you don’t want to have to worry about where you live at all. If you have worked hard all of your life to be able to afford the house, you really don’t want to find yourself being unable to actually get things done. You may have a good family that you can rely on, but who wants to burden them? No, when you get older you want to be as independent as possible so that you don’t put any more stress or pressure on your family.
So the question remains: will equity release programs really last in a troubled economy? We think so, for a few reasons:
Equity release schemes work. They just do — if you have worked hard all of your life and paid down your mortgage, you’re going to find yourself being able to really take advantage of a lot of built up equity. Why not release it so that you can take care of yourself? You’re going to get a lump sum payment that you can use for anything and everything that you want. There’s no need to worry about where you’re going to be able to go to take care of yourself. You won’t have to leave your home. The rising cost of living means that it’s getting harder and harder to actually live anywhere. So if you are worried about actually being able to take care of your needs, you can rest easy now.
We’re talking mainly about the lifetime mortgage option for equity release, which is very popular. You will be able to stay in your home, have a lump sum of cash, and do all of the things that you want to do.
Proper financial management is still the key to making equity release work, because you really don’t want to try to go into deeper debts. In addition, if you don’t release all of the equity in your home, you may still be eligible for other types of loans. However, only the equity release scheme lets you skip the monthly payments. If you went with a regular equity loan, you would still have a monthly payment to deal with. Lowering your bills as you get older just makes sense — especially when it’s combined it with other savings and investments that you might have!
Reasons for Releasing Equity in Your Home
When you are young, it is easy to think that owning a home is a fantastic investment for the future. Paying money so that you won your home can feel really satisfying but when you get older you may not feel the same way. It can be great living rent free, but you will have a lot of money maybe tens or even hundreds of thousands tied up in a property. You may want to continue living there, but want some of the money and this is where equity release comes in.
There are lots of reasons why we may need some extra money when we are older. We may need it because we want to have a nice holiday, buy some new things or even give it to our family. Some people like the idea of passing their inheritance on to their children early, but they can only do this by releasing some equity in their home. It may even be that you just want to have some money in the bank so that you have something to fall back on if necessary, but you do not want to sell your house and downsize as you are happy, have good memories and are in a good location.
Another reason why someone might need to do this, is if they have not made a good enough pension provision. The cost of living has gone up more than anyone predicted and it could be that the pension is just not enough to cover it. However, once retired, it can be difficult to find a way of bringing in more income and equity release could be the answer.
Some people also feel that their money is wasted tied up in their property as they would much rather be able to use the money. They do not mind that it will mean there is no property to pass on to someone after they no longer need it, they might rather be able to use the money themselves. It may even be that they have no dependents and so have no one to pass it on to.
So there could be all sorts of reasons why someone might decide to release equity in their home. It is something which is a fairly new idea and it is likely that more and more people will be doing it as the idea gets more widely excepted and people has less good pension provision.
Interest Only Equity Release Mortgages
There are many different ways to raise some money in retirement from releasing equity in your home. An interest only equity release mortgage is becoming a popular option for those people who have a good retirement income but need a lump sum of money.
In this scheme you will be able to borrow a lump sum of money in the same way that you would with a mortgage. You will then be charged interest each month. You will pay back the interest owed. Then when you no longer need the house and you decide to sell it, the lump sum will be paid back before the rest of the equity is paid to those inheriting money.
This option is really good if you want to get a lump sum of money. You may need this to pay for a holiday, repairs on your house or perhaps to give away to children or grand children that are in need of help. It can be frustrating knowing that you have capital tied up that you cannot get hold of and so this is a great way to release it.
The advantage of doing it this way is that there will be no costs to be paid after you die. You will have paid the interest on the mortgage and so when the house sells, there will be no additional fees, just the lump sum to pay back.
Another advantage is that you can use any type of mortgage rather than just looking at equity release ones. You do not need to be so limited in your choice and that means that you are more likely to get a better deal, something that is more competitive. You will also have the option of being able to borrow more in the future or even going for a reversion scheme.
This can be a more satisfactory and flexible approach for those with a decent retirement income. However, it is important to make sure that the interest will always be affordable. At the moment interest rates are low and so it can seem that it is a great thing to do. However, imagine how you might cope when they start to rise. They have been as high as 15% in the past and are only 0.5% at the moment and so the interest only payment could significantly increase in the future. Make sure that you will still be able to afford the payments if this does happen.
Fixed Interest Rate Interest Only Equity Mortgage
At the moment, with interest rates low, fixed interest mortgages can seem expensive. You so have to be a bit of a fortune teller to work out what interest rates might do in the future as well. However, there are advantages to a fixed rate mortgage.
Many people like the stability of having a fixed rate. They are able to work out exactly what they will be paying each month. For an equity release mortgage, this can be really important. This is because you will be having a fixed pension income in each month which you will be using to pay the interest on the mortgage. If this mortgage interest goes up too high, you may find that you cannot afford to pay it any more. This would not be a good situation to be in.
With a traditional mortgage, a variable rate suits many people because their salaries will increase when interest rates go up and so they will have more money to pay for the interest. However, pensions do not always increase in line with inflation and so if the interest rates go up, you will still have the same fixed income to pay from. Therefore having a fixed rate mortgage could be very helpful.
It could give you a great peace of mind as well, knowing that you will not have to pay a different amount of interest on your mortgage. However, like mainstream mortgages, the fixed rate period may not last for the whole term of the mortgage. This means that eventually you may have to go on to a variable rate.
It is also worth noting that you can fix the period of the loan as well. You can decide to repay it within a certain period in the same way you would with a normal mortgage. If you have a significant pension income, you could be able to save up enough to repay it or you may be using the money to help out children who might pay you back before the term is up.
The type of mortgage you go for is obviously something you need to think about really hard. Think about the pros and cons of each type and then predict what might suit you the best. Consider the income that you will be getting during retirement and whether it will be enough to afford the interest that you will be charged.
