Equity release shrugs off poor reputation by Finance News Bulletin
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Published: 20/11/07
Equity release - where big homeowners unlock money from their property, often to boost a meagre retirement fund - has a bad namecensus: Equity-rich, cash-poor pensioners are increasingly cashing in on the value of their home If you are, what option are you most likely to takeBritish mortgage lenders desire us to remove our new home price crash calculator
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>> Mortgage ratesThe Financial Services power earlier this month levied its first fine against an evenhandedness release adviser for failing to monitor the advice it was giving to homeownersThe Minel collection in Newcastle upon Tyne was fined £10,500 It has been ordered to recompense customers and has agreed to stop selling mortgage-based equity let go schemesBut despite its poor reputation, equity let go is becoming increasingly popular and industry experts speak the quality of the deals is improving along with the advice
Those heading for retirement are warming to the thought fastest, according to Norwich Union, one of the biggest providers of evenhandedness release schemesIt polled more than 1,600 people aged between 50 and 56 and found one in ten would consider it in future However, those already retired are less enthusiastic with only one in 20 thinking evenhandedness release would be sensibleKey Retirement Solutions, the biggest independent consultant specialising in equity release, says demand is up 10% this year on 2006
The amount of equity being reserved by older homeowners is up by even more - 26% in 2007, captivating the total to above £1bn for this day More than 22,000 households have signed up since January, releasing an average £49,000 of equity compared with £42,100 in 2006Jayne Almond, boss of equity release corporation Stonehaven in Victoria, central London, says: 'The market nowadays is very different The paperwork given to customers before they symbol goes so much further
It really shows what they're receiving into'For many older homeowners, tapping into their property's worth is the only solution to money doubts Polly Healy, 60, from Sunbury-on-Thames, Surrey, spent decades abroad before recurring to the UK in 2001After her husband died in 2005, she was left with the half-finished renovation of a house they had bought fronting on to the Thames
With her income as a travel agent looking tenuous, Polly decided to let go equityPolly says: 'I was afraid of the monetary bits, but my neighbour sat in on one of the meetings' She chose Prudential, a family member newcomer to the market 'It told me how much I could draw down and I've taken about a third of an agreed maximum,' she says
The Pru system is called a lifetime mortgage and most deals labor on this code where money borrowed attracts interest, which is rolled up until the loan is cleared The interest is compounded, so even if the speed is low - Polly pays 65% - the total payable can mount This is why it is crucial not to release more equity than needed
'The mix interest rate is the nasty small piece,' Polly says 'The man from the Pru worked out that on average I'm probable to live another 27 years He then told me how much I'd be indebted, based on the interest rate, if I borrowed unreliable amounts over various times'Polly might withdraw more cash to assist son James, 25, buy his own flat
But in the meantime the cash she has taken is helping to come to an end the renovations and funding the launch of a small publishing business, listing festival activities for pupils in the area'I won't say I don't wish we had managed belongings differently and not had to do this, but I've explained it to James and he's well about it,' she says 'And most importantly, I appreciate it'• Do not consider an equity let go deal without first thinking of other cheaper, simpler ways of finding money, perhaps through downsizing, selling other possessions, or even pending to an informal arrangement with close family
• Do talk to relations, friends and, if possible, the executors and beneficiaries of your will before entering into a deal that might affect them• Do read as much as you can about different schemes and seek help from an self-governing adviser who is able to recommend deals from many companies, or look for information from at least two rival firms Invite a family member to be present at adviser meetings• Do consider a wide range of future scenarios, including how extended you might live, what would happen if you wanted care, and whether you would easily be able to move house
Financial Mail publishes a guide to equity release in association with consultant Key departure Solutions For a free copy, call 0800 085 5755 Charity Age Concern sells a book on the topic, called Using Your Home As Capital 2006/7, priced £699
Call 0870 442 2120choose a loan term 12 months (1 year) 24 months (2 existence 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 years) 120 months (10 years)Please select a kind of insurance Life insurance Home and inside Car Breakdown services Health - checkup Health - dental Travel Pet - dog Pet - cat GOThinking about investing in possessions This is Money has
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Equity release may be beneficial for asset rich, cash poor borrowers - Published:05/12/07
Bankruptcy is "becoming more and more palatable" to those in serious debt, according to Thomas CharlesThree-quarters of populace in the UK do not understand how a one per cent dissimilarity in mortgage tax would affect their loan, according to new researchMoneyExpertcom - Equity release may be beneficial for benefit rich, cash deprived borrowers - 10/04/2007Homeowners that are "asset rich but cash deprived" can benefit from utilising so-called equity release schemes, a structure society has advisedSuch schemes take the form of a secured loan against the proprietor's property and can in effect be a second mortgageA Norwich Union spokeswoman said that captivating part in an equity release scheme can have "considerable crash in allowing people to access cash they would be unlikely to get any other way"Sarah Horner additional that equity let go can also allow people who need money "to stay in their homes instead of having to slim down or move"And she explained: "People who've bought their house 20-25 years before, the amount of equity tied up in it is so much more than they would have paid for it - so that obviously does have an impact"In related information, it was revealed today by Halifax land Agents that the majority of house hunters are looking for a property "in shut proximity to the scenery"A quarter of respondents to the poll conducted by the body supposed this was a key criteria.
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Is equity release a good move? - Published:13/03/07
Betty and Ted Trowbridge love their house on the Isle of Wight The pair retired there 20 years ago after running a pub for many existence in Oxfordshire Now Betty, 74, and Ted, 83, are keen to carry out house improvements and improve their carThey also want to add a shower space downstairs in the event that either of them becomes less mobileThe couple's semi-detached home in Ryde is value £200,000 and builders say improvement work will price £20,000Three months ago, they started looking into evenhandedness release to fund the work and met with an adviser from Prudential's life mortgage divisionIt was important to the couple that they had a face-to-face meeting because they had plenty of questions about the implications of equity release, particularly as they have four grown-up children'We looked at a few options before contacting Pru,' says Betty 'I thought the lifetime mortgage alternative was the right one and meeting the adviser helped us approach to the right decision'Betty and Ted's adviser, Ed base, was with Pru's direct sales power until 1999 - it closed in 2001 - and rejoined the company to work in face-to-face recommendation for equity let go when the service launched in August last year He says business is thrivingBetty and Ted's £20,000 mortgage will come through in the next few weeks, so building work on their home can begin Interest on the loan, set at 669%, will roll up and will be added to their loan during their lifetimeThe amount anyone can borrow on a life mortgage relative to the home's value depends on their age There is nothing to pay now and Betty and Ted can wait in their home until they die if they wishThe loan and interest will be repaid out of their land when the home is sold, usually on the last death If this was in ten years, in Betty and Ted's container, the amount repaid would be £37,332 It would go up to about £51,000 in 15 yearsBut even if property prices drop or the couple live longer than expected, the amount owed can never be more than the property's value This is a obligation of all equity let go productsToday's 50 and 60-year-olds will have a combined £14 trillion in equity in their properties by 2020, says marketplace psychoanalyst DatamonitorClearly, the equity release market is set to grow But there are other choices obtainable and Peter Fisher at Help the Aged's independent equity let go advice service says homeowners should approach the decision with caution'meet as much information as possible and research your options,' says Fisher 'engage your children and think about what other savings you have'About half of homeowners who seek advice from Help the Aged finish up not going down the equity release route, opting for assist from their relations, downsizing or claiming benefits they did not realise they were entitled toJanet Davies of Warwick Butchart connections in Bidford-on-Avon, Warwickshire, which specialises in mind home funding, says: 'An independent financial adviser, ideally with qualifications in lasting care planning, together with advice from a solicitor, is the most excellent approach'Consumers require to understand the implications of their choice It will affect the legacy you leave your brood, it could impact on any condition benefits you claim and there could be penalty for long-term care funding if that is needed at some stage'The alternative to a lifetime mortgage is a home deterioration plan There are a number of providers of both life mortgages and home reversions, including Bristol and West, GE Life, input Retirement Solutions and Norwich UnionThe industry association Ship (Safe house Income Plans), which represents 95% of the market, has details of providers With a house reversion plan, owners sell all or part all of their home to a bank or insurance company in go back for a lump sum and the right to exist in the property for lifeThe sum salaried depends on the applicant's age and health, but is always less than the value of the proportion of the property in use by the finance company Reversions are less popular because they are not regulated by the Financial Services Authority, however, the FSA will begin overseeing the marketplace next month life mortgages have been regulated since October 2004Frank and Elizabeth Johnson took out a deterioration plan seven years ago with Home & assets, based in Bedford The couple who were both 71 at the time, were given a lump sum in return for a piece of the value of their three-bedroom house in Weston-super-Mare, Somerset They received independent financial and legal advice'We were looking to addition our retirement income as I only have a small confidential pension,' says forthright, who before retirement worked in motor accident repairs 'After talking to our three children, we decided the deterioration suited our needs We like the supple nature, which meant we could move house without a problem'Frank, a eager pigeon fancier, and Elizabeth have used the money to put in a new bathroom and repair the top - and to enjoy a few holidays Last day, the couple, both aged 76, exercised the right in their reversion plan to move home without penalty They now live in a novel property in Rainham, Kent, near their two daughtersDOWNSIZING: go out and Don Lawson chose in the direction of move in the direction of a cmaller propertySelling up and moving to a cheaper, smaller home is almost always the most cost-effective way to release equity because you realise the factual market value of your house A recent survey by specialist financial collection Saga revealed that 40% of retired people who found themselves hardup in retirement moved house to decrease their cost of livingOn average, downsizers release £112,000 of evenhandedness when moving down the ladder, says online estate manager propertyfindercom Sally Lawson, 69, and companion Don, 73, from Dorking, Surrey, sold their four-bedroom house, where they lived for 14 existence, for £320,000 in 2001 and bought a lesser cottage in Climping, West Sussex, for £250,000 Sally, a retired consultant and explanation manager for a cosmetics firm, says she and put on, who ran his own joinery commerce before retiring, needed to get at the money locked up in their homeThe couple, who have three grown-up children, were judgment the large property difficult to run 'We looked at equity release schemes, but we didn't think they represented high-quality value,' says Sally 'We didn't like the idea of charitable up part of our home to a bank or insurance company'Sadly, put on had a stroke in 2002 so the couple moved back to Dorking, where they live in a twobedroom Linden Homes flat with wheelchair right of entry 'I'm glad we downsized,' says Sally, who cares full time for put on 'It may have been complicated and expensive if we'd had an equity let go plan and needed to move'Contacts: Safe Home profits Plans, ship-ltdorg, 0870 241 6060; Financial armed forces Authority, wwwmoneymadeclearfsagovuk, IFA Promotion, unbiasedcouk, 0800 085 3250Select a loan term 12 months (1 day 24 months (2 years) 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 existence 120 months (10 years)Please select a type of cover Life cover Home and contents Car stop working services Health - medical Health - dental Travel Pet - afflict Pet - cat GOThinking about investing in possessions This is Money has the best information.
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Are you in endowment freefall? - Published:16/02/07
Endowment payouts are still falling even though store markets have soared for the past four existenceNumber crunching actuaries warn there is worse to come and payouts could carry on to fall for the next 15 yearsThe prediction will mean further misery for homeowners lumbered with these deteriorating stock market gambles which will not pay anything like the amount at first promisedEven former top-drawer companies are failing their investors Standard Life has exposed that a massive 95% of its 11m donation mortgage customers - that's 1,045,000 homebuyers - won't have enough cash in their policies to pay off their homeloansAnd of the 60,000 homebuyers with Standard existence policies that come to the end of their term this year, 48,000 face a deficit with an average £2,800 missingThose with 25-year mortgage endowments growing this year will see a payout of just £36,950 for investments of £50 a monthThis is 86% less than the £40,459 the beleagured with-profits fund salaried for a policy maturing a year earlier Just nine years ago, a alike policy would have matured at more than £107,000 The information is similarly awful at other, once well-regarded namesLast month Norwich Union revealed more than 670,000 of its 750,000 mortgage endowment savers are looking at shortfalls Curiously, its 25day mortgage endowments are paying out less this year than last - even though the fund the policies are invested in has full-grown by nearly 12%Policyholders with secretarial Medical, part of Halifax, have suffered the same destiny It announced last week that payouts on a alike policy were down more than £1,000 to £43,687Millions of homebuyers bought these inflexible investments plans without realising they were gambling their mortgages on the stock marketplace Salesman emphasised the plan should pay off their loan and give them a handsome amount on top In reality, they have failed to come up with the goodsWhat's worse is that there is no sign of an end to the shortfall misery shamefully, experts forecast that endowment payments will carry on falling for years A report from number crunchers at trade corpse Actuarial line of work says it expects payouts on 25-year policies to carry on lessening year on year - by around 3% a year - for the next 15 years The forecast assumes that money will grow by an average 6% a year after taxThe path will carry on downwards because investment returns are usually lower than in the Seventies and Eighties, and because some money have moved most of their money from shares to bonds Shares and property typically give a better go back than fixed-interest bonds over the long terminvestigate from Barclays Capital reveals UK shares grew by 69% a day on average over the history 20 years against 56% for fixed interest Last day, shares were up 114% while fixed interest dropped by 45%This is Money is crowded with news, advice and gear that can help you get ahead and save moneyStronger offices such as Prudential, Norwich Union and Legal & General should do better than the weak stopped up funds such as Scottish joint and NPI as they have more invested in shares But, as the figures out so far show, even the better companies have produced dreadful returnsIn the next couple of weeks Prudential and Legal & universal will reveal just how well - or poorly - they have invested your money Policyholders in closed money such as Sun Alliance, Royal, NPI, RSA, Alba Life, Scottish joint and Scottish Provident could wait until the finish of next monthHomeowners relying on these weak companies to produce reasonable returns should support themselves for bad news8 existence ago (when I was young and naive), I took out an endowment mortgage After now 18 months I was told it was probable to fall £6k short I took the choice to convert to a repayment mortgage and cashed in the policy, creation a loss of £600, but that's nothing compared to the amount I would have lost if I'd carried on2) If you've had the rule less than 5 years, consider responsibility what I did(swallowing the loss now still gives you occasion to make it up with better asset performance); or3) If you've had the policy for more than 5 years old, it is more complex but you should still weigh up the benefits of cashing it in and investing into a component trust or OEIC in an ideal world in an ISA if you haven't got one already)Obviously you should seek expert advice before doing anything - but the one thing you cannot do is nothingSelect a loan word 12 months (1 year) 24 months (2 years) 36 months (3 existence 48 months (4 existence 60 months (5 existence 72 months (6 existence 84 months (7 existence 96 months (8 existence 108 months (9 existence 120 months (10 years)Please select a type of insurance existence insurance Home and contents automobile Breakdown services Health - medical Health - dental.
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