Call Us 01632 960585

Lucky Enterprise Link Property

What is an Interest Only Mortgage?

With the recent furor from the FCA (Financial Conduct Authority) regarding the sale and uptake of interest only mortgages, we take a look at how these controversial interest-only mortgages work. The interest only mortgage is not for everyone, so the information you learn about this particular product is imperative to your decision making process.

Firstly, interest only mortgages operate by requiring a monthly payment to be made to the mortgage lender. This payment made pays off the interest that the lender is charging on a monthly basis.

This differs from a conventional repayment mortgage which pays off both capital and interest, and which results in the mortgage balance reducing over the term. Therefore, this capital and repayment mortgage will guarantee the eventual repayment of the mortgage at a pre-determined date in the future.

An interest only mortgage has no capital repayment element and as such the balance on the mortgage will remain the same for the duration of the term. Therefore, to ensure eventual repayment a separate savings plan can be set up where regular payments are made and investment growth occurs. This provides a mortgage which establishes a long term repayment strategy.

The normal investment plans that are required to pay off an interest only mortgage are usually one of three vehicles. This could be equity ISA (Individual Savings Plan), less commonly a pension plan or a low cost endowment. These products are taken out separately and are the responsibility of the mortgagor to ensure they are on track to pay off the capital amount at the end of the term.

This is where problems have arisen over the years, particularly with endowment policies that have failed to meet expectations.

So, is the risk worth it?
Judging by the majority of plans now maturing and people scrambling for alternative means of making up shortfalls, the answer is probably no.

Endowment policy holders with the fortune of hindsight may have already changed to a repayment mortgage upon receipt of the endowment projections with the red warnings. At least time was on their side and action could then be taken to address any potential shortfall.

But, this wasn’t the only reason the FCA has clamped down on interest only mortgages. These mortgages were becoming increasingly popular with first time buyers who were struggling initially to afford the monthly mortgage payments. The danger of this is the temptation for first time buyers to either not set up a repayment vehicle or never switching over to a repayment basis when finances ease.

Pros and Cons of Interest only mortgages
Advantages
• Greater control over the savings element, how it is invested and managed
• Option of which investment vehicle can be used and the ability to maximise tax free growth
Managed correctly the investment growth rate could exceed expectations; therefore, you may be able to pay off the mortgage earlier. Alternatively, on maturity if the policy has over performed then the lump sum paid out at the end of the repayment period could be greater than the mortgage balance. This savings excess then can be put to further use which can normally assist their retirement plans.

Disadvantages
• There is no guarantee that there will be sufficient funds on maturity to pay off the interest only mortgage balance at the end of the repayment period. This could be due to under performance or insufficient payments being made during the investment period.
• The mortgage debt remains constant during the term
• Some investments such as endowments cannot be stopped and restarted, and others may incur a penalty or fee if premiums cease.

As you can see there are disadvantages of interest only mortgage products. Given that you usually have a term of 10 to 15 years for the repayment there is a definite need to roll-over the remaining mortgage into a traditional mortgage before the term comes to an end.

There is one interest only product on the market that is slightly different than those offered to first-time homebuyers.
This is the interest only lifetime mortgage. It is for retirement aged individuals 55 and up. It is set up to provide you with cash throughout your retirement, where you have a disposable income, and may not pay the loan off until you die. If you have reached an age of retirement you may want to ask your financial adviser about the differences in this type of loan.

Whether you choose interest only mortgage in your young age or as a retiree you should speak with your family about it.

For further details on Interest Only Mortgages visit EquityReleaseAdvice.com.

Finding the Best Home Reversion Schemes for You

A home reversion scheme is where you are able to sell your house or part of it to a home reversion provider and in doing so you are able to release equity that would otherwise be tied up in your home. You can choose to either receive this equity in one large sum or to have it released monthly as a regular income. You are able to agree to a set amount of how much you will receive each month. There are certain advantages and disadvantages of these home reversion schemes, which is why you need to find the best plan for you.

You can also select to have a blend of both of these where you can receive an initial lump sum and then the rest will be paid to you each month. This money can be used how you like and you will only need to sell your home at the end. The part of your house that is sold belongs to the home reversion provider and the rest can be used for an inheritance. They can only recoup their money from the share of the house they own.

A home reversion provider will provide 20 to 60% of the home value based on the portion you sell. At the time you move out or die, the entire home is sold and the portion you retained ownership on is what your beneficiaries will inherit. The amount inherited is generally the same percentage of value as given in the original agreement. It is based on the current market value of the home.

If the home increases in value the percentage that remains should increase the value given to your beneficiaries. While they get a percentage like 20 to 60% for the remaining portion of the house, it is due to valuation changes that determines the actual payout.

People who are looking at home reversion schemes will have different needs. This means that one policy may not suit everyone. Home reversion providers then offer different home reversion schemes for a customer to choose from. They will differ in terms of interest, how much equity can be released, the minimum amount of your house that can be sold, the value of your house and other technicalities. This means that you should not just jump into a policy but rather weigh up all your options.

Be aware that home reversion schemes are called home equity releases and lifetime mortgages. A lifetime mortgage is a loan that accrues interest, which is different from selling a portion of your property. If you sell your property and gain funds you do not have a loan to pay back. The lifetime mortgage will have a principle and interest to pay back since you did not sell the home.

It is important to shop around just like with anything. Compare different policies that a home reversion provider offers as well as different home reversion schemes from different providers. A simple way to compare home reversion plans is to look online. Different companies post themselves online and other sites are able to source the best deals and various policies. These are then listed and compared for you. Also, sites will allow you to sign up to them and based on your details and needs they can source a home reversion scheme that suits your needs.

When comparing the different schemes, look for SHIP agents as the UK government has set up a regulatory authority to oversee home reversion providers. Someone on the SHIP list is a trustworthy company that will work with you and provide a fair agreement based on the type of home reversion scheme that will work best for you.

Once you have found a home reversion scheme that suits you, you can call the company that is offering it and make an appointment. You can then get a comprehensive run through of the policy. Make sure that you understand the complete policy and that it suits your needs before you sign on the dotted line.  To first find your potential plan we recommend visiting www.HomeReversion.org.

You may also want to take a moment and utilise other online tools from the company’s website like a home reversion calculator or interest-only lifetime mortgage calculator. Both calculators can highlight the expenses and amount of equity you may receive from the home equity release plan you are interested in.

Most consumers interested in home reversion schemes find it helpful to explore the different options, including the expenses and potential payout before setting up a meeting at a home reversion company.

Why Have Home Reversion Plans Become So Unpopular?

The home reversion plan has had a noticeable decline in recent years, mainly due to the rise in the popularity of new equity release schemes. The main culprit for their demise has been the introduction of newer style lifetime mortgage plans. In particular, you now have a range of lifetime mortgage schemes which are drawdown lifetime mortgage, enhanced lifetime mortgage and the interest only lifetime mortgage. For one reason or another these have become advocates in the lifetime mortgage market.

Home reversion entails selling some or all of your property to a reversion provider in exchange for a tax free lump sum. When you die or move into care, the provider is able to recoup their money when the property is sold. They receive their percentage that they own and your beneficiaries receive the percentage (if any) you didn't sell. This is attractive because there are no monthly payments like in the case of a residential mortgage or personal loan.

You are also able to protect your inheritance as you are only selling a portion of the property. A home reversion plan is only available to those who are over 65 years of age and with a minimum property value of £75,000 (Bridgewater Flexible Release Plan). However, there are more modern and flexible lifetime mortgages which are appealing more to the home owner. A variation to the ordinary lifetime mortgage is the previously mentioned drawdown lifetime mortgage.

A drawdown lifetime mortgage scheme offers you greater control over when to take your money as it can be taken in stages, rather than all at once. Instead of releasing all of your money at once like a home reversion plan, a maximum facility is created. This means that you are able to take a smaller amount at first and then drawdown when extra money is needed. Also, the interest that is charged is only charged on the amount that has been taken and not the entire facility.

You are able to apply for a lifetime mortgage at an earlier age compared to home reversion; usually they can be applied for at age 55 years. However, the maximum facility that you are able to form is usually smaller than the lump sum you would get from a home reversion scheme. You will be able to keep more equity in your property with a drawdown lifetime mortgage which can be a great advantage for any beneficiaries.

A problem with home reversion plans is that people are now more reluctant to lose full ownership over their property, as you have the right to live effectively in their part of the property for the rest of your life. Also, the reversion provider will not give you the full market value and you won’t benefit from any house price inflation on the portion of the house you sold.

Lifetime mortgages are therefore proving very flexible and there are many different types of lifetime mortgages on offer that will suit your lifestyle more easily. You exert more control with a lifetime mortgage and still remain the owner of your property, which is more appealing to many people nowadays.

Home Reversion Plans
• Retaining ownership of your home is done through a lifetime tenancy agreement that can include anyone living in the home.
• The provider may require anyone not 65 or older to sign a release of occupancy; it is an occupancy deed stating that the younger person gives up their right to remain in the house once you move on.
• You do not have a monthly payment, thus there is certain flexibility to use the money in more ways than just living expenses.

A drawback to lifetime mortgages is the loan you have out that must be repaid after you move out or move on. The loan will have interest added to it the longer you remain alive and leave the loan unpaid. It can become a costly scheme if your life expectancy is higher than you planned for. It can also put the inheritance in jeopardy.

Despite home reversion plans becoming unpopular, it is a good idea to remember the disadvantages of lifetime mortgage schemes while you consider which equity release scheme is most beneficial to you and your current financial situation since it can make reversion plans a more suitable option for some.

Nevertheless, do not forget the virtues of a home reversion as they still have a part to play in providing independent and complete equity release. Advice: - guaranteed inheritance & security of tenure for the rest of your life.

Can Home Reversion Plans Keep Up With the Modern Day Lifetime Mortgage?

Despite the fact that home reversion plans have been regulated by the Financial Conduct Authority since 2007 (formerly the FSA), the number of new business cases written only now stands at 3% of all equity release sales. This percentage is dwindling and counter responsive given the fact that home reversion schemes have some protective advantages.

Home reversion schemes have a higher starting age, 65, than lifetime mortgages. Lifetime mortgage schemes will consider many factors like the age of a person, sex and the value of the property to determine the amount that can be released. Lifetime mortgages present many options e.g. inheritance protection and drawdown facilities than home reversion plans do.
 
Additionally, lifetime mortgages have the advantage of being available from the age of 55 and can also now take account of the health of the individual. This is something that home reversion plans have failed to offer since Partnership offered their enhanced home reversion scheme. However, they do benefit from the guarantee offered in that a proportion of the property will always pass to dependents and other beneficiaries.

Reversion schemes work on the premise that you sell part or all of your property. If you sell 50% of your home, then 50% remains with your beneficiaries once you pass away. At this point the provider will sell the home to gain their funds paid out to you when you were alive. Your beneficiaries receive a fair portion of the value based on the amount of property left under their ownership.

Home reversion plans do not accumulate interest, so you do not have to worry about an uncontrolled increase in debt which can apply to lifetime mortgages. There is the other advantage of the fact that you will benefit from the increase in value on your share of the property. People who are much older could even release more cash with a home reversion plan, so it helps a lot in the raising of money compared to a lifetime mortgage.

The disadvantages of a home reversion plan are few, including the fact that you will not own your home 100%. This is perhaps the main reason that has contributed to the dwindling number of home reversion plans. If you choose to sell your home, your estate will not benefit and neither will you retain any property price escalation on the proportion of the property sold.

It is not easy for a reversion company to release money on a property so they tend to be very selective. Lastly, people who die immediately after taking out a home reversion plan could lose a lot more on their estate, unless some protection options are built into the scheme.

The FCA has helped in recent years to provide better protection under home reversion plans in that someone who dies within 4 to 5 years after starting one of these plans may not have to worry about loss of value in their estate. While the property is often sold, the beneficiary can retain a higher portion of the value than they might otherwise gain.

There is also the protection of the lifetime tenancy agreement that states anyone named in the plan and in the tenancy can remain in the tenancy for their lifetime. Even if one person on the agreement passes away early, the remaining family member is able to live out their life in the home before the provider can sell the property.

A main advantage to remember regarding home reversion plans is the lack of increased debt. In fact, you can use the money you obtain on the partial sale of the home to pay off other debts you still have such as personal loans, car loans, or credit card debt. You also do not take out a new loan to gain money for expenses unlike lifetime mortgages.

Lifetime mortgages might be seen as more flexible because of the payment options and age; however, you have to be concerned over the debt you leave behind. In trying to save one’s inheritance you might actually put it into jeopardy under this scheme; that is, if the remaining person has to sell the home to pay the lifetime mortgage.

Before equity release in any form including home reversion plans is undertaken, it is important to get financial advice from a qualified equity release adviser who provides free initial advice via telephone, or even meet you at your own home. You will be presented with many equity release solutions from the range of home reversion plans and lifetime mortgage schemes offering their products in the market.

To learn about the best Equity Release Providers we recommend visiting EquityReleaseCompanies.com.

When Ill-Health Can Prove an Advantage

People with ill health, and especially the older population, can now gain a lot from answering short questionnaires about their health. Previously, ill health was a disqualifying factor when it came to mortgages. Insuring partners have come up with equity release plans that consider the health of a person in determining the amount that one can borrow against their property. Since these plans are made according to the life expectancy of a person, the more ill a person is the more the amount one can borrow. This option is known as ill-health lifetime mortgage.

The ill-health lifetime mortgage is no doubt cold sounding, especially since one has to prove that you may not have a long life expectancy compared to the average person. For example, for a person who is 80 years or above, the number of years that the standard plan assumes one will stay on the property before moving to an aided care institution or passing away are specific. This means that the mortgage company will wait for a specified period before taking over a property to recover their investment.

In order to qualify for the impaired or ill health lifetime mortgage, one has to prove that they are unlikely to live beyond a certain period. Once the proof has been verified, the lending company processes the request fast, giving you favourable interest rates. The impaired lifetime mortgage also features favourable payouts, which could be up to 30% more than the normal release schemes.

The application process varies depending on the policy of the company where you wish to apply for an impaired mortgage. Usually, the process is more involved than that of a standard mortgage. Some of the compulsory processes include filling out a questionnaire on health and lifestyle, and indicating if you suffer from any medical condition.

Medical conditions that apply for the enhanced lifetime mortgage include:
1. Obesity
2. Issues due to smoking or drinking during your life
3. Cancer
4. Aids/HIV
5. Tumours
6. Other diseases with low life expectancy (Multiple Sclerosis, Huntington's, etc.)

The insuring partners have different requirements for the application process. The main insurers are Aviva, Partnership and More2life. These companies may require you to get a medical check up to prove the severity of your health condition. Aviva's Lifestyle Flexible plan has an interest rate starting from 5.42% and annual percentage rate of 5.6%.

Partnership's plan share a name with More2life's equity release plan, which is the Enhanced Lifetime Mortgage. It comes with a 7.45% interest rate and an APR of 7.5%. This plan is suitable for people who are 60 years and above, and comes with 500 pounds cash back guarantee. More2life, on the other hand, offers 6.6% monthly interest rate with 7.1% APR and a 1000 pounds cash back guarantee. It is suitable for people of 55 years and above.

Ill-health lifetime mortgage options do vary; however, if you are 55 years of age you do have an option of gaining help for owning your home. You may want to consider other situations before signing up for one of these mortgages. For example, when you die what will your family live off of? If you have a spouse will they have enough savings to make retirement? The idea of enhanced lifetime mortgage is for the house to be sold and the mortgage repaid upon your death. This could put your remaining family in a difficult situation. You need to understand that this policy option is not for everyone, but it does have benefits you might find useful based on your health and living situation.

The lump sum will be greater than a regular lifetime mortgage and it will still be dependent on your home equity. The more equity you have in your home the easier it will be to get a larger lump sum for when you need it. Housing values can also increase, which may help your loved ones as they reach retirement.

It is always a good idea to speak with your family to outline your plan and see what they feel about the ill-health lifetime mortgage. If you and your family have questions seek a financial advisor who can look at your current savings, retirement pensions, and your home value to determine if this type of mortgage or one of your other options is better. You want to live out your life comfortably without worries, so make certain you can with the right mortgage choice. Try out one of these schemes if you wish to buy a home or gain equity from your home, and your ill health is limiting you.

The more2life Interest Choice Plan Can Help Your Children in More Ways Than One

The Interest Choice Plan is also known as an interest only lifetime mortgage which provides you with greater flexibility than a traditional roll-up lifetime mortgage plan. It can provide you with more freedom in both how you release your tax free cash and how you intend to repay it back. More2life Interest Choice Plan as with all equity release schemes places no restrictions on you spending the money in whatever way you wish. 

More2life now provides you with the option to pay the interest off monthly, so that a portion or all of the interest can be covered. With an optional contribution amount starting from £25 per month, you can decide how much you wish to pay. If you wish to repay some or the whole amount of interest for your lifetime mortgage, it can help in decreasing the amount you owe when the time comes and your property will need to be sold.

As a result, you will be leaving more inheritance to your loved ones which can be beneficial compared to the standard type of lifetime mortgage whereby the interest will roll-up, thus reducing the net equity in your property. For even greater flexibility, the more2life Interest Choice Plan provides you with the option to take further release(s), even after taking the initial lump sum. This is commonly known as a drawdown lifetime mortgage. However, more2life plans are now the first equity release provider to actually offer a drawdown interest only lifetime mortgage scheme. Read More...

The Home Equity Mortgage is Coming to Town

If you are above the age of 55 and are a UK homeowner, you could benefit from a home equity mortgage where you get the money in the form of a monthly payment, lump sum or a combination of both. The good thing is that the money raised through equity release is all yours and what you do with the cash is totally up to you. Moreover, the money is tax-free and you can spend it on anything you like including going on holiday, home improvements, improving your lifestyle and also the chance to clear your mortgage among other financial worries.

 

Reasons to use Equity Mortgages Read More...

Lifetime Mortgage Deals

Now that equity release is no longer a foreign term for us, we can start to look at all the different options available for elderly home owners. As you know equity release is done by borrowing from the value of your home. You cease monthly payments on your mortgage if you decide to repay it with any new lifetime mortgage deals.

It can be received as a one off lump sum, or via flexible withdrawals from a reserve facility, or a combination of both. The basic idea remains the same, as elderly couples can receive a capital lump sum and maintain ownership of their property. The only difference is when it comes to paying the loan amount back. This is not paid by the homeowner, but depending on the different equity release deals available, the amount left as an inheritance can differ greatly.

  Read More...

Are Interest Only Lifetime Mortgages Misleading?

Are you retired and longing to go on that dream holiday but just do not have sufficient funds to finance it? Would you like to purchase expensive gifts for your children and grandchildren? Does your home need improvements? These and many more can be financed with an interest only mortgage. Interest only loans are one of the most common equity release schemes. It allows homeowners to obtain a loan against their property. It is a cheaper alternative to the capital and repayment mortgage in that only the interest is paid. The capital loan amount is not repaid during the lifetime of the homeowner.

Explanation of Interest Only Lifetime Mortgage

The capital loan amount is normally repaid after the borrower and his partner both die or no longer choose to continue living in the property. The property is then sold and the sales proceeds are used to repay the London home equity loan. In order to qualify for interest only lifetime mortgages, a homeowner needs to prove that he will be able to pay the monthly interest amount. Ideally, this is repaid via an alternative savings vehicle such as an ISA or endowment planRead More...

More Information Form

Enterprise Link Property - spice up your life.

Follow Us

TestimonialsMichele W. Garraway
The Green Pineapple Print Design Company

Excellent as always, are words can use to describe the work you have done again. I think you have handled every aspect of buying the property with much sensitivity and thought making me to be sure of making profit

TestimonialsJames M. Thompson
Plain Turtle Shoe

Your support staff was a team of good communicators.  They demonstrated comprehensive understand of how stressful this experience can be.  They kept us informed throughout and showed great sympathy. You count not have done better

I want more, I want Enterprise Link Property.