Financial

"Age Concern does not endorse the providers listed below and users of this website accept full responsibility together with any liability of losses that may arise as a result of their dealings with the provider.

The Website user agrees that Age concern shall not be held in any way responsible of liable for acts or omissions of the provider"

Your home is not just the place where you live. As property prices increase, some of the value of your home may be used to provide an income or a capital sum.

Remember that if you unlock part of the value of your home, you may be excluding yourself from means-tested benefits. To discover whether you qualify for Minimum Income Guarantee, ring the freephone number 0800 028 11 11. Contact your local council to discover whether you are entitled to council/housing benefits (the number if you live in Southend is 01702 215290).

The easiest way to release the value of your home is to move to a cheaper property. Disadvantages are the costs and upheaval of moving. You may also lose contact with friends. These problems apply particularly if you move to another town. Be sure to consider the availability of facilities such as shops, public transport, banks, library and clinic. Ask the local branch of Age Concern if you are in doubt.

If you decide to stay where you are, there are three options.

First, a simple legal document will transfer ownership of your home to a child, who can then pay you a monthly income. The advantage of this scheme is that the full value of your property will be passed to your heirs. Disadvantages are that they may incur Capital Gains Tax, the income may become problematic if you fall out with your children or if they run into financial difficulties, while the local authority may refuse to fund a place in a nursing home if you have given your home away.

Second are reversion plans. A reversion company (usually a bank or insurance company) buys between 30 and 100% of your home, usually for a lump sum, at its present value. They reclaim this proportion of the proceeds when your home is eventually sold.

Third are mortgage plans. A mortgage is taken out. Either the sum gained is used to buy an annuity, with interest being deducted from the monthly income, or income is rolled up and repaid with the amount of the loan when the property is finally sold. There should be safeguards so that the amount of interest cannot exceed the value of the property.
Both the second and third options mean that the full value of your property cannot be passed on to your children. As the company has a legal interest in your home, you will have to keep the property well maintained and fully insured. This may take a considerable proportion of the money released.

Members of SHIP (Safe Home Income Plans) have a voluntary code of practice as well as statutory regulation.

These schemes need to be discussed fully with relatives. You should also seek legal advice and independent financial advice. You may be charged for this.

Detailed advice is available in Using your home as capital by Cecil Hinton, published by Age Concern (0870 44 22044) (£4.99 + £1.95 p & p). Factsheet 12 Raising income or capital from your home is available from Age Concern, tel 0800 00 99 66, or go to www.ageconcern.org.uk . It is available for reference at Southend Central Library.

EQUITY RELEASE

Westcliff Financial website www.westclifffinancial.co.uk/aged60plus

Jim Thompson - Principal of Westcliff Financial Services Ltd

Jim Thompson worked for the Halifax from 1965 - 1999 when he took early retirement.

Jim is professionally qualified to advise on equity release products for the over 60s including both lifetime mortgages and home reversion schemes. Whereas most advisers can only advise on one organisation's equity release products, Jim is able to advise on products from the whole of the market, thereby offering you a better deal.

Jim holds the qualification CeRER (Certificate of Regulated Equity Release) in addition to CeMAP and CertCII(MP). He is also a member of PEER (Promoting Excellence in Equity Release).

What is equity release?

Equity release plans allow you to release tax-free cash from your home to boost your finances in retirement. The two main types of equity release plans available are lifetime mortgages and home reversion plans. Both types of equity release plan allow you to:

safely release equity from your home
spend the cash as you wish
make no monthly repayments
stay in your home for life

Reasons to release equity

A significant proportion of retired people are asset rich but cash poor. Equity release allows a percentage of the value of the property to be released and used as capital for personal use.

The cash may be used for any purpose:

making some home/garden improvements
buying a new car
taking regular holidays and short breaks
treating family and friends
improving or maintaining your lifestyle
healthcare
reducing inheritance tax liability

How to find the right equity release plan

There are currently over 40 equity release plans to choose from, and you can save your estate thousands of pounds if you choose the right one.

It is important that you deal with a professionally qualified and experienced adviser that has access to the whole of the market to ensure that the advice is tailor made to your individual circumstances.

Types of equity release schemes

There are essentially two main types of equity release schemes currently available:

Lifetime mortgages
Home reversion plans

Each type of equity release scheme can help you to make the most out of your retirement by safely releasing equity from your home to spend entirely as you choose. All regulated equity release schemes have a set of guarantees to ensure your safety:

No monthly repayments to make in your lifetime
Stay in your home for as long as you want
Move if you wish (subject to provider criteria)
A no negative equity guarantee so the amount owed will never exceed the value of your home

Lifetime mortgages

A lifetime mortgage is a form of equity release scheme where a loan is secured against your property to provide you with a tax free cash lump sum or a regular income to spend as you wish, with no monthly repayments to meet.

Interest is added to the lifetime mortgage loan throughout your lifetime, accruing at a fixed or variable rate. The loan plus interest is eventually paid back when the home is sold, usually when you move into long term care, or when you and your partner die. You can typically release between 18-50% of the value of your home with a lifetime mortgage, depending on your age.

Advantages of a lifetime mortgage

A lifetime mortgage gives you the choice of a cash lump sum or income with no monthly repayments to meet
You retain full ownership of your home
Lifetime mortgages are available to younger people (aged 55+)
Many plans offer no negative equity guarantee
Some lifetime mortgage plans let you guarantee an inheritance for your family
All equity release plans are regulated by the Financial Services Authority

Disadvantages of a lifetime mortgage

The amount you leave as an inheritance will be reduced
The interest applied can grow quickly as it is compounded
You can't usually raise as much money with a lifetime mortgage as you could with a reversion plan, especially at younger ages
If you repay the lifetime mortgage early, you may have to pay an early repayment charge

Lifetime mortgages have become a highly popular form of equity release scheme over the past few years, prompting many providers to offer a variation of a lifetime mortgage called a drawdown lifetime mortgage which allows you to release equity as and when you need it, rather than taking a lump sum or regular income.

Drawdown plans

A drawdown lifetime mortgage has the same advantages and disadvantages as a regular lifetime mortgage, as well as a few more that are unique to this kind of equity release plan.

The main difference with a drawdown lifetime mortgage is that you don't request the full sum of money available to you immediately. Instead, you decide on a maximum amount of equity you want to release, and 'drawdown' the cash in stages when you want to.

Advantages of a drawdown lifetime mortgage

You can drawdown cash by making withdrawals as and when you need them, or you may be able to request a monthly income
You only pay interest on the amount of equity released, so interest could accumulate more slowly than with a regular lifetime mortgage
You are in control of your money as you can release cash when it suits you
You retain full ownership of your home
Drawdown plans may be available to younger people (aged 55+)
Some drawdown plans let you guarantee an inheritance for your family
All equity release schemes are regulated by the Financial Services Authority, including drawdown plans

Disadvantages of a drawdown lifetime mortgage

Interest rates are usually higher on a drawdown plan than they are on a standard lifetime mortgage
If you want to increase the amount of equity released beyond the original amount agreed, you would normally have to apply for a further advance, which is not guaranteed
There are restrictions on the minimum amount you can release
The amount you can leave as an inheritance will be reduced
The interest applied to the drawdown mortgage can grow quickly as it is compounded
You can't usually raise as much money through equity release with a drawdown lifetime mortgage as you could with a reversion scheme, especially at younger ages
If you repay the lifetime mortgage loan early, you may have to pay an early repayment charge

Home reversion plans

With a home reversion plan you sell part or all of your home to a reversion plan company in exchange for a tax-free cash lump sum and a guaranteed lifetime lease with no monthly repayments to meet.

You stay in your home rent free for as long as you choose and are able to guarantee an inheritance to your beneficiaries. Both you and the reversion scheme company share in any increase in your property's value, providing you have not exchanged 100% of its value.

Advantages of a home reversion plan

You are able to guarantee an inheritance
There are no monthly repayments to make
You benefit from any increase in value of the percentage of the property that you still own
Reversion plans may be available to those aged 55+ and you can typically raise more money from your home at a younger age with a reversion plan than a lifetime mortgage would allow
The older you are, the more money you will be able to release with a reversion plan

Disadvantages of a home reversion plan

Typically, you do not receive the full market value of the share of the property you sell because the reversion plan company will give you the absolute right to live in it rent free for the rest of your life, and will not get their money back for a number of years
The reversion plan company owns a share of your home and will also benefit from any increase in value
Reversion plans cannot usually be reversed as you are selling part of your home
The majority of reversion plan providers do not guarantee further advances

Points to consider

Equity release can provide you with financial freedom in retirement but it's not always the right option for everyone.

A qualified and independent equity release adviser will consider your individual circumstances to tell you whether a plan would be the most suitable option for your needs. It is also important to consider the following points when thinking about whether to release cash from your home.

All plans will reduce the value of your estate, so it's important to involve your family and discuss your ideas with them.
Would your entitlement to state benefits be affected, and if so, how would you feel about this?
Releasing cash from your home is a lifetime commitment and the loan is only expected to be repaid upon your death or entry into long term care. Early repayment charges may apply on some plans if you want to repay the loan early.
You could sell your home and move somewhere cheaper (but it could be tough and expensive to find somewhere attractive and affordable)
You could ask your family for financial assistance
You could consider other forms of borrowing, such as loans or traditional mortgages (subject to affordability)
You could use other money you may have access to such as savings or investments
All plans approved by SHIP (Safe Home Income Plans) allow you to move home if you wish. Any move will be subject to the provider's criteria.

Safety

Financial Services Authority

The Financial Services Authority (FSA) was set up by the Government and is responsible for regulation of a range of financial services and products, including equity release plans. They aim to:

promote efficient, orderly and fair markets to help consumers achieve a fair deal
maintain confidence in the financial system
secure the appropriate degree of protection for consumers

Ensure that you deal with an adviser that is authorised and regulated by the Financial Services Authority.

Safety with SHIP

SHIP is a self regulatory trade body dedicated entirely to the protection of equity release planholders and the promotion of safe equity release plans. They ensure that equity release products are safe and their code of practice applies to both lifetime mortgages and reversion plans. Most leading equity release providers are members of SHIP, however there are equity release plans available that have not been approved. Those that are will be completely safe, so you should only ever choose an equity release plan endorsed with the SHIP logo.

All SHIP approved equity release plans come with a standard set of safety guarantees which include:

The right to remain in your home for as long as you choose
The freedom to move to another property without financial penalty (subject to lenders' criteria)
That you will receive a cash lump sum or a regular income
That you will never fall into negative equity no matter what happens to house prices in the future

Jim Thompson CeMAP, CeRER, CII(MP), DMS

Director & Equity Release Specialist

Westcliff Financial Services Ltd

"Westcliff Financial Services is a trading style of Rosemount Financial Services Limited who is an appointed representative of Intrinsic Financial Planning Ltd and Intrinsic Mortgage Planning Ltd. Intrinsic Financial Planning Ltd and Intrinsic Mortgage Planning Ltd are authorised and regulated by the Finacial Services Authority."

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HELEN BROWN FINANCIAL SERVICES (0800 074 2684). www.hbfsonline.co.uk