Tag Archives: Interest Only Lifetime Mortgages

What is the Formula for a Home Reversion Plan Calculator?

What is the Formula for a Home Reversion Plan Calculation?

Equity release schemes have seen a massive surge in popularity in recent years with figures continuing to rise in 2013. Year to date figures for October shows there has been over £800 million of new equity release funds released, and is set to reach an all-time high of possibly £1 billion by year-end.

This will be a landmark for the equity release industry after years of care in building its reputation through regulation, financial advice and more innovation in product design from the equity release companies themselves. The main growth area in the types of equity release schemes available has been in the field of lifetime mortgage schemes market. Nevertheless, it is the home reversion plans the London equity release mortgage market has to thank. For this is how back in the 1960’s when the former property equity release schemes were invented.

Why the decline in home reversion sales?

Home reversion schemes in comparison to lifetime mortgages have not seen much change in design or structure since their inception. In fact less than 1% of all equity release schemes written in Q3 of 2013 were a home reversion plan! So what is the reason for their significant decline? One word – Flexibility.

Within the equity release sector, there have been products such as home reversion plans that have lost out to other more flexible and secure options that are now becoming available. Flexible terms of lending such as new interest only lifetime mortgages and the enhanced lifetime mortgage UK are now more popular & freely available. Where a release of equity is necessary and advice is required more than 9 times out of 10 advisers will favour lifetime mortgages & for this reason they have effectively made home reversion plans near obsolete.

After all, demand creates supply, and there seems to be little demand for home reversion schemes on the whole. This is perhaps the reason why several companies that used to have a home reversion calculator have now withdrawn the application from their website.

Where can I find a home reversion calculator?

Old home reversion companies of the past had tools such as a home reversion plan calculator which could help people over the age of 65 assess the maximum they could borrow. Two such companies were Retirement Plus of which they provided the data for companies like Equity Release Supermarket to use on their own website.

Alas when Retirement Plus withdrew their hybrid home reversion/lifetime mortgage plan these calculators were pulled. Unfortunately this left a void in the market. More recently Bridgewater have provided a home reversion calculator for advisers to use, but is also accessible to the general public to use with the right-click!

There are some specific reasons for this decline in popularity. The first reason probably is that home reversion involves selling a part of your home, and not many people are comfortable with that thought. The main advantage of home reversion was that it involved no repayment over the loan term; however, with the arrival of flexible new interest only lifetime mortgages home reversion no longer offers something unique.

Advantages and disadvantages of home reversion plans UK

Another reason is perhaps that home reversion involves this selling a part of house at a highly discounted price, so that you not only lose out on the market value when you start the plan, but also do not benefit from any property price rise on that percentage of the equity when the house is finally sold.

Another significant drawback of home reversion plans is that in case you die early and the plan ends, you potentially lose a valuable chunk of your property in exchange for a highly subsidised price. This can be a big risk for your beneficiaries. But with certain new lifetime mortgages, you can get guaranteed inheritance protection in case of early closure, which is a significant improvement.

Home reversion plans are still very much available however, so there are clearly some advantages to these schemes and they suit some clients. They do offer a large lump sum release, there are no monthly repayments to be made, and by selling only a small portion of the home, you can still protect any inheritance you may wish to leave behind. However, enhanced lifetime mortgages available today can surpass the release allowed by home reversion schemes, and still allow you to retain full ownership of your home.

Home reversion summarised

Companies such as Retirement Plus, Aviva, Home and Capital, and Partnership did offer enhanced home reversion plans, which seem to have now been withdrawn. As stated historically, several reversion companies had home reversion calculators on their websites, but with the decline in demand for these schemes and the availability of new more flexible lifetime mortgages, it is difficult to find a home reversion plan calculator today.

However, the home reversion plan in the UK is not dead & buried and still must have a part to play in the overall equity release advice service offered by any qualified adviser.

You can calculator standard results on the best home reversion deals by visiting specialist equity release broker websites such as – www.homereversion.org

 

Where Can I Find Companies That Provide Equity Release Solutions?

Which Companies Can Provide Equity Release Solutions?

Equity release has seen a massive surge in popularity in the past few years. This growing demand has fuelled the sector and today we have more providers, with a wider portfolio of more flexible equity release plans than ever before. While equity release is not suitable for everyone, the variety of equity release plans means that it is certainly likely to be a suitable solution for a lot more people today than ever before.

Recent surveys have shown that a large number of pensioners are homeowners with a size-able amount of equity tied up in their homes are suffering from a credit crunch and are unable to fund their day-to-day expenditures or have no money for that big one-off expense. In other words, there are numerous people around the UK, who are property rich, but cash poor.

Such equity release solutions allow them a way to release some of the equity in their home in the form of conveniently usable cash. This money can be released either as a lump sum or in the form of irregular installments. The uniquely attractive feature of equity release plans is that they allow you to tap into the value in your home without the need to move out or sell the property. Irrespective of what type of equity release you choose, you can continue to live in your home until you die or move into long-term care.

Types of equity release solutions

There are two main types of equity release plans – home reversion schemes and lifetime mortgages. Home reversion involves selling a percentage of the house to the lender in exchange for the money. At the moment companies offering home reversion plans are Newlife Mortgages, Bridgewater Flexible Release Plan and Hodge’s Shared Growth option.

Lifetime mortgages offer the other type of equity release solutions – wherein instead of selling a part of the house, the lender sets up a secured 1st legal charge on the property. There are also interest only lifetime mortgages where you can repay the interest monthly, thus maintaining a level balance on the loan. Such companies offering the interest only lifetime mortgage solution is Stonehaven with its range of Interest Select plans or more2life’s interest choice plan.

Latest product development

A recent innovation in this domain of interest repayment is from Hodge Lifetime with its flexible repayment lifetime mortgage. Although the repayments of interest cannot be on a monthly basis, Hodge Lifetime do allow upto 10% of the original amount borrowed to be repaid each year without penalty. Becoming a serious player now in the equity release marketplace, Hodge Lifetime have set down the gauntlet to other companies lacking in ingenuity and ideas with their current and future plans.

The most common form of equity release are the roll-up lifetime mortgages where the interest is added to the principle amount and compounded over time. This means that the debt effectively rises yearly for the rest of your life, until you either die or move into long-term care. Hence, before entering into one of these contracts you should always discuss your intentions with your family first & then arrange an Equity Release Adviser.

There are other types of equity release schemes which do include the drawdown lifetime mortgage such as Aviva’s Lifestyle Flexible Option, designed for those who want to have the option of borrowing more in the future without any obligations. For those who want the biggest lump sum, enhanced mortgages such as more2life’s Enhanced Lifetime Mortgage may be suitable, providing they meet the health & lifestyle questionnaire.

These are some examples of equity release solutions designed to suit different needs, and some companies that offer these products. There are, of course, many more providers within each sector. The best way to find a suitable deal is to compare different equity release plans, and seek independent advice from a qualified equity release adviser.