5 Myths about Equity Release

5 Myths about Equity Release

5 Myths about Equity Release

Since regulation in 2007 equity release has come along way. Lifetime Mortgages are equity release plans designed for people aged 55 and over which guarantee that you can continue to own your home, whilst giving you the financial freedom to pursue lifelong aspirations, clear-off debt, top up income or help with family matters that may arise.

  1. Myth: You give up ownership of your home.
    Contrary to popular belief, taking out a Lifetime Mortgage does not affect the ownership of your home. The property remains yours and the mortgage, plus the accrued interest (if interest roll up), only gets repaid once the property stops serving as your primary residence.
  2. Myth: You can be left owing more than the value of your home.
    There is a ‘No Negative Equity Guarantee’ ensures that your estate will never owe more than the value of your property when it is sold. Once the loan has been repaid, any remaining funds will be paid to your beneficiaries based on the instructions in your Will. In the unlikely event that the property sells for less than the amount of the loan, the remaining balance will be written off by the provider.
  3. Myth: You can’t release equity from your home if you have an outstanding mortgage.
    You can still release equity from your home if you have an outstanding mortgage, provided that you can pay off the outstanding mortgage balance with either some of the equity you release or other savings you may have.
  4. Myth: You have to make monthly repayments with a Lifetime Mortgage.
    Despite the name, with a Lifetime Mortgage you do not need to make monthly repayments. Like any other borrowing, an interest rate is charged and any interest you choose not to pay is simply added to the total and paid when you or your beneficiaries eventually sell the property.
  5. Myth: You won’t be able to move home.
    You have the right to move your plan to another suitable property or repay the mortgage in full. Some lenders may charge a financial penalty to do this, but typically after 10 years they do not.

Please note this article is for information purposes only.

What is Equity Release and how does it work

What is Equity Release and how does it work

Equity Release what is it?

Equity release refers to a range of products that let you access the equity (cash) tied up in your home if you are over the age of 55. You can take the money you release as a lump sum or, in several smaller amounts or as a combination of both. The “catch” is that the income-provider must be repaid at a later stage, usually when you die. Thus equity release is particularly useful for elderly persons who do not intend or are not able to leave a large estate for their heirs when they die.

There are typically two equity release options:

Lifetime Mortgage

You take out a mortgage secured on your property provided it is your main residence, while retaining ownership. You can choose to ring-fence some of the value of your property as an inheritance for your family. You can choose to make repayments or let the interest roll-up. The loan amount and any accrued interest is paid back when you die or when you move into long-term care.

  • If you’ve taken out an interest roll-up plan, there will be less for you to pass onto your family as an inheritance.
  • Debt can grow quickly if the interest is rolled up.
  • You will have to pay arrangement fees, which can reach approx. £1,500-£3,000 in total.
  • If you decide you want to downsize later on you may not have enough equity in your home to do this.
  • The money you receive from equity release may affect your entitlement to state benefits

Home Reversion Plans

You sell part or all of your home to a home reversion provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die, rent free, but you have to agree to maintain and insure it. You can ring-fence a percentage of your property for later use, possibly for inheritance. The percentage you retain will always remain the same regardless of the change in property values.

  • You will have to pay arrangement fees, which can reach approx. £1,500-£3,000 in total.
  • If you release equity from your home, you may not be able to rely on your property for money you need later in your retirement. For instance, if you need to pay for long-term care.
  • If you decide you want to downsize later on you may not have enough equity in your home to do this.
  • The money you receive from equity release may affect your entitlement to state benefits
  • These schemes can be complicated and expensive to unravel if you change your mind.
  • Home reversion plans will usually not give you anything near to the true market value of your home when compared to selling your property on the open market

Always seek independent financial advice and legal advice before committing to an equity release scheme. There are many risks in both lifetime mortgages and home reversion plans. This article is for information purposes only and should not be considered as advice.

Top Tips for Saving Money

Top Tips for Saving Money

  1. Look around for the cheapest household insurance policies

Home insurance is not mandatory – you don’t need insurance. However it is strongly advisable. Can you afford to pay the bill if your house catches fire or is smashed into by a 4×4 driver playing Angry Birds, who takes off from the scene like a sparrow in a catapult? Unlikely. Searching online is the quickest and best way of finding the household insurance policy that saves you the most £££. It will allow you to compare hundreds of policies in a matter of minutes.

Annual Savings: £100’s

  1. Change your approach towards your mortgage

Unless you’re planning on buying a private jet or a small island the most expensive purchase you are ever likely to make is your home. If taking out a loan to finance your future house, make it is the best available to you. For example, if you are paying your moneylender’s full standard variable rate (SVR) you are probably going to be paying hundreds of pounds a year more than you actually need to. There are literally thousands of deals out there to choose from however it is key to check the fine print for any hidden catches, this is a relatively straightforward way to you a lot of that hard earned money. Top tip: loyalty to your bank benefits your bank, not you.

Overpayments on your mortgage are an even better way of making massive savings. If you can afford to make overpayments, you could clear your debt several years early. For example, if you look to loan £150,000 at 6% over 25 years, you will pay it back at £966 a month. This results in a total charge of £139,000 for credit. However if you can afford to overpay by £150 a month you will clear the debt in under 19 years, giving you 6 years of mortgage-free living and saving a whopping £37,500 in interest.

Annual Savings: £1,000’s+

  1. Have another look at your life insurance policy

Ever since we started bathing regularly, humans have been getting healthier. As a result our life expectancy has gone through the roof – with the cost of insuring the unthinkable decreasing all the time. If you were sold a life insurance policy at the same time you took out your mortgage you may have been too distracted to shop around. You could be missing a trick.

Annual Savings: £100

  1. Make full use of your ISA allowances

If you didn’t already know, you can save up to £15,240 in an ISA which is a tax-free savings account (for the more financially savvy of you there’s also an investment ISA which deals in stocks and shares). It means that any interest accumulated in your account is tax free.

Annual Savings: £100’s+

  1. Consider installing a water meter

We take our tap water for granted. If you have a home with few occupants you may want to consider installing a meter instead of having an unlimited water plan. It may surprise you to hear this could halve your annual bill.

Annual Savings: £100’s

  1. Fight your parking tickets

If we don’t all love getting parking tickets. Those traffic wardens that cower behind the nation’s wheelie bins with their notepads and cameras waiting to pounce upon unexpecting motorists the second they set one tire out of line. In the event of being awarded a parking ticket you feel was unjust its simple… fight back.

Annual Savings: £100

Link: How to fight parking tickets

 

 

Why use a Mortgage Broker?

Why use a Mortgage Broker?

Why use a Mortgage Broker?

Before we consider how you should find a local mortgage broker, lets first consider the benefits of using one. Thanks to technology, namely the internet, it’s now possible to find hundreds of mortgage deals online. In addition we are always inundated with adverts on the TV and within our high street banks.

So with all this availability it may seem a strange idea to consider paying an extra fee to obtain advice from a mortgage broker, or commonly called mortgage advisers. But they can provide some important and valuable benefits:

  • A qualified mortgage adviser can search thousands of mortgage deals quickly and compare like with like.
  • Mortgage applications are becoming increasingly difficult and time consuming to complete, an adviser can take much of this burden away.
  • Their advice is insured via Professional Indemnity insurance and subject to them being regulated, you can make a claim if the advice given was not suitable for your needs.
  • Lenders criteria changes constantly, your circumstances may not meet their desired profile. Brokers have access to the mortgage underwriters and can find out if your circumstances will work before applying.
  • Some lenders charge an application fee which will not be refunded if they say no, its worth getting the application right first time.
  • Experience, it’s probably one of the most understated facts, but an experienced mortgage adviser can apply some ‘out of the box’ thinking when it really matters.
  • Wider financial planning, when taking out a mortgage it’s also important to look at your wider financial circumstances and consider if you need life assurance, or even income protection for example – advice can be valuable in these areas.
  • If you have irregular earnings, poor credit history or work abroad then high street lenders may not be the most suitable bet. Specialist lenders typically operate more in this area, which may only deal with a qualified and regulated mortgage broker.
  • Lastly most mortgage advisers are independent, which means they work for you and not a particular lender.

Please remember to always check your mortgage adviser is qualified, regulated and is suitably experienced. Heritage Financial Solutions Ltd offer an independent mortgage service, our experienced team can help search the whole of the mortgage market and find you the most suitable recommendation.

Benefits of a Mortgage Review

Benefits of a Mortgage Review

Benefits of a Mortgage Review

Reviewing your mortgage is very important in times when there is an interest rate change, when your mortgage deal comes to an end and also just a general annual review in order to determine how your existing mortgage compares to the new deals within the market.

You may be paying too much – If you haven’t reviewed your mortgage for a while, it is likely you will be paying much more than homebuyers are today. Therefore, searching for the new deals available could cut your monthly repayments dramatically.

Your term may be costing you – Within the allowed limits, you may find it beneficial to start making overpayments in order to reduce your term, this therefore means there is less time for interest to accrue, so you would pay less overall. The advantage to making overpayments rather than choosing to reduce your term is that you can stop these overpayments at any time should you need to.

Your credit score may have improved – If when you took out your mortgage, your credit history wasn’t the best, it is likely that your provider charged a higher interest rate in order to counteract this. If your credit scoring has since improved, it may be beneficial to review your mortgage in order to see whether a better deal with lower interest rates is available to you.

In summary, reviewing your mortgage can result in reduced monthly repayments however; it is also important to bear in mind there may be potential costs involved. These include costs such as valuation fees, arrangements fees, legal fees and early repayment charges. Therefore, you must ensure you have considered the possible costs involved as well as reviewing the potential cost savings.

Seeking help from an Independent Mortgage Adviser can allow you to explore the different deals in the market that are best suited to you.

This article is for information purposes only and should not be taken as advice.

Benefits of using a Mortgage Adviser

Benefits of using a Mortgage Adviser

Why use a Mortgage Adviser?

Mortgage Advisers can often add value along with smoothing the process in purchasing a property. However, many still have reservations surrounding the true benefits a qualified and experienced mortgage advisers can bring to the table.

  • Mortgage Advisers have a duty of care to provide you with the best mortgage deal suitable for you. They will look at your income and affordability, as well your liabilities in order to establish the right mortgage for you.

 

  • They often have access to better deals that cannot be received by private individuals. They can also provide a whole of market search to ensure they supply you with the appropriate deal.

 

  • Mortgage Advisers must be qualified to give advice as it is much more complex than finding the cheapest fixed rate or tracker rate mortgage. Therefore, with the qualifications and knowledge they have in regards to the industry, it can give you the peace of mind that the mortgage applied for you is the best available for your individual objectives and needs.

 

  • As well as determining the best deal suitable for you, they will also advise you with any insurance that could be useful, whether it be buildings & contents insurance or decreasing term insurance. When working with a mortgage adviser, it is always useful to ask them about life insurance as they can determine whether you would benefit from it based on your circumstances.

 

  • Mortgage Advisers don’t always charge an advice fee; they can often receive commission straight from the lender due to introducing an individual to their deal. Therefore, getting help from a mortgage adviser doesn’t always cost you money.

 

  • Lastly, mortgage advisers often complete most of the paper work for you; this initially leaves you with less hassle and can speed up the process. They also can have strong relationships with local estate agencies and solicitors which can further speed up the process, along with potentially reducing your costs.

If your looking for a mortgage adviser in Chester, Cheshire, Flintshire or North Wales then contact Heritage Financial Solutions Ltd for a free mortgage review. Heritage have a team of experienced mortgage advisers that will allow you to benefit from all the above points and more.

Mortgages Explained

Determining the most appropriate type of mortgage can be difficult due to the numerous choices available along with the desire to achieve the most cost effective.

FIXED

A fixed rate mortgage is when the interest rate remains the same throughout the period of the deal. Therefore, if the interest rate changes, your mortgage payments are guaranteed not to vary. This gives you the peace of mind of knowing how much your mortgage payments will be each month and can help you greatly with budgeting. Within this type of mortgage, if the interest rates were to fall, it is important to be aware that you will not benefit from a reduction in mortgage payments. You are contracted in with this deal for the length of the agreed period, which usually lasts between 1 and 5 years.

TRACKER

A tracker mortgage is linked to the Bank of England base rate where the interest rate tracks the Bank of England base rate at a set margin above/below what your mortgage provider has contracted. Therefore if the interest rates were to increase, your monthly mortgage repayments would increase. This is the risk with a tracker mortgage; you can’t ensure the level of security you receive with a fixed mortgage. On the other hand, if interest rates were to fall or remain low as they currently have been, your mortgage payments would be less.

DISCOUNT

A Discount mortgage links to the lenders standard variable rate (SVR). A certain discount rate is determined and this rate is discounted off the SVR. However, if the SVR goes up, this will increase your mortgage payments. Likewise, your mortgage repayments will fall as the SVR falls. It is important to be aware that the lender can increase the SVR regardless of the Bank of England base rate. Therefore, your repayments can vary unexpectedly.

OFFSET

An offset mortgage links your savings to your mortgage debt. Usually you would gain interest on your savings; instead of this, an offset mortgage enables individuals to use their savings to pay less interest on their mortgage. Essentially the interest you would have gained from your savings, replaces the interest you should be paying on your mortgage. This mortgage feature can often result in individuals paying off more of their mortgage each month, therefore clearing their debt quicker, whilst saving a significant amount in interest (within the terms of your lender’s early repayment charges). The rates on these mortgages can often be higher than those of others so individuals with smaller amounts of savings often stick with a normal mortgage.

As well as a variety of types, there are several repayment methods in which you can decide to pay back your mortgage. Therefore, below gives a short description on the range of repayment vehicles obtainable which may aid with determining the suitable one for you.

REPAYMENT (CAPITAL & INTEREST)

A repayment mortgage is the most popular of the repayment vehicles and you in essence make monthly payments for a contracted period, paying back the initial capital and the interest. Each month your mortgage balanced will reduce and if the agreed payments are kept up, your mortgage will be repaid at the end of the agreed term.

INTEREST-ONLY

An interest only mortgage allows you to only pay the interest due on the amount borrowed every month. This means that repayments will be significantly lower than a repayment mortgage however, you will still owe the initial loan amount acquired. At the end of the term, the capital would usually be paid using an endowment, ISA or pension etc. Lenders may often check within the term that you are adding to savings or that you continue to hold a sufficient amount in order to pay the capital back. The interest rate paid can be at a fixed or variable rate, similar to the repayment method.  Individuals can often find it difficult to be issued an interest only mortgage due to the risk.

COMBINED REPAYMENT & INTEREST-ONLY

A combined mortgage offers the chance to have a part-repayment and part-interest-only deal. At the end of the agreed term, some of the initial capital will still need to be repaid. Different lenders will have different terms and conditions regarding this repayment method.

Quick Mortgage Approval

Helpful Tips for Quick Mortgage Approval
With recent changes, mortgage lenders have become more strict and fussy with the clients they want to lend too, even looking into people’s lifestyles. Every lender has its own methods in deciding whether it wants to lend money to you. It’s almost like a beauty parade where lenders compare you to its own ideals. If you fit within a lenders criteria, bingo, you’ll be accepted or like a lot of people, possibly rejected. Most lenders score card / criteria is based on several factors, such as; the size of loan, the size of your deposit, employment status and income, outgoings, existing debts and importantly credit rating.

Check your Credit Score
Lenders essentially use a computer system to review your credit report and decide whether or not they want to borrow. Now this is not just a pass or fail, you could almost be a A,B,C or D Rating. This essentially can mean an A rating can borrow more than a B or C, so it’s important to know what your credit rating says about you. Most Credit Reference Agencies (companies who compile credit data) offer a free trail where you can obtain a free credit report for 30 days, this is a must! Correcting errors on your credit file could save you thousands along with avoiding a silly mortgage decline.

• Are all the items relating to you and are they correct?
• If you’re not on the voters roll, make sure you get on it!
• Close any old accounts that are no longer used
• Don’t apply to 10 different lenders at once, keep searches to a minimum; if you are rejected by a lender don’t just throw yourself at the feet of the next one
• Remove any financial links which no longer apply
• Stay within your credit limit and avoid overdrafts where possible

Deposit
The bigger your deposit the greater security the lender has and so the lower risk they class you. So even if you don’t have a great credit score, if you have 15% + deposit you start to look more attractive to the lender.

Add £100 on top of deposit
Putting down a little bit more than the minimum deposit required can boost your attractiveness to the lender, or at the very least cut the amount of documentation it wants to see. All mortgages have a maximum loan-to-value (the amount you borrow compared to what the property’s worth) but it’s best to borrow just under this, if you can.

Paperwork
Lenders now have to see proof of your income before they can offer mortgages, so it makes sense to get your paperwork together in advance. Sending all the paperwork in one batch speeds up the process as it reduces the chances of your application being reviewed by more people. Many lenders won’t accept printed internet bank statements so you may need your bank(s) to send you original copies. Prepare these a few weeks in advance in case you need to wait for the originals to arrive.

Seek Professional Advice
Mortgage Advisers don’t just sell mortgages, they can help you get a mortgage by drawing on their experience and knowing which mortgage provider to place you with. Good mortgage advisers can also find exclusive deals you didn’t know existed and the best mortgage advisers will hold your hand through the whole process, from start to finish, ensuring the right documents and information is provided at the right time.

Care has been taken to ensure that the information is correct however Heritage Financial Solutions Ltd neither warrants, represents nor guarantees the contents of the information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Heritage Financial Solutions Ltd is authorised and regulated by the Financial Conduct Authority 618320.