Equity Release in Later Life Planning - CII Local Institutes · Equity Release in Later Life...
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Equity Release in Later Life Planning Sheffield CII: Life & Pensions Society 7th June 2017 Simon Chalk CeRER, CeLTCi, AdvCeMAP, CertCII (MP & ER) Equity Release Planner SOLLA Advisory Board Member Equity Release Council Member 1
Transcript of Equity Release in Later Life Planning - CII Local Institutes · Equity Release in Later Life...
Equity Release in Later Life PlanningSheffield CII: Life & Pensions Society 7th June 2017
Simon Chalk CeRER, CeLTCi, AdvCeMAP, CertCII (MP & ER)
Equity Release Planner
SOLLA Advisory Board Member Equity Release Council Member
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£2.15bn
released(trebled since 2011)
34% up on 2015
27,500
new plans
2016 - Records smashed!
Source: Equity Release Council - Market Report Spring 2017
Safeguards & Guarantees
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Right to remain in your own home for life (or earlier move into Long Term Care)
No payments to make during your lifetime
‘No-negative equity’ guarantee
Fixed interest rate / Variable (capped)
Transferrable to another property
Independent legal advice
LIFETIME MORTGAGES & HOME REVERSION PLANS
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“How much can I release?”
0.0 10.0 20.0 30.0 40.0 50.0 60.0
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67
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Maximum % LTV
Drawdown – the popular choice
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H2 2016 - Drawdown Plans *
AVERAGE AGE 71.7 YEARS
AVERAGE HOUSE PRICE £341,758
AVERAGE INITIAL ADVANCE £54,584
AVERAGE EXTRA RESERVES £37,751
AVERAGE TOTAL LTV 27% (16% + 11%)
Current best fixed rate 3.92% Legal & General **
Flexible Lifetime Mortgage
with £44,525 Cash Reserve
SOURCE:
* Equity Release Council - Market Report Spring 2017
** Iress Exchange 03/06/2017
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House Price Inflation: What’s required to keep the remaining equity intact?
AT OUTSET YEAR 10 YEAR 14 YEAR 20Av House Value £341,758 £369,371 £381,030 £399,214Loan Balance £54,584 £80,178 £93,509 £117,774Remaining Equity £287,174 £289,192 £287,521 £281,440
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£50,000
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£350,000
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£500,000
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House price Loan value
SOURCE: Age PartnershipAssumed fixed rate @ 3.92% Annualised Equivalent Rate
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Just 0.78% paHouse Price Inflation!
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“Roll-up, roll-up? It’s not the only show in town!”
Rolled-up interest?
Interest-only? (full, or partial, option to later switch to roll-up)
Rolled-up interest, with capital repayment option?
illustrated…
9SOURCE: Age PartnershipAssumed fixed rate @ 3.92% Annualised Equivalent Rate
£0.00
£10,000.00
£20,000.00
£30,000.00
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Loan
Am
ou
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Years Elapsed
No Payments
Interest Only
With Payment
Plan Name Legal & GeneralPayments Can Start In Year 0 Current Age 71
Loan Amount £54,584 Year Payments Start 1 Life Expectancy Age 85Interest Rate(AER/Annual) 3.92% Year Payments End 7 Years remaining 14Maximum Annual Payment £5,458
Interest-Only Payment £2,140 Savings Balance at End of TermMinimum Annual Payment £500 After 10 years £10,056 Roll-up £ 93,509 Client Annual Payment Amount £5,458 After 15 years #N/A With Payments £ 37,222
Over estimated Life Expectancy £18,081 Interest-Only £ 54,584
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“Aren’t the early repayment penalties high?”
Early Repayment
Charges?
Variable ERC
Linked to
Gilts or Swaps
0 – 20 / 25%
Fixed, reducing ERC
E.G. on INITIAL loan:
5% yrs. 1-5, 3% yrs. 6-10
E.G. on loan BALANCE:
5% yrs. 1-5, 4% yr. 6, 3% yr. 7, 2% yr. 8, 1%
yr. 9
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“What if I downsize & want to repay my loan?”
Downsizing Protection
Option
Hodge Lifetime
Can repay loan penalty-free after 5 years if move home.
ERC in first 5 years:
5%, 4%, 3%, 2%, 1%
One Family
Can repay loan penalty-free after 5
years if
move home.
In first 5 years 6% ERC
NB: Available on certain plans
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“What if the lender doesn’t approve of my new home?”
ERC Downsizing Exemption
Client moves home & unable to transfer the loan
because the new property is unacceptable to the lender –
can repay the debt
PENALTY-FREE!
Pure Retirement
Classic range
More 2 Life Flexi Choice
& Capital Choice
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“What if my partner dies first & I want to repay the loan?”
3 year ERC exemption
on first death / move into care (joint borrowers)
LV
AvivaLegal & General
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Numerous uses…
Pay-off mortgage / debtsHome improvements / adaptations for later life Top-up income / maintain lifestyle (leaving pension
fund intact?) Lifetime gifting Pay for care at home / in a home Property purchase / bridgingDivorce: keep the home / buy a new home / each
buy a new home!
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The techie stuff…
Tenants in Common (drawdown?)
Power of Attorney / Deputyship (drawdown?)
Trusts – Asset Protection Trusts beware!
Property underwriting…
Questions?
Thank you
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Thank you!Direct: 01246 202 571Mob: 07734 151 251
