What Can You Get?

If you are making plans for early retirement or making a big lifestyle change that requires extra money, knowing how much you can get if you take out an equity release plan (or a reverse mortgage plan) will help you to gauge whether it will be worth you while. How much you will be able to get from the equity built in to your property may depended on many different factors.

You age and the age of your partner (or any other owners of the property) is a major determinant.  You cannot take out an equity release plan if you are younger than 55. In most cases, companies that offer equity release mortgages are businesses who wish to see a return sooner rather than later.

They are willing to offer you a loan based on the fact that your age, on the basis of probabilities, means that the older you are when you take out the loan the quicker they will get the return once you and/or your partner die, at that point the property reverts to them and they are able to realize the capital growth. If equity release loans were offered to younger people, there would essentially be longer to wait to realize the profit from the transaction.

When companies such as Northern Rock, or JP Morgan offer customers an equity release mortgage, they offer people who need extra money policies that suit their particular circumstances. Don’t make the decision on equity release plans without checking all your options first.

People who are looking for financial freedom, look towards home equity mortgages as a way of releasing funds from what is most commonly their most expensive asset. In times when the economy is harsh, a home equity conversion mortgage can seem like a way out of a financial hole, however one needs to be aware of reverse mortgage scams that are around that seek to take advantage of people who are in vulnerable positions.

This is particularly notable if you are a senior, as most reverse mortgage scams target seniors, with no family or support. Seniors are most vulnerable to this type of problems because reverse mortgages (or equity release plans) are only usually available to seniors over 55.

For the best advice on reverse mortgages in England, seek advice from a registered financial adviser. If you are someone who seeks to know how does a reverse mortgage work, then they will be able to explain this further and also recommend suitable companies to you.
If you are from the US, and have a property or relative in England who wants to find out more about reverse mortgages, then check out Safe Home Income Plans (SHIP) as well. They are the membership organisation for companies who offer home income/equity release/reverse mortgage products.

According to Which? problems could arise if the circumstances of the borrower changes. Which? have also stated that taking out an equity release plan could affect means tested benefits. They highlight the fact that these type of mortgages, should only be used as a last resort.

Equity release plans allow borrowers to lend money on their home without having to move out. Borrowers receive a lump sum payment that is paid back to the lender on the death of the property owner(s).

Age Concern have a great information leaflet on home reversion plans/equity release which can be found here.

What is a Reverse Mortgage

A reverse mortgage works in the same way as an Equity Release mortgage but in this case we are talking about financial options offered to senior citizens in the USA. Reverse mortgages are offered to people who own their homes outright, or have very small mortgages that can be cleared with the proceeds from a Reverse mortgage.

The difference between a reverse mortgage and a regular mortgage is that no payments are due on the load by the home owner. They are entitled to receive the loan either as a lump sum or as a fixed payment until they die or sell the property, at which time the loan becomes repayable in full.

What Help For Reverse Mortgages

The new changes are set to reduce the incidence of fraud from would be lenders, and is said also to cap fees that can be charged on this type of financial product. The Housing and Economic Recovery Act of 2008, is a set of measures proposed by the US government that is intended to provide some relief and assistance to home owners and thus stem the decline in the US housing market.

The fall in the equity withdrawal figures is blamed on the global credit crunch which has seem lenders tightening their criteria for lending and as such fewer home owners are able to borrow money to pay for home improvements, pay off debt or simply to provide a little relief as disposable incomes are squeezed.

Traditional equity release for people over 50 also saw a slight decrease, however a representative from Safe Home Income Plans (SHIP) said in a quote in the Independent business magazine that this decrease was due mostly in part on the collapse of Northern Rock which held quite a sizeable stake in the equity release market.

SHIP is the trade association hat represents lenders offering equity release schemes for older people.

Northern Rock’s portfolio accounts for a great deal of the UK mortgage market, however after being embroiled in the global credit crunch problems has meant they were unable to borrow money to fund their business practices, hence the bail out by the UK’s main bank.

The portfolio of lifetime mortgages prior to the sale to JP Morgan is said to make up approximately two percent of Northern Rock’s assets. At the time of writiing, Northern Rock offer three equity release products

• Standard Lifetime Mortgage
• Cash Plus Lifetime Mortgage
• Protected Equity Lifetime Mortgage

Chief Executive Andy Kuipers is happy about the equity release portfolio sale. He said “It illustrates the quality of our assets, which has enabled us to achieve a sale at a premium despite continuing difficult financial markets“.