Tag: Retirement Plan

Are We Likely To Ever See Prudential Equity Release Plans Again?

In order to answer the question as to whether we will see Prudential equity release plans again we need to consider why equity release plans emerged in the first place and what they have to offer. Equity release allows you to raise funds from the value of your property. You and your spouse or partner retain the right to live at the property until you pass away or move out.

Essentially what you are doing is selling your home and then moving out later. For the retired over 55 individual or couple this can be a wonderful way to raise funds when they are needed. There are many reasons to choose equity release. The most obvious is that your retirement plan simply has not lasted as long as you thought or hoped it would. With the cost of living at an all-time high this is very common.

But, of course, you could just want to make your retirement a bit more relaxed. Or, perhaps you have always wanted to take an overseas trip and you have decided that this is the time.

Not all equity release schemes have been taken off of the market. In fact you have at least three companies that are major equity release providers. When you lose one provider there are often two more coming along the way or at least two more products to make it on the market. Whether Prudential equity release plans appear again or not, you are not being left out in the cold for your retirement needs. Instead, you have plenty of choices that have replaced the one product that is gone from the market right now. Let’s take a look at those options versus dwelling on the loss of one particular company’s product.

Lifetime Mortgages for Retirees

Under the name lifetime mortgages you have four products on the market right now. These are:
• Drawdown
• Roll-up
• Interest Only
• Enhanced

To start, rollup is the mainstream equity release. It is the one which all other lifetime mortgages are designed around. They are made for the person unable to make a monthly payment on the loan and who desires a large lump sum of cash to live out their retirement. You will see interest accrue onto the principle lump sum you took out. This lump sum and the interest are paid back once you die or decide to move out of the house the product is covering. Typically, payment is made with the sale of the home as most retirees do not have enough cash to cover the amount without a sale. You must be 55 years of age to take out one of these rollup products or any lifetime mortgage.

Drawdown is a definite change to rollup because you receive a smaller lump sum initially and then you take out money as you need it. Interest only adds up on the funds you have withdrawn from the account. This saves you money in the long run.

Enhanced is a version of the rollup scheme in every aspect, except it is a specialised mortgage to offer more money in a lump sum. You receive even more than the rollup plan or drawdown mortgage because your life expectancy is compromised. It might sound cold to say that illness in which death is quicker than most retirees is an advantage. However, in this case it is your ill health that can get you more funds because the loan is expected to be repaid quicker.

Interest only works like a rollup mortgage except you pay a monthly interest amount for as long as the loan is unpaid. Some products allow you to choose the amount of interest and make it a hybrid with a roll up in which any unpaid interest is rolled up into the lifetime mortgage. Most expect you to pay the full interest as it accrues each year.

If you do not appreciate these equity release plans in your situation, then consider a different choice in home reversion. This is an absolute sale of your house, but at least you get funds without a mortgage and interest accruing. For some this is a better option than having the burden of debt when they pass away.

Whatever scenario applies to you, you can see that the need for equity release plans is only going to increase. With this in mind it does seem likely that we will see equity release plans again in the form of Prudential equity release or at least from another company with products just as great.

Important Factors To Consider Before Choosing an Equity Release Plan

Many retirees turn to equity release plans as an easier way to raise more cash to fund their retirement years. You can speak directly to an expert prior to making a firm decision, since these plans are not always the most suitable for everyone. Here are some critical points that you can consider prior to making any decision and questions that you should ask your lifetime mortgage adviser.

Discuss the alternative ways of raising the money
An equity scheme will reduce the property’s value, with a few exceptions; hence, if you are not comfortable with this then the plan may not be the best idea for you. You may consider downsizing to a smaller property; however, many people do not like moving out of the home that they are used to, and the one they have brought up children in, for the sake of downsizing.

The reason it reduces the value is that you are taking equity out of the home and will have more to pay back in the end. It may be more than your children can pay and more than is covered by any life insurance policy. It could end up in an eventual sale of the house anyway.

Selling off items that you no longer wish to keep is one way to raise some money. It might not be a lot or enough, but it is a good place to start. For instance, do you need two cars anymore now that you and your spouse/partner are retired? Do you have other property like a second home you could sell or is it smaller so you could move there instead? Do your children wish to move back home to help out? Perhaps they have a little cash they can help fund your retirement with?

Always think of the alternatives before going with equity release.

Do you have potential state benefits?
Depending on your current circumstances, you may be a qualifier for additional state help, meaning that there is no need for you to withdraw funds from your home. As you compare the different equity release schemes in the market, the adviser will bring out some of these questions and help you make a wiser decision. The last thing you want is to lose income elsewhere.

Benefits can run out, so if you can take advantage of them now you might wish to do so. On the other hand you may find that owning a home keeps you from gaining extra benefits. If this is the case you may wish to use the equity in your home until you can no longer do so. At this point you can sell your home, pay the loan back, and then gain those additional state benefits. It just depends on what is available to you and why it might be an option.

Will you qualify for equity release?
You need to understand that not all people who own a property will qualify for an equity release mortgage, hence do the comparison research and confirm that you do qualify. For one, you must be aged 55 – 95 years and own a home worth at least £70,000 or more depending on the provider. There is a further criterion each company uses hence you must always check eligibility before submitting an application, as you do not want to be wasting hard earned money on a valuation fee.

You should be aware that the above are standards. They may not apply to each company. Some companies may stop giving out lifetime mortgages when you reach 75 meaning you need to attain it before this cut off age. Other companies may be willing to offer someone 99 years of age a helpful retirement plan. Compare the age, health options, and the value needed in your home to find a solution.

Are there equity plans that fit your needs?
There are various plans that you can explore and are provided by FCA (formerly SHIP) registered companies such as Stonehaven, Just Retirement and Aviva. Such companies have access to an equity release calculator to determine how much you can release from your home. Interest rates vary depending on the lender concerned and with some companies it can be affected by age. The property value is the key determinant as to how much as a percentage of its value you can get.

If you do not understand how equity release works, you need to first research the subject which can be undertaken online and requesting a free guide to equity release. However, if you are fully aware of what equity release entails, then go ahead and find your local equity release adviser and submit an application to enable you to enjoy your retirement lifestyle.