Your guide to Equity Release EXPERT ADVICE with no obligation
Your introduction to equity release Your retirement should give you the freedom to do all the things in life you haven t had time for. However, you may be finding your income needs to stretch further and you can t afford to do all the things you ve dreamed of. Contents Page Equity release may be able to offer a way to release cash from your home to use however you choose whether it s for the holiday of a lifetime, a special purchase, home improvements, or simply to make day-to-day life more comfortable. Our informative guide to equity release explains the main types of plan available and can help you when considering the important issues and implications involved. Taking out an equity release plan is a major financial step and seeking specialist advice is absolutely essential. With the Saga Equity Release Advice Service, provided by Just Retirement Solutions Limited (JRS), you can receive no-obligation expert advice and it s provided at no additional cost to you. You will have access to a panel of carefully selected providers so you can feel assured that the product recommended is best suited to your individual needs. As a member of the Equity Release Council, JRS adheres to a strict Code of Conduct (outlined on page 8), which provides a number of safeguards and guarantees for customers. Your specialist equity release adviser will: What is equity release? 4 Why people are releasing cash from their homes 4 Some good reasons to choose equity release 5 The two main types of equity release plan 6 Some points you should consider 6 How the Saga Equity Release Advice Service can help 7 Saga Equity Release Plan 8 review your circumstances in full, assess whether equity release is right for you and explain the advantages and disadvantages of equity release assess the impact equity release will have on your eligibility for state benefits, your tax position and your provision for leaving an inheritance check to see whether you qualify for any additional state benefits only recommend a plan with a fixed interest rate, so you always know exactly what you owe only recommend plans that offer a no negative equity guarantee, meaning that as long as you adhere to the conditions of the plan, you will never leave a debt to your estate as a result of taking out a plan support you through every step of the process. Equity release case study 9 Frequently asked questions 10 On page 7, you can find out more about our advice service and how it could help you. 2 3
What is equity release? Some good reasons to choose equity release Put simply, if you and your partner are homeowners aged 55 or over, you could use equity release to help you free up cash from the value of your property. The equity in your home is the difference between its value and any outstanding loans, such as a mortgage, secured on it. Equity release is a way of unlocking a proportion of the value - or equity - you have in your home in exchange for a tax-free lump sum. Equity release plans can be quite complicated and the decision to take one out is a major step for many people. Your house may well be your main asset as well as your home, so taking specialist advice from financial experts, such as the Saga Equity Release Advice Service, is essential. Am I eligible? To be eligible for equity release, the youngest applicant must be 55 or over, and you must own and occupy a property in the UK that is worth at least 70,000.* If you have an outstanding mortgage or other debts secured against your property, you may still be eligible, however you would need to repay these with some of the equity you release. The ownership status (leasehold or freehold), property type and even construction are all factors that will influence which product from which equity release provider is most suitable for your needs. The specialist adviser working for you through the Saga Equity Release Advice Service will explain things fully and only recommend products that are right for you and your individual circumstances. How much money can I release? This will depend on a number of factors, the main ones being your age and the value of your property. The older you are, the greater the proportion of your home s value could be released. The amount you could borrow, and the way in which you could borrow it, will depend on the plan you choose. For an indication of the maximum amount you could potentially release, visit our online calculator, which can be found on our website, saga.co.uk/equity-guide Why people are releasing cash from their homes Longer life expectancy Advances in modern medicine are helping us to live longer in fact, the average 65 year-old male today will live to be 83 # and the average 65 year-old female to be 85 #. However, it means that retirement incomes have to stretch a lot further to keep up with inflation. Dealing with difficult times When economic conditions are difficult, those who rely on income from pensions, savings and dividends may be hardest hit, while others hoping to sell and downsize to provide extra cash may find it difficult to find a buyer. *Minimum age and property value varies between product providers. #Source: Interim Life Tables, England & Wales 2009-2011 Office of National Statistics Released March 2013. The good news is that, despite the uncertain property market, UK house prices are still much higher than ten years ago with the average house worth tens of thousands more than a decade ago, so many people still have substantial equity tied up in their homes. Equity release could enable you to turn some of your property s value into accessible cash without having to move. The opportunity to spend the equity on almost anything you choose You can use the equity released from your home to spend on almost anything you choose. For many people, the cash is used to do the things they ve always dreamed of in retirement such as a holiday of a lifetime or to fund a significant purchase. Or sometimes the equity can be used to clear any existing debts you may have or help your children onto the property ladder. Think carefully before securing other debts against your home. The opportunity to stay in your own home With equity release you don t have to move or sell your home to unlock the equity it holds. Tax efficiency Money released from the value of your main home is free of tax, although if the cash is then invested there may be tax to pay on any income or growth. Tax treatment depends on the individual circumstances and may be subject to change in the future. Enjoy your money now If leaving your property to your family is not a key concern, then releasing the cash tied up in it may be an alternative worth considering. With equity release you can unlock this money as and when you need it. Source: Halifax House Price Index, existing houses (all buyers), non seasonally adjusted - monthly data. July 2013. 4 5
The two main types of equity release plan Lifetime mortgage A lifetime mortgage allows you to release a cash lump sum (or, with some plans, take smaller amounts as and when you need them) from the value of your property. With most lifetime mortgages, there are no regular payments to make and nothing has to be paid back until the end of the plan. This is usually when the last planholder living in the property dies or moves into long-term care. You continue to own and live in your own home and may benefit from any future increases in its value. It is important to note that a lifetime mortgage is a lifelong commitment. If you choose to repay the loan early, early repayment charges may apply. The solution to releasing equity from the value of your home may involve a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration. The Saga Equity Release Advice Service can advise you which type of equity release plan is suitable for your financial needs. Some points you should consider Although equity release could enable you to help your family whilst you are still living, it will reduce the value of your estate and the amount that will go to your beneficiaries on your death. How the Saga Equity Release Advice Service can help Equity release is a serious decision and it is important you understand the advantages and disadvantages to make a decision that s right for you. So, the first important step to releasing equity from your home is to seek expert advice. That s where the Saga Equity Release Advice Service, provided by equity release specialist JRS, can help. No-obligation expert advice - at no additional cost to you Some companies charge for providing advice on equity release. With the Saga Equity Release Advice Service, we can provide no-obligation expert advice with no advice fee. After your appointment the adviser will review your objectives and put together a report. They will then make a further appointment with you to present their recommendations. If you are happy with their proposal, you will then complete the application form, pay any fees (if applicable) and a solicitor will be appointed to complete the process. If you decide to take out a plan, Just Retirement Solutions Limited will pay Saga an introductory fee. Equity release is not suitable for everyone and your adviser will tell you if it is not right for your circumstances. Home reversion plan Home reversion plans involve selling part or all of your home to a home reversion provider in return for a cash lump sum. If you choose a home reversion plan, all or part of your home will belong to the provider company. You can remain living there for the rest of your life rent-free and continue to be responsible for its maintenance and upkeep. There s no interest to pay either, because a home reversion plan is not a loan. However, if your property increases in value, you will only benefit from the increase in value of the proportion you still hold. Usually when you die or move into long-term care, the property will be sold and the company receives its share of the proceeds. A home reversion plan is a lifelong commitment and if you wish to buy back your share of your home, you will have to do so at the current market value. Equity release schemes involve borrowing against (lifetime mortgages) or selling all or part of your home (home reversion plans) and there may be more suitable methods of raising the funds you need. For example, making sure you are receiving all the state benefits you are entitled to, or moving to a smaller property. Equity release may affect your tax position and your entitlement to means-tested benefits and grants. If you choose to meet or talk with an adviser from the Saga Equity Release Advice Service, your adviser will explain this in more detail. Equity release is not for everyone. Taking professional advice such as that offered by the Saga Equity Release Advice Service is essential. A simple process After you call the Saga Equity Release Advice Service, the adviser will first check your eligibility for equity release. If they believe you are eligible, an appointment can be made for you to meet an adviser (or speak to them by phone, if that s your preference). In the meantime you will receive a budget planner to help you assess your current and future expenditure and needs. Then, when you meet the adviser you can discuss your goals and requirements, look at the available options and ask any questions. Call Saga on 0800 056 6070 and ask to be put in touch with a specialist adviser. 6 7
Saga Equity Release Plan with no upfront fees* One of the plans available through the Saga Equity Release Service is the Saga Equity Release Plan and your adviser will be able to tell you whether this option is the most suitable for you. If it is not, they will explain why and recommend another plan more appropriate to your needs. The plan is only available to those aged 60 or over. What is the Saga Equity Release Plan? The Saga Equity Release Plan is a lifetime mortgage which gives you the flexibility to release tax-free cash either as a lump sum or in smaller amounts as and when you need it. You continue to live in and own your home and there are no monthly repayments to make. The loan only becomes repayable on the sale of the property, or when the last planholder dies or moves permanently into long-term care. No upfront fees* - more money for you We understand that if you are looking to release cash from your home, the last thing you need is to find additional cash to pay fees. The Saga Equity Release Plan has no set-up or valuation fees and what s more 425 will be paid towards your legal fees. This should cover the basic fee for the legal work involved in a lifetime mortgage, although you will be responsible for paying any additional fees over and above this. The Saga Equity Release Plan is provided by Just Retirement Limited. As a member of the Equity Release Council, Just Retirement Limited adheres to a strict Code of Conduct, which provides a number of safeguards and guarantees for customers. The Code of Conduct states that: any recommended plan will have a no negative equity guarantee, meaning you will never owe more than the value of your home you have the right to stay in your property for life, as long as it remains your main residence a plan should be presented in a clear way, including an explanation of its costs, benefits and limitations all legal work is carried out by a solicitor of your choice you have the right to move your plan to another suitable property without any cost the main impact that equity release will have on your estate is clearly explained. This is a lifetime mortgage. To understand the features and risks ask for a personalised illustration. The Saga Equity Release Plan is only available through the Saga Equity Release Advice Service provided by Just Retirement Solutions Ltd. *The no upfront fees offer applies to the Saga Equity Release Plan. If a plan from another product provider is recommended, application, valuation and legal fees may be charged. Equity release case study The following case study is a fictional example designed to represent a typical situation and does not relate to any particular individuals. You should not look upon this case as financial advice or a recommendation of a particular course of action. Rather, consider your own circumstances carefully and consult the Saga Equity Release Advice Service for a professional, fully advised service. Improving the home Mr and Mrs Adams, aged 72 and 70, have lived in their current property (a four bed detached house) for 25 years. They bought it for 58,749 and it is now worth 246,813, a staggering increase of 420%. Having been there for so long, they could not imagine living anywhere else. However, the property has become quite expensive to maintain and could do with some modernizing. Their younger son read an article on equity release and suggested it as a way for them to remain in their home without reducing their standard of living. They sought specialist advice and their circumstances were reviewed, including looking into any grants that might be available. They were recommended a lifetime mortgage with a drawdown facility, which would provide them with 25,000 now to replace the kitchen and carry out other home improvements, plus another 15,000 for a longed-for trip to Australia to visit relatives. They also have the option to withdraw a further 38,980 from their property in the future. The interest charged will be added annually to the value of the loan, so they do not have any repayments to meet. Also, interest is only charged on the equity released they will not pay interest on funds until they are drawn down. Notes: Original price based on value of detached property in North West England in Q1 1988 Halifax House Price Index. Current house price based on house price calculator North West England Q1 1988 to Q1 2013 Halifax House Price Index August 2013. Released amounts based on Just Retirement Limited Roll-Up Lifetime Mortgage September 2013. 8 9
Frequently asked questions Will I still own my home? If you take out a Lifetime Mortgage (such as the Saga Equity Release Plan) the property remains in your name, as it would be with a conventional mortgage. There may be an early repayment charge if you settle the mortgage early. Your adviser will explain this in detail. However, if you take out a home reversion plan, the reversion company will own all or part of your property (although you can continue to live there for the rest of your life). You should be aware that when you take out the plan you will normally receive less than the current market value of your home this is because the reversion company cannot sell it until you die or move into long-term care and so need to protect themselves against any potential loss in value. How much does it cost? Most equity release plans include additional set-up, property valuation and legal fees. The specialist adviser, after reviewing your circumstances and requirements, will recommend the most suitable plan for you. If the Saga Equity Release Plan (see page 8) is recommended, there are no valuation or set-up fees and 425 is paid to your solicitor on completion and should cover the cost of most applications. You will be responsible for paying any additional fees over and above this amount. If equity release is suitable, but this plan is not, the adviser will recommend a plan from another provider, who may apply these fees. Whichever plan is recommended, this no-obligation expert advice is provided at no additional cost to you. Will equity release affect my state benefits? The Saga Equity Release Advice Service includes a full review of your entitlement and you may find you are eligible for additional state benefits you were not aware of. Will I be able to leave an inheritance to my children? The adviser will assess the likely effect on the value of your estate. However, it will not affect any other money that you may leave as part of your inheritance for example, from savings or life assurance policies. What s more, when the time comes, if your home sells for more than you owe, the remaining equity could form part of your estate. The solution to releasing equity from the value of your home may involve a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration. Saga Equity Release Advice Service What our customers say... From start to finish the whole process felt comfortable. The most important component was the initial home visit and the co-ordination with the legal service was smooth - all in all a very professional experience. Taking equity release has given us peace of mind financially. Taking equity release enabled me to help my daughter with a financial contribution as well as giving me a better lifestyle. I felt the service provided was first class from start to end. Mr K, Merseyside Mr H, Wales We used equity release for peace of mind and to settle our debts. Our pensions now cover all outgoings. Mrs J, Inverness-shire We are both delighted with the service received from your adviser and office staff, and impressed by the efficiency with which our case was dealt. Equity release has helped us have financial security. Mr W, Norfolk Our adviser explained everything to us very thoroughly and has kept us fully updated during the procedures. Mr & Mrs O, Somerset 10 11
The next step to take To find out more about equity release and the Saga Equity Release Advice Service visit saga.co.uk/equity-guide or If you think equity release may be of interest to you, call the Saga Equity Release Advice Service on 0800 056 6070 to be put in touch with a specialist equity release adviser. Lines are open 8.30am-6.30pm Monday to Friday and 9am-1pm Saturday The Saga Equity Release Advice Service is provided by Just Retirement Solutions Limited. The Saga Equity Release Plan is provided by Just Retirement Limited. Saga Personal Finance is a registered trading name of Acromas Financial Services Limited, which is registered in England and Wales (Company No.3023493). Registered office: Enbrook Park, Sandgate, Folkestone, Kent CT20 3SE. Acromas Financial Services Limited and Just Retirement Solutions Limited are authorised and regulated by the Financial Conduct Authority. Just Retirement Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. CSB-AF0173 ER/BR/NB/A5/N13