Equity Release A guide to our Lifetime Mortgage products
Introducing Retirement Advantage 2
A guide to our Lifetime Mortgage products Retirement Advantage is a wellestablished company that can trace its roots back to 1852. We provide those who are in, at or approaching retirement with a range of simple, secure and flexible products to suit their needs. Every year thousands of retirees rely on us for their income. We have over 2billion of funds under our management, and a heritage dating back over 160 years. In January 2018 Retirement Advantage became part of the Canada Life Group (UK) Limited. Canada Life shares a similar heritage, and just as importantly, places the same emphasis on providing outstanding service to customers. Canada Life has operated in the United Kingdom since 1903. Today the Group offers life insurance, critical illness cover, retirement planning, annuities, investments and inheritance tax planning, looking after the needs of thousands of individuals and companies. Canada Life is itself part of Great-West Lifeco, with over 30 million customers worldwide and 760 billion in assets under administration. Retirement Advantage is authorised and regulated by the Financial Conduct Authority (FCA). We re also a member of the Equity Release Council the equity release trade body, which is dedicated to the protection of planholders and we re committed to following their code of practice. Releasing equity from your property is a big decision. So to make sure you make the choices that are right for you, we only sell our products through financial advisers. To find a retirement specialist, there are directories that are free to use and will display a list of firms that can help you. Our website will show you a number of these organisations including Pick-A, Pension Wise, Equity Release Council and Unbiased. Visit retirementadvantage.com/find-an-adviser. 3
What is equity release? Put simply, equity release is a method of releasing some of the money built up in your property, without having to sell it. How much equity you can release depends on your age, how much your property is worth and how much you choose to borrow. There are two different types of equity release plans Home Reversion plans and Lifetime Mortgages. At Retirement Advantage we offer Lifetime Mortgages, however we believe it is important you understand how both work. With a Lifetime Mortgage, the amount borrowed (along with any charges or interest accumulated) will usually be repaid at the time of your death or when you move into long-term care, commonly using the cash generated from the sale of your property. You will always retain ownership of your property, and it will never be repossessed, as long as you abide by the terms and conditions of the loan. With a Home Reversion Plan, you sell all of your property to a reversion company in exchange for a cash lump sum. Ownership passes to the reversion company, but if it is your main residence you have the right to remain in the property rent free. Some schemes allow you to retain an interest in the property, as if you ve only sold part of it. 4
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A guide to our Lifetime Mortgage products Is a Lifetime Mortgage right for me? People choose to release equity from their property for various reasons from supplementing their own pensions or paying off existing mortgages, to giving their children or grandchildren a lump sum towards buying properties of their own. Whatever the reason it s important to remember that taking out a Lifetime Mortgage is a long-term commitment, as it is usually designed to be paid back only when you die or if you move permanently into long-term care. You should consider the options available to you, as there may be more suitable ways of raising the money such as downsizing, or using your savings. It s also important to consider that a Lifetime Mortgage could impact your tax position and your eligibility for means-tested state benefits. It could also change the amount of inheritance your beneficiaries receive. So, along with discussing your options with a financial adviser, it s a good idea to talk these outcomes through with your family. 7
Am I eligible? To be eligible for a Retirement Advantage Lifetime Mortgage, you will need to meet some key requirements, the most basic of which are: You must own the property You must be a UK resident You must be 55 years of age or older Your property must be in England, Scotland or Wales Your property must be your main residence, unless it qualifies as your second home, as set out below. The other requirements relate to your personal circumstances and your property. Some restrictions may apply over the type of property you own. Am I eligible for a Second Home Lifetime Mortgage? To be eligible for a Second Home Lifetime Mortgage, you will need to meet the above criteria. Your property will need to meet some key requirements, the most basic of which are: The property must be available for you, the owner, to use If the property is ever let-out, it can only be let-out for a maximum of 4 weeks at a time The property must be used by you, the owner, for a minimum of 4 weeks every year There are other requirements which relate to whether the property is advertised and whether any formal tenancy agreements are in place. Your financial adviser will be able to talk you through these key requirements in more detail. 8
A guide to our Lifetime Mortgage products How much can I borrow? The amount that you can borrow depends on your circumstances, which include your age and the value of your property. If there are two of you borrowing together, the amount available will depend on the age of the younger borrower. In order to gain an accurate value of your property, an independent valuer will be appointed by us. 9
How do I take out a Lifetime Mortgage? 1. Research Before taking out an equity release product it s important to research all of your options, to make sure it s the right choice for you. 5. Have your property valued We will appoint an independent valuer who will contact you to arrange a convenient time to visit your property to carry out a valuation. 2. Talk to your family As a Lifetime Mortgage could affect your family, we encourage you to talk to them before making a decision. 3. Talk to your financial adviser If, after discussing your options, your adviser decides a Retirement Advantage Lifetime Mortgage is right for you, they ll provide you with a summary of the important details and costs involved called a Key Facts Illustration (KFI) or personalised illustration. 4. Fill out an application form Once you re happy, you ll need to complete an application form. Your financial adviser will help you with this and will be responsible for sending it back to us. At this point you ll need your solicitor s details and may need a cheque for the valuation fee. 6. Appoint your solicitor To make sure you fully understand the implications of your decisions, all Equity Release Council members require that you discuss it with your own solicitor before committing to a Lifetime Mortgage. If you don t have a solicitor you can contact the Equity Release Solicitors Alliance on 0800 988 5102. 7. Retirement Advantage will make you an offer Following your property valuation, we will confirm how much you can borrow, and send an Offer Letter to you, your solicitor and your financial adviser. 10
A guide to our Lifetime Mortgage products 8. Legal process After your solicitor has received a copy of the Offer Letter they ll talk you through the offer. When you re happy, you ll be asked to sign a Mortgage Deed and your solicitor will sign a certificate to confirm the essential features and implications of the plan have been explained to you. 9. Cash released Once we have received the correct documents and have carried out the necessary checks, we will release the cash to your solicitor. In the majority of cases, they will then arrange for the funds to be transferred to you. 11
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A guide to our Lifetime Mortgage products How much does it cost? When you take out a Lifetime Mortgage, there are some charges that you will need to pay. Below are the main costs please refer to Our Charges leaflet for more detail on the costs involved. This document is available on our website, or you can ask your financial adviser for a copy. Valuation Fee This covers the cost of valuing your property and may be payable when you submit the application. Completion Fee This is only paid upon completion of your lifetime mortgage. You can usually pay this at the point of completion or add it to your loan. Your solicitor s fees You should agree these with the solicitor of your choice. Our legal fees are covered within the Completion Fee. Your adviser s fee You may be charged an advice fee by your financial adviser. Early Repayment Charge (ERC) The loan may be repaid in full, or in part, at any time. However, our plans are designed to last for the rest of your life so an ERC may be payable if the loan is repaid earlier. Your financial adviser will explain when and how you may have to pay this. It is also clearly explained in your Key Facts Illustration or personalised illustration. 13
Our equity release products Over the next few pages we ll outline the Lifetime Mortgage products we provide, which allow you to tailor how you release cash from your property. Within some of these products, we have options that differ by the maximum amount you can borrow and the interest rate you ll pay. To learn about these products in more detail, please refer to our website retirementadvantage.com. 14
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Our Lifetime Mortgages These products can be used to unlock equity from your main residence or Second Home. To find out which of the options below best suit your circumstances, speak to your financial adviser. 1. Lifestyle Options Our Lifestyle Options provide you with a one-off cash payment. With these products you don t make any monthly interest payments. Instead the interest rolls up and is added to the mortgage each month. The difference between the Lifestyle Options are the maximum amount that you can borrow and the interest rate that you will pay. 2. Voluntary Select Options Our Voluntary Select Lifetime Mortgages are designed to provide you with flexibility and choice, to help you stay in control of your finances. These options allow you to make voluntary payments of up to 15% of the initial loan balance each year, without having to pay an early repayment charge. If you are applying for this product on a Second Home, you can make voluntary payments of up to 10%. You can choose how much to pay (minimum 50) and how frequently. The flexible payments mean that you can maintain control of your mortgage, and you can choose whether to pay off some of the interest and/or capital each year. The voluntary contributions are not mandatory so if you do not make any payments there are no penalties. Like our Lifestyle Options, the differences between the Voluntary Select Options are the maximum amount that you can borrow and the interest rate that you will pay. 3. Interest Select Options This product range is available on your Main Residence only. Interest Select is not available for your second home. Unlike traditional roll-up Lifetime Mortgages, our Interest Select Lifetime Mortgages allow you to pay some, or all, of the interest charged each month, for a period of your choice. This allows you to reduce the size of the rolled-up loan significantly. And, if you d like to leave an inheritance to your family, this could be a good choice for you. With our Interest Select Option products the money you release is a tax-free one-off payment. You can choose how much interest you pay each month (between 50% and 100% of the total interest amount), and for how long (between 5 years and the life of the loan). 16
A guide to our Lifetime Mortgage products Interest payments will be debited from your nominated account on the first working day of the month. At the end of your chosen payment term, the interest payments will cease, and interest will be added to the loan meaning there are no hidden surprises! Once you ve decided how much to pay and for how long, you can t amend it you can only cancel it. If your financial circumstances change, you can choose to stop making the interest payments at any time but it may affect the interest rate charged. Your financial adviser will be able to talk you through the implications of this. The differences between the Interest Select Options are the maximum amount that you can borrow and the interest rate that you will pay. Our range of Buy-to-Let mortgages Our lifetime mortgage products are secured on your main residence and Second Homes. We also offer a range of mortgages which can be secured on your Buy-to-Let property. If you d like to find out more about these options, please refer to our A Guide to our Buy-to-Let products. 17
Product Features 18 Our products come with many features. Speak to your financial adviser to find out which products include the following: No negative equity guarantee We guarantee that when your property is sold, if the proceeds after solicitors and estate agents fees are not enough to pay the amount owed to us, we will not ask you or your beneficiaries to pay the shortfall. If your property is sold for more than the amount you ve borrowed against it, the amount left over belongs to you or your beneficiaries. Early Repayment Waiver Some of our products offer an Early Repayment Waiver. This means that if you are joint borrowers, you will not need to pay an Early Repayment Charge if you decide to repay your Lifetime Mortgage within 3 years of the date that the first borrower dies or goes in to long term care. Downsizing Protection Some of our products offer a Downsizing Protection. This means that if, after 5 years, you want to repay the loan because you are selling your home and moving to a different property, you will not need to pay an Early Repayment Charge. You will retain ownership With our Lifetime Mortgages, as long as you abide by the Terms and Conditions of the loan, you will always retain ownership and control of your property. This means that you are responsible for maintaining it. No repossession Your lifetime mortgage is on your main residence. Providing you abide by the Terms and Conditions of the loan, you will be able to live in your home until your death or you move into long-term care. You won t have to worry that your property will be repossessed due to the loan, including rolled-up interest, exceeding the value of the property. Option to move home You are releasing money from your main residence. Our products offer you the option to move the lifetime mortgage to a new property. If you move to a new property that is suitable to us, you can move the loan to your new home under the same Terms and Conditions. However, if you move to a property of lower value, it may mean that we cannot lend you the amount you currently owe. In these cases you may have to repay part of the loan. This is described in more detail in your Key Facts Illustration.
A guide to our Lifetime Mortgage products Cash reserve facility If you think that you d like to borrow more money in the future, some of our products allow you to add a cash reserve facility to your Lifetime Mortgage at the outset. This facility means that you can withdraw further funds without taking financial advice. Your financial adviser can talk you through this option in further detail and advise which products allow a cash reserve facility. Fixed interest rate The rate of interest is fixed for the duration of the loan, which means you won t get any surprises later on down the line. Any additional borrowing is also at a fixed rate, but the rate is set at the time you apply and can be different from the initial rate of the loan. Repayment of the loan The loan, and all outstanding interest and charges, is usually repaid from the sale of your property when you die or move into long term care (or when the last surviving borrower dies or moves into care). Your estate will receive any remaining equity and retain full ownership of your property until it is sold. Option to make interest payments Because the loan is usually repaid from the sale of your property when you die or move into long term care, some of our products allow you to choose whether to make any payments during the term of the lifetime mortgage. Your financial adviser will talk you through the options available to you. Optional Inheritance Guarantee Some of our Lifetime Mortgage products let you choose to protect a percentage of the eventual sale value of your home at the outset. This means that the percentage you choose to protect is guaranteed to be available to you or your beneficiaries in the future. This product feature is free of charge. Regulated Retirement Advantage is regulated by the Financial Conduct Authority (FCA). Your beneficiaries can repay the loan without selling the property, if they choose to. 19
Additional Borrowing With our Lifetime Mortgages, you may be able to access further funds at a later date. We will describe the options available to you here, but your financial adviser will be able to discuss them with you in greater detail. Cash Reserve Facility Some of our Lifetime Mortgage products offer the option to add a cash reserve facility to the Lifetime Mortgage at the outset. This allows you to withdraw further funds at any time, without having to seek financial advice. If you choose to add this option to your mortgage, your monthly interest rate will increase by 0.2%. When you choose to make a withdrawal from your cash reserve facility, you need to get in touch with us. The withdrawal process takes up to 20 working days, and you can choose when and how often you withdraw funds. The minimum amount you can withdraw is 2,000 and the maximum is the total value of your facility. There is no fee for making withdrawals. Further Advance If you d like to borrow further funds from your property, you can apply for a further advance. You can do this at any point, providing your application meets our lending criteria, and there s enough equity still in your property. This must all be done through your financial adviser. The minimum amount which can be taken as a further advance is 4,000 and the maximum will depend on your personal circumstances. Your financial adviser will be able to tell you about the fees associated with a further advance. You may need to pay a valuation fee and a completion fee, and your financial adviser may also charge you an advice fee. 20
A guide to our Lifetime Mortgage products Early Repayment Charges (ERCs) Our Lifetime Mortgages can be repaid at any time. You can also make partial repayments providing there is a minimum loan balance of 10,000 remaining. However, our plans are designed to last for the rest of your life, so an early repayment charge may be payable if the loan is repaid early. Each repayment is subject to a fee that is calculated based on when the initial advance, further advance or cash withdrawal was made. The early repayment charges are as follows: Years 0-5: 5% of the initial advance Years 6-8: 3% of the initial advance Years 9+: no charge on any early repayments If a partial payment is made, it is calculated in the same way, but is based on the amount being repaid rather than the initial loan amount. When an early repayment charge is not applicable There are circumstances where an early repayment charge wouldn t be payable: For some products, if you sell the property and transfer the mortgage to another suitable property. For some products, if you, or the remaining borrower, have moved into long-term care. When repayment takes place after death of the remaining borrower. If the early repayment charge term has expired. If you make overpayments allowed under our Voluntary Select Options. This will be explained in your offer letter. Our early repayment charges have been designed with you in mind. They are fixed, transparent, and simple to understand. They let you know where you stand throughout your Lifetime Mortgage and give peace of mind from the outset. 21
We re a member of the Equity Release Council Retirement Advantage is a member of the Equity Release Council, the equity release trade body. If you are securing the lifetime mortgage against your main residence, their product standards ensure that: You will never owe the lender more than the value of the property in the event of your death or move into long term care. This is called a no negative equity guarantee. You can move home and take the loan with you without being charged an early repayment charge. All clients seek independent legal advice. Our Second Home Options do not meet one of the Council s product standards because the lifetime mortgage isn t being secured against your main residence. Instead, money is being unlocked from your Second Home. Therefore the right to remain in the property for life, or until you move into long term care, does not apply as this standard is designed to protect you only in your main residence. All of the remaining product standards apply in full to this product range, including a fixed interest rate for the life of the loan, a no negative equity guarantee, and an independent valuation. To find out more about the Equity Release Council please visit equityreleasecouncil.com. 22
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What do our customers think? Retirement Advantage helped us clear our mainstream mortgage Mr and Mrs Richards, Cheshire Mr and Mrs Richards had an interest-only mortgage, which had an outstanding balance of 25,000. When they were two years away from the end of their mortgage term, their Lender wrote to them to asking how they were intending to clear the outstanding balance. Unfortunately, they didn t have sufficient means to pay off the mortgage in full, so they went to see a financial adviser to discuss their options. Although Mrs Richards was only 57, they were turned down by mainstream lenders because she was approaching retirement. Instead, their financial adviser recommended an interest paying Lifetime Mortgage. They were able to clear their mainstream mortgage using the equity they released from their home. They also released some additional money to make some home improvements. A Retirement Advantage Lifetime Mortgage meant I could give 20,000 to my daughter as an early inheritance Mrs. C, Scotland Mrs. C had recently moved into a new home, which she had begun to improve and enhance. Over recent months Mrs. C noticed her daughter struggling with financial commitments, so she wanted to help. She decided that she d want to make interest payments on any money she borrowed, to reduce the impact of interest roll up. She was thrilled to see that Retirement Advantage offered an Interest Select Lifetime Mortgage where she could choose how much interest to pay each month. To make sure Mrs. C received the right information and advice we asked her to speak to her adviser, who guided her through the process. Having reviewed her financial situation, he recommended the Retirement Advantage Interest Select product and they submitted an application. Mrs. C is thrilled that she has been able to gift an early inheritance to her daughter at a time when she needs it. And is pleased that she can make interest payments to safeguard her future inheritance as well. Please note the examples shown above were appropriate for those customers, however it does not mean that in similar scenarios the solution shown would be right for everyone. Speak to your financial adviser about what is best for you. 24
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How to make a complaint We re serious about resolving customer issues fairly and as quickly as possible. We believe the majority of problems can be resolved immediately and to your satisfaction by contacting our Customer Centre. We also have a complaints procedure to deal with any issues that can t be resolved immediately or any complaints you may have about the Retirement Advantage products you have purchased. Customer complaints procedure 1. To make a complaint, please contact us by one of the following ways: Email: er-complaints@ retirementadvantage.com Call: 0800 068 0212 2. We ll provide a written acknowledgement of your complaint within five working days of receipt. 3. If we cannot resolve your complaint within four weeks, we ll write to you explaining why and let you know when we ll make further contact. We ll write to you again if your complaint is still unresolved after eight weeks of initially receiving your complaint. Our letter will explain the reason for the further delay and let you know when we expect to be able to provide a final response. We ll also explain what action you may take if you are dissatisfied with the progress of the investigation. 4. When we ve concluded our investigation into your complaint, we ll explain our decision in writing. 5. If after eight weeks we have been unable to satisfy your complaint, or haven t sent you our final response, you can write to the Financial Ombudsman: Financial Ombudsman Service, Exchange Tower, London, E14 9SR. financial-ombudsman.org.uk Email: complaint.info@financialombudsman.org.uk Telephone: 0800 023 4 567 However, the Financial Ombudsman is unable to deal with your complaint unless you ve first given us the chance to put things right. Our complaints procedure can be found at www.retirementadvantage.com/complaints We ve made our complaints procedure easy to follow, so that you should not have to use a solicitor or seek professional help. If you choose to do this, you ll be responsible for the costs. For further information please talk to your financial adviser. 26
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Retirement Advantage is a trading name of Stonehaven UK Ltd. Authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 05487702. Registered office: 110 Cannon Street, London EC4N 6EU. 30-012 01/18