Examples
The examples below give you details on how Equity Release Plans operate and are for illustration purposes only.
Lifetime mortgage. To understand the features and risks, contact us.
Please note that this is only one example of how these plans work, for information purposes. There are other methods which may suit you better. You should take professional financial advice in this area. A family meeting may be suggested. Surrey Financial Advice is here to help. Remember, with Surrey Financial Advice, any initial consultation is free of charge (apart from a cup of coffee, perhaps) and you are under no obligation to proceed. [Contact Us]
The example is based upon a:
- Single applicant aged 77
- £30,000 Lifetime Mortgage Loan
- Property valuation of £100,000
- The loan will be repaid on death or permanently leaving the property.
|
IF PROPERTY VALUE DECREASES BY 1% PER ANNUM COMPOUND |
IF PROPERTY VALUE INCREASES BY 1% PER ANNUM COMPOUND |
|
Year 15 |
Year 15 |
PROPERTY VALUE |
£86, 005 |
£116,096 |
AMOUNT OF LIFETIME MORTGAGE LOAN |
£30,000 |
£30,000 |
AMOUNT RECEIVED (*1) |
£29,405 |
£29,405 |
LOAN INTEREST ACCRUED (*2) |
£49,089 |
£49,089 |
TOTAL AMOUNT PAYABLE |
£79,089 |
£79,089 |
APR (*3) |
6.82% |
6.82% |
RESIDUAL VALUE OF PROPERTY AFTER REPAYMENT OF LOAN |
£6,916 |
£37,008 |
Notes:
(*1) The amount received is after the deduction of the application fee of £595. The applicant will also have made a contribution of £130 in advance, towards the cost of property valuation.
(*2) Loan interest has been applied at a fixed rate of 6.48% per annum compounded monthly (correct available example as at 15/11/05).
(*3) Please refer to the explanation of APR below.
Property values:
An increase in the value of your property would offset the effect of the interest charged on your loan. The Lifetime Mortgage Loan and interest, together with all costs and charges due to the lender, are taken from the sale proceeds at the time your property is sold. The amount, which remains to you, or your beneficiaries, will depend on house prices at the time and sale proceeds received when your house is sold. Past performance of property prices should not be taken as a guide to the future. In addition, regional house price variations should be considered.
APR:
The Annual Percentage Rate defines the cost of obtaining credit. The APR takes into account the total interest payable for term of the loan, and all other payments and charges which the customer is required to make in respect of the loan. All lenders use a common formula so that comparisons on rates can be made between lenders. The APR will depend on the personal details for the borrower, the charges, the interest rates and the term of the lifetime mortgage loan.
Risk Factors:
Property valuation is a matter of judgement by a qualified surveyor, whose decision will not be open to appeal. It is possible that the loan and interest due may eventually equal the value of your property. This would affect your ability to move house in the future, unless you have other funds available. Entitlement to any benefits you receive, such as Income Support or Council Tax Rebate may be affected by taking out this plan.
Check that this mortgage will meet your needs if you want your family or others to inherit your home. If you are in doubt, seek independent legal and financial advice.
Shared Growth typical example
TODAY
- PROPERTY VALUE NOW - £100,000
- Ages: Male 75, Female 75
- Transferring 50% of the property will produce a lump sum of £23,087
- The lump sum can be used for any purpose.
If the above customers were to die in 10 years time the following payments would be due:
- Estimated Property Value £150,000*
- Payment to Bank
- (50% reversionary interest) £75,000
- Payment to next of kin £75,000
Property values:
Clients will benefit (or otherwise) from any future changes in the value of the percentage they still own.
Past performance of property prices should not be taken as a guide to the future. Regional house price variations should also be considered.
RISK FACTORS
Property valuation is a matter of judgement by a qualified surveyor, whose decision will not be open to appeal. Entitlement to any benefits you receive, such as Income Support or Council Tax Rebate may be affected by taking out this Plan.
