Do Safe Equity Release Schemes Actually Exist?

June 10th, 2021 by dayat No comments »

Probably the most secure Equity Release Schemes existed around 40 years ago and were known as life time income or home income plans. These equity release plans where only available for retired home owners aged over 75 and involved a secured property loan of up to £30,000 with fixed interest only repayments for life. At that time it was possible to qualify for tax relief deducted at source on the mortgage interest so interest only repayments were reduced. The loan amount was used to buy a life time annuity that paid a very high fixed income for life. The monthly payments from the annuity were greater than the net fixed mortgage repayments, so the home owner had change left over to spend.

These equity release schemes could make a come back, but with tax relief no longer available on interest payments the annuity would need to be substantial. This means that the annuitant will need to be typically over eighty years old and in adverse health. It is also possible these days to access much larger equity release loans, particularly for much older home owners. For example an elderly homeowner could apply for an interest only lifetime mortgage that could produce a lump sum of say £50,000. This cash sum could buy an annuity income of say £7,000 p.a. or more for life. So if the interest only mortgage is say 7% p.a. (£3,500) then the homeowner would be able to keep the difference (£7,000 less £3,500 = £3,500 p.a.) as a lifetime spendable income.

In this instance the annuity income provides a guaranteed annual fixed return of £7,000 (14%) so when the fixed interest only mortgage of say 7% has been paid by the annuity income, the net lifetime annual income to the retired home owner is 7% which is paid monthly.

The downside of this equity release scheme arrangement is that the £50,000 loan to buy the annuity has been sacrificed for good, even if death occurs early. However this type of equity release may be regarded by many as the safest form of home income plan. This is because unlike a home reversion plan, you do not have to sell a part or all of your property to release capital. Also, unlike a roll-up lifetime mortgage, the original loan always remains the same, so any uncertainty is removed.

In the above example, the £50,000 loan to buy the annuity always remains the same unlike the most popular equity release schemes of today whereby unpaid interest will accumulate on top of the original advance. When the house is sold after the annuitant dies or moves into care the original £50,000 is repaid to the lender. However with a mortgage interest roll up scheme, the amount that will be eventually being repaid is not known.

With the annuity scheme if the person is still alive when the house is sold due to downsizing or entering residential care, the annuity income still continues being paid for life. This is simply because the annuity remains in force as the £50,000 loan used to buy the annuity in the first place is repaid from the proceeds of the house sale.

Immediate Annuity Explained

An immediate annuity can be thought of as the opposite of life assurance whereby young people are worried about dying too soon due to illness or accident. So for a regular payment they can make sure a large lump sum is payable if they die early. But with pure life insurance there is no return of premiums if the person does not die. However an annuity is a lump sum payment by older persons who are worried they may live too long. In return they receive a regular income for life but if they die too soon their lump sum is not returned.

In other words, the benefits of life assurance are when a person dies too soon. But the benefits of an annuity are when person lives too long.


Extra income produced by an equity release scheme can help pay for domiciliary care and prevent an elderly infirm person from having to sell up and move in to residential care.

Mortgage interest paid by an annuity may be seen as the safest form of equity release scheme, but it only works for very elderly homeowners in below average health who may be unable to carry out one or more activities of daily living. However there are three certainties.

The original loan does not increase.
The income is guaranteed for life.
The property does not need to be sold.
On the negative side, if the person dies early, the money used to buy the annuity has been lost and only a few income payments may have been received.

A free equity release scheme guide and a unique equity release calculator tool that measures equity release lifetime mortgage risks can be accessed at the Equity Release Analysis Centre.

Discover more about modern equity release schemes and visit the Equity Release Analysis Centre at []. Here you will find remarkable resources that enable you to analyse the potential risks of lifetime mortgages. See how rolled up mortgage interest can affect the equity that you hope to leave to your heirs. The site has two complimentary calculators including the world’s first equity release comparison tool that shows how home reversion schemes compare to lifetime mortgage on a like for like basis. These interactive programs are easy to use. Simply enter a few basic figures and hey presto, you will see amazing

New Equity Release Lender More2Life Launches New Products

June 10th, 2021 by dayat No comments »

Signs that the equity release market is beginning to spark into life again, can be evidenced by the re-emergence of a former lender in the market.

More2Life have joined forces with annuity specialist Partnership assurance to re-launch their impaired life roll-up lifetime mortgage plan.

Incorporating an impaired life facility & protected equity guarantee, the More2Life equity release plan can be seen to be opening a niche market for itself. The impaired life facility means that depending on health & lifestyle, a higher than normal tax free lump sum can be achieved, should serious health issues be present.

The More2Life equity release plan has been designed with three scenario’s in mind: –

1. Enhanced plus – industry leading maximum release, impaired life product

2. Enhanced protected – impaired life plan with ‘protected equity guarantee’

3. Protected plan – older applicants looking for a ‘protected equity guarantee’

Pitching the enhanced plus plan at the maximum release end of the market means that should the applicant qualify on medical grounds, they would have the highest lump sum currently available. This would even surpass the current Aviva Lump Sum Max product, although this would be at the expense of a higher interest rate with More2Life.

The following percentages are the maximum releases available on the Enhanced Plus: –

Age 55 23%

Age 60 28%

Age 65 33%

Age 70 38%

Age 80 48%

Age 90+ 54%

For example, an applicant aged 65 with a property valuation of £250,000 & meeting the underwriting criteria, can release a maximum of £82,500 on the enhanced plus plan.

The interest rate for this product will be 7.49% monthly.

The second product – ‘enhanced protected plan’ is also based on health & lifestyle grounds & again can provide an enhanced lump sum. However, to qualify for this equity release scheme the health situation will not be a serious as the enhanced plus. The interest rate for this plan is lower at 6.99% monthly.

Another feature of this plan is the ‘protected equity guarantee’ which is included & guarantees a percentage of the property for the children/beneficiaries on the eventual sale of the property.

The guarantee works as follows: –

Should the overall facility available be £80,000, yet only £40,000 is taken, then 50% of the final sale value will be protected on sale.

This can be an essential tool for applicants who wish to ensure that a guaranteed inheritance is passed onto their children.

The final option is the ‘protected plan’ which has no impaired life facility, but does include the protected equity guarantee. The interest rate is the same as the enhanced protected at 6.99% monthly.

In summary, depending on whether the maximum lump sum is being sourced, or one is looking to take equity release but still guaranteeing an inheritance for their children, then one of the three More2Life schemes can benefit.

Mark Greggs is the founder of Equity Release Supermarket who were recently accredited ‘Best Financial Advisers’ at the Equity Release Awards 2008. Mark is an experienced Independent Financial Adviser who has now been providing quality equity release advice for the past 8 years. Gained with this experience is exclusivity to deals with some of the UK’s