Economic Lifestyle is challenging other equity release providers to improve the terms and conditions of their products as it launches its Cash Release Plan, a fully portable and flexible reversion scheme available for customers aged 60 and over.
The retirement housing and finance specialist believes poor sales of reversion plans in comparison with lifetime mortgage schemes is partly due to the inflexibility of existing products and has designed its Cash Release Plan to offer customers a better deal.
Recent figures show sales of reversion plans currently make up just six per cent of all money released through equity release schemes with lifetime mortgage products dominating the market.
Economic Lifestyle’s scheme, which is available direct and through independent financial advisers, offers customers a wider range of choices than many reversion plans and lifetime mortgages currently on the market. Reversion schemes allow homeowners to sell all or part of their property to a provider in return for a cash lump sum or monthly staged payment or a combination of both.
Economic Lifestyle’s scheme allows homeowners to take the income in a structured payment plan and will pay 6 per cent annual interest on cash which has not been drawn down.
They will also benefit from any rises in the value of their house if they opt to extend an existing plan having already released part of the equity.
And crucially the plan is fully portable and can be transferred to another property if they want or need to move home having taken out a scheme. There are no application fees and customers are only charged a valuation fee which is fully refundable on completion.
Economic Lifestyle managing director, Mark Neal, said: “Sales of reversion schemes have been poor and we believe this must to some extent be because the current plans on the market do not meet customers’ expectations.
“Our Cash Release Plan is designed to address issues of flexibility and portability so that retired homeowners can take out a product which genuinely meets their needs.
“Paying six per cent interest on cash that has not been drawn down is, in our opinion, simply a matter of fairness as retired homeowners need to know that they are getting as good a deal as possible.”
The amount of cash released via equity release schemes in the three months to September 30 was £293.6 million, according to Safe Home Income Plans. Just £17.3 million of the total was released through reversion.
Economic Lifestyle believes its scheme is the only one available to customers aged 60 or over. Most other schemes on the market are restricted to those aged 65-plus.
Financial advisers selling the Cash Release Plan earn fees of three per cent of the initial advance.
Economic Lifestyle also offers homeowners a variety of high-quality retirement homes, which benefit from a range of security features. In addition to this, it offers retired homeowners a number of other options for releasing some of the equity in their homes or to live in a property that they would not normally be able to afford.
1. Life Interest Plan
The Life Interest Plan allows people over the age of 65 to buy a home designed for retirement living at a fraction of its true value by selling their existing property then using part of the equity to buy a Life Interest in an Economic Lifestyle property. The retirement property then becomes their legal home for the rest of their life/lives allowing them to make the most of their retirement years with the remaining equity.
2. Find & Afford Plan
The Find and Afford Plan enables people to find a property that they want and Economic Lifestyle will buy it and lease it to them at a cost that is greatly below its market price. The property reverts back to the company on the passing away of the customer/s. It is also possible to opt for a part find and afford which allows them to release capital but also leave part of the property value to their estate.
3. Home Exchange Plan
For people taking out the Life Interest Plan or using the Find and Afford Plan, Economic Lifestyle can arrange a cash sale of their current home. This enables the retired homeowner to eliminate chains, stress, unwanted visitors and estate agents fees. Two free independent valuations are arranged from which the average is taken and an offer of approximately 90 per cent is made.
