Duncan Young is managing director of Retirement Plus
“John and Victoria have few options available to them to make life a little easier in their last years together. They need to raise finance off at least half of the value of their property, which makes it very unlikely that a conventional lifetime mortgage will meet their needs, so their adviser will have to look to the home reversion market for a potential solution.
Raising sufficient funds will still be difficult in the normal home reversion market, but there is the opportunity of seeking an impaired life quotation from three providers. It is probable with their medical history that John and Victoria would be able to raise a reasonable amount, more than £100,000 if they so wish – probably around £114,000. One hopes that their intermediary has taken the trouble to take the necessary home reversion exams and is aware of the impaired life options available.”
Dean Mirfin is business development director at Key Retirement Solutions
“If considering an equity release option to meet their needs, John and Victoria may well be depending on providers who will offer impaired rates. Standard loan-to-values (LTV) from lifetime mortgages will not meet their expectations. The maximum LTV from lifetime would be 40 per cent (£80,000) available from Stonehaven.
Impaired rates on a lifetime mortgage would not be of benefit as LTVs are based on the youngest life, which is John and he is healthy. A potential route would be a home reversion, which would offer greater sums. Average reversion rates should produce close to their target amount however the calculation for impairment would increase the rates offered from a number of providers even though Victoria is the older life as the calculation is based on both ages. Finding out the effect of Victoria’s health on the amount available can be done at little, or with some providers, no cost.”
Simon Chalk is mortgage planner at Mortgage Portfolio Services
“Home Income Plans were usually set up on a fixed interest and fixed annuity income basis, sufficient to service the interest payments with remainder to the borrower, after any income tax deduction, so I take ‘badly performing’ to mean only that the income has failed to keep up with the cost of living. A lifetime mortgage or home reversion will allow them to keep all of the net annuity income and remain in their home. If the plan was arranged before April 1999, then MIRAS will be lost.
Ordinary equity release products would not cover the £100,000 mortgage. Indicative terms could be obtained from those few providers with impaired life terms and offering 50 per cent LTV by completing a health questionnaire. An application could then be made, enabling them to apply for GP reports and issue an offer.”
